Telangana High Court
M/S Sunil Constructions, vs Dega Madhavi on 10 February, 2023
Bench: P Naveen Rao, J Sreenivas Rao
HON'BLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SRI JUSTICE J.SREENIVAS RAO
COMMERCIAL COURT APPEAL NO.25 OF 2019
&
CIVIL MISCELLANEOUS APPEAL NO.1303 OF 2017
Date: 10.02.2023
COMCA No.25 of 2019:
Between:
M/s Sunil Constructions,
501 Pent House, Sri Venkataramana Apartments,
Thakur Mansion lane, Somajiguda,
Hyderabad, Rep. by its Managing Partner
Sri B.Sunil Chandra Reddy.
.... Appellant
And
Dega Madhavi, W/o D.Srinivasa Reddy,
Aged about 56 Years, Occ:Homemaker,
R/o Plot No.207, Road No.1, Jubilee Hills,
Hyderabad and others.
.... Respondents
This Court made the following :
PNR,J & JSR,J
COMCA No.25 of 2019 and
CMA No.1303 of 2017
2
HON'BLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SRI JUSTICE J.SREENIVAS RAO
COMMERCIAL COURT APPEAL NO.25 OF 2019
&
CIVIL MISCELLANEOUS APPEAL NO.1303 OF 2017
COMMON JUDGMENT: (Per Hon'ble Sri Justice P.Naveen Rao)
1. Facts
as culled out from the pleadings are as under:
1.1. On 19.10.2002 Development Agreement-cum-General Power of
Attorney (DAGPA) was entered into by the respondents 1 to 6 in favour
of appellant for development of land admeasuring 3.5-3.6 acres
(2 acres from respondents 1 to 4's total land of Acs.3.00 and 1.5-1.6
acres from respondents 5 and 6's total land of Acs.2.00) situated in
Sy.N.136 of Gachibowli village, Serilingampally Mandal, Ranga Reddy
district to be developed into a residential layout with independent
houses. On 29.10.2002 appellant paid an amount of 12,50,000/- to
respondents 1 to 4 and 9,00,000/- to respondents 5 and 6 as
refundable deposit. The amount with respect to respondents 5 and 6
was paid in favour of Patel Engineering Limited as respondents 5 and 6
were Directors of the said company. The DAGPA required owners of
the land to ensure mutation of their names in revenue records. On
24.07.2004, Mutation Certificate was obtained in favour of the original
pattedar, Syed Suleman, vide proceedings bearing No.B/1986/1997.
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CMA No.1303 of 2017
1.2. Later, respondents 1 to 6 expressed desire to develop a Star hotel
on the land instead of residential layout. Further, they requested the
appellant to restrict the area to be developed from 3.5-3.6 acres to
9009 square yards and to construct a high-rise building as opposed to
residential apartments. The appellant agreed to restrict the
development area to 9009 square yards.
1.3. On 06.02.2007, Authorization Letter was issued by the Airport
Authorities of India for the construction of a high-rise building. On
10.09.2007, the Fire and Emergency Services Department granted
permission for the construction of a high-rise building.
1.4. On 30.10.2007, DAGPA was entered into by respondents 1 to 6
in favour of the appellant for development of land admeasuring 9009
square yards (5349 square yard from respondents 1 to 4 and 3659
square yards from respondents 5 and 6) situated at Sy.No.136 of
Gachibowli village, Serilingampally Mandal, Ranga Reddy district to be
developed into a high-rise office/software block (commercial building).
The DAGPA terms specify that it should be registered within three
months or after mutation of names of the present landowners in the
revenue records as pattedars is completed, whichever is later. It was
mutually agreed to share the constructed area, undivided share of land
and parking area in the ratio of 60 to claimant and 40 to respondents 1
to 6. It was agreed that construction will be completed within 36
months after obtaining building permission. It was also agreed that if
PNR,J & JSR,J
COMCA No.25 of 2019 and
CMA No.1303 of 2017
the GHMC/HUDA insist on uniform setback of 13 Mtrs all around the
building, the total extent of land for development would be 9174
square yards.
1.5. On 24.05.2010, respondents 1 to 6 obtained NOC from the Office
of the District Collector, Ranga Reddy District. On 18.10.2010,
appellant obtained the Land Use Information Certificate issued by the
Commissioner, GHMC. On 02.11.2010, respondents 1 to 6 furnished
the Revenue Sketch Plan of land admeasuring Acs.5.00 in
Sy.No.136/2.
1.6. Land Use Certificate issued by the HMDA reflected that the land
admeasuring Acs.5.00 was falling in commercial are (Commercial-cum-
Offices) and was partly affected under 60 Mtrs road at one side and
partly affected under 36 Mtrs wide road on the other side. The
appellant claims to have taken various steps to secure construction
permission. In the process, appellant came to know that road width
was increased to 150 Mtrs from earlier 60 Mtrs and this has affected
larger area of respondents 5 and 6. This required revision of proposals.
1.7. On 15.05.2015, appellant came to know that respondent no.5
alienated 4840 square yards of land to Sreshta Constructions i.e., a
group company of respondent no.9 (Sreshta Properties) along with the
western boundary of the scheduled property which was given for
development to the appellant.
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
1.8. Appellant filed Arbitration O.P.No.1077 of 2015 seeking an
injunction against respondents 5 and 6 from alienating the claim
schedule property pending disposal of arbitration proceedings.
Respondents 1 to 4 filed counter stating that entire land was entrusted
to the appellant and respondents 1 to 4 have no objection for the
development of their lands. In the counter filed by respondents 5 and
6, they have asserted that DAGPA was a tentative document and as the
appellant has failed to comply with the obligations under the said
agreement, the agreement was rendered null and void.
1.9. On 29.12.2005, Hon'ble XIII Additional District Judge,
R.R.district, L.B.Nagar granted injunction directing respondents 5 and
6 to maintain status quo with respect to the claim on schedule
property.
1.10. On 13.06.2016, respondents 5 and 6 sent a notice terminating
the DAGPA. On 23.06.2016, appellant responded by stating that
unilateral cancellation of the DAGPA was not permissible and that the
matter was pending before the Court. As there was no response, on
03.10.2016 appellant addressed a notice to respondents 5 and 6
nominating an Arbitrator. On 09.11.2016, respondents 5 and 6 replied
contending that DAGPA is a tentative document and the question of
nominating an Arbitrator does not arise. Appellant addressed a
rejoinder notice and filed Arbitration Application No.5 of 2017 under
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CMA No.1303 of 2017
section 11 of the Arbitration and Conciliation Act, 1996 (for short, 'the
Act, 1996).
1.11. On 21.09.2017, the XIII Additional District and Sessions Judge,
R.R. district, L.B.Nagar, dismissed Arb.O.P.No.1077 of 2015 holding
that the DAGPA is not registered and that therefore no claim can be
made under the said document. It also held that DAGPA is a tentative
document and it cannot be looked into.
1.12. After the dismissal of Arb.O.P.no.1077 of 2015, respondent no.5
executed a sale deed dated 06.10.2017 in favour of respondent no.7
i.e., Sreshta Properties, with respect to an extent of 4840 square yards.
1.13. Aggrieved by the dismissal of Arb.O.P.No.1077 of 2015, the
appellant filed CMA No.1303 of 2017 before this Court. This Court vide
orders dated 15.12.2017 restrained the respondents 6 and 7 from
alienating the schedule property.
1.14. On 07.02.2018, appellant and respondents 1 to 4 entered into a
DAGPA to develop the portion of their schedule property. It is asserted
that development work commenced and substantial construction has
been completed.
1.15. During second week o October, 2018 appellant noted digging and
execution work being undertaken on the land belonging to respondents
5 and 6.
PNR,J & JSR,J
COMCA No.25 of 2019 and
CMA No.1303 of 2017
1.16. Appellant filed Arb.O.P.No.10 of 2018 on the file of XIII
Additional district Judge-cum-Commercial Court, Ranga Reddy
District, L.B.Nagar under Section 9 of the Act, 1996 seeking interim
relief restraining respondents 5 to 7 from undertaking any
construction or from changing the nature of the schedule property.
Respondents 5 and 6 filed counter affidavit urging that DAGPA is a
tentative document and stood terminated. Respondent no.7,
represented by its Managing Partner, Mr.Srikanth Reddy, filed counter
contending that they are bona fide purchasers and did not have notice
on DAGPA or pending proceedings. On 13.11.2018, the Court passed
order of status quo. Arb.O.P.No.10 of 2018 was dismissed vide orders
dated 01.04.2019. Aggrieved thereby, appellant filed COMCA No. 25 of
2019. This Court passed order of status quo on 10.07.2019.
1.17. CMA No.1303 of 2017 was filed after 5th respondent alienated
land to an extent of 4840 sq yards along with western boundary of the
petition schedule land to 9th respondent. COMCA No.25 of 2019 is
filed against order in Arb.O.P.No.10 of 2018 which was filed based on
subsequent developments after filing of Arb.O.P.No.1077 of 2015. As
the core issue and parties to both cases are same, those two matters
are heard and a common judgment is made.
1.18. To complete the narration, on 27.06.2019, this Court passed
orders in Arbitration Application No.5 of 2017, based on the consent
Memos filed by both the parties, appointing retired Judge Justice Sri
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CMA No.1303 of 2017
T.N.C.Rangarajan as the sole Arbitrator to decide the dispute between
the parties. On 20.08.2019, appellant filed claim statement before the
Arbitrator. Respondent no.9 (M/s.Sreshta Properties) and respondent
no.6 (Sonal Patel) filed counters. Evidence was closed. Written
arguments were filed by the appellant and respondents 5, 6 and 9. At
that stage, by his decision dated 10.04.2021, Arbitrator terminated
Arbitral proceedings holding that he was unable to pass an award.
While doing so, he expressed his opinion on the dispute between the
parties.
1.19. Aggrieved thereby, COP No.4 of 2021 is filed under Section 14(2)
read with Section 15 of the Act, 1996 on the file of Special Judge for
Trial and Disposal of Commercial Disputes, Ranga Reddy for
appointment of substitute Arbitrator.
1.20. COP No.10 of 2021 is filed under Section 34 of the Act, 1996 on
the file of Special Judge for Trial and Disposal of Commercial Disputes,
Ranga Reddy for setting aside the award dated 10.04.2021.
1.21. On 09.06.2022 orders were passed by the Court below in COP
Nos.4 of 2021 and 10 of 2021. In respect of COP No.4 of 2021, the
Hon'ble Court held that it is the High Court which has the power to
appoint a substitute Arbitrator. In respect of COP No.10 of 2021, the
Hon'ble Court held that the termination order dated 10.04.2021 passed
by the Arbitrator is not an 'award' and therefore setting aside of the
same under Section 34 of the Act, 1996 is not warranted.
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
1.22. While so, appellant filed Arbitration Application No.109 of 2022
under Section 11 of the Act, 1996 seeking appointment of a substitute
Arbitrator to decide the disputes between the parties. By order dated
22.12.2022, with the consent of all the parties, this Court appointed
substituted Arbitrator.
1.23. While Arb.O.P.No.1077 of 2015 was filed seeking interlocutory
orders under Section 9 of the Act, 1996 soon after 5th respondent sold
4840 sq yards of land to 9th respondent, praying to restrain
respondents 5 and 6 from alienating the petition schedule property,
i.e., 3659 square yards in sy.No.136 of Gachibowli village, O.P.No.10 of
2018 was filed contending that in second week of October, 2018 when
appellant visited the site he noticed excavation work by 9th respondent
on land entrusted to appellant and that the respondent no.6 executed
registered sale deed on 6.10.2017 in favour of 9th respondent alienating
4840 sq yards of land of which appellant schedule land forms part
seeking interim protection against respondents 5, 6 and 9 taking up
construction, developing and changing the nature of the petition
schedule property i.e., 3659 square yards in Sy.No.136 of Gachibowli
village. It is thus seen that both O.Ps flow out of DAGPA dated
30.10.2007 and against Orders of trial Court in interlocutory
applications filed under Section 9 of the Arbitration and Conciliation
Act, 1996. The parties are same, issues raised are common and
property in issue is same. Therefore, both were heard and considered
together and common order is made.
PNR,J & JSR,J
COMCA No.25 of 2019 and
CMA No.1303 of 2017
1.24. We have heard learned counsel Sri M.V.Prtap Kumar for the
appellants, learned senior counsel Sri Prakash Reddy appearing for Sri
Rusheek Reddy K.V. for respondents 5 and 6, learned senior counsel
Sri Damaalapati Srinivas, appearing for Sri C.S.Venkatsh, for the
respondent no.9. In addition learned counsel also submitted written
submissions.
2. Submissions of learned counsel for appellant:
(1) Learned counsel contended that the trial Court grossly
erred in holding that the development agreement is compulsorily
registerable to look into arbitration clause.
(2) He would submit that appellant never treated the land of
respondents 5 and 6 as separate, but they themselves have treated as
separate land, divisible agreement, issued separate notice of
termination. The finding of trial Court on this aspect is also erroneous.
(3) He would submit that appellant has been ready and willing
to carryout terms of DAGPA. In the written submissions, learned
counsel chronicled various steps taken by him before executing
DAGPA, from 2007 to 2012 and 2012 to 2015. He would submit that
there has been constant correspondence in connection with
development of the project. Respondents 5 and 6 failed to respond to
two letters dated 27.06.2014 and 24.04.2015, which have highlighted
all the steps taken by the appellant. It is the respondents 5 and 6 who
failed to comply with their objections.
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
(4) He would submit that arbitration agreement is a separate
agreement and it would still stand even if main agreement is
terminated.
(5) He would submit that as a developer possession is
inconsequential.
(6) Respondents 5 and 6 are guilty of breach of contract and
therefore appellant is entitled to enforce specific performance of
DAGPA.
(7) Respondents 5 and 6 illegally sold a portion of land given
for development in favour of M/s.Shrestra Properties. Later, they have
alienated entire extent of land keeping this Court in the dark.
(8) As the 9th respondent purchased land pendente lite he is
bound by the result of litigation. Against 9th respondent, appellant can
claim relief of specific performance.
3. Submissions of learned senior counsel Sri D.Prakash Reddy:
(1) According to learned senior counsel, the party who has
committed breach or unilaterally novated the agreement cannot claim
specific performance of a contract. He would submit that the appellant
entered into separate Development Agreement dated 07.02.2018 with
respondents 1 to 4 exclusively and excluding the land of 6th
respondent, applied for building permission on 06.07.2015 in respect
of land belonging to respondents 1 to 4, which was much prior to filing
Arb.O.P.No.1077 of 2015 and prior to termination of DGPA. By his
conduct, the appellant frustrated the DAGPA dated 30.10.2007.
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
(2) The DAGPA is in the nature of license. The appellant has
not applied for building permission and, therefore, the issue of
developing the property does not arise. There is no transfer of land to
the appellant. Therefore, no injunction can be granted to a lisensee.
Further, under Section 60 of Easement Act, a license can be revoked
by the grantor unless license is coupled with transfer of property and
such transfer is in force and the licensee has done some work of
permanent character. None of these conditions are attracted here.
Learned senior counsel relied on the decision in M/s.Landman Ventures
LLP Vs. M/s.Jubilee Hills Co-op. House Building Society Limited (CMA
No.216 of 2022).
(3) He would submit that no physical possession was
delivered to appellant. This is also clear from prayer sought before
Arbitral Tribunal seeking to deliver possession.
(4) While respondents 5 and 6 fulfilled all the obligations
flowing out of DAGPA, not a single obligation was fulfilled by the
appellant and thus committed breach of contract. In paragraph-5 of
the written submissions, he lists out the violations by the appellant.
(5) He would justify the termination. According to learned
senior counsel from the letter dated 23.06.2010 it is clear that the
appellant clearly admits of inability to fulfill its obligations and
respondents 5 and 6 cannot endlessly wait for appellant to honour the
commitments. Further, cancellation/termination of contract on
09.06.2016/13.06.2016 is not challenged and has become final.
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
Coupled with this the fact that appellant entered into another DAGPA
with respondents 1 to 4 only, obtained building permission covering
their land and making construction would show the intention of the
appellant and imply that old DAGPA stood dissolved.
(6) Appellant was never ready and willing to perform his
obligations flowing out of DAGPA. Therefore, he is not entitled relief of
specific performance and his claim is hit by Section 16(1) of the
Specific Relief Act. The claim is also hit by delay and laches and
hopelessly barred by limitation under Article 56 of Limitation Act.
(7) He would submit that Arb.O.P.No.1077 of 2015 was
initially dismissed for non-prosecution. On an application filed to
restore the O.P., it was restored only against respondents 1 to 6 and
not against defendant no.9. whereas, respondent no.6 sold the subject
land to respondent no.9, much before filing of CMA No.1303 of 2017.
(8) As consistently held by Hon'ble Supreme Court that when
granting damages is an adequate relief, no injunction should be
granted.
(9) He would submit that entire claim is vitiated on account of
interpolation in the document. Original word 'Earlier' was struck-off by
writing word 'later' by changing the meaning. This was done behind
the back of the respondents 5 and 6.
(10) Learned senior counsel relied on following decisions:
(i) Sushil Kumar Agarwal vs. Meenakshi Sadhu and others1;
(ii) Kishorsinh Ratanasinh Jadeja Vs. Maruti Corporation and others2;
(2019) 2 SCC 241
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
(iii) Best Sellers Retail (India) Private Limited vs. Aditya Birla Nuvo
Limited and others3;
(iv) Dalpat Kumar and another vs. Prahlad Singh and others4;
(v) Build India Constructions System vs. Union of India5;
(vi) Polymat India (P) Ltd. And another vs. National Insurance Co.Ltd.
and others6; and
(vii) Judgment of this Court in M/s. Landman Ventures LLP vs.
M/s.Jubilee Hills Cooperative House Building (CMA No.216 of
2002 dt. 15.09.2022).
4. Submissions of learned senior counsel Sri D.Srinivas for 9th
respondent:
(1) According to learned senior counsel, 9th respondent is a
bona fide purchaser and, therefore, his transaction cannot be dragged
into inter se dispute between appellant and respondents 5 and 6. He
has drawn the attention to paragraph-20 of petition averments filed by
appellant in Arb.O.P.No.1077 of 2015. The appellant deposed that 5th
respondent sold 4840 square yards to 9th respondent which is adjacent
to petition schedule land on western boundary that included 200
square yards of land on which DAGPA was executed.
(2) He would further submit that Arb.O.P.No.1077 of 2015
was dismissed for default for non-prosecution. While seeking
restoration of the O.P., appellant did not seek restoration against 9th
respondent. Therefore, it is no more open to appellant to drag the 9th
respondent into litigation.
(2009) 11 SCC 229
(2012) 6 SCC 792
(1992) 1 SCC 719
(2002) 5 SCC 433
(2005) 9 SCC 174
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
(3) He would submit that clause-1 of the DAGPA stipulated for
registration within three months or after the mutation was completed
whichever is 'earlier'. Illegally the word 'earlier' is replaced by 'later' by
overwriting. This changed the whole complexion of the agreement. As
per the original terms, after 3 months of execution, the DAGPA is not
valid as it was not registered. Further, even though mutation was
secured in April, 2010, the appellant was not keen to continue the
project as is evident from its letter dated 25.06.2010. it clearly shows
that appellant was not willing to perform his obligations for long years.
5. Reply by learned counsel for appellant:
(1) It is the respondents 5 and 6, who have treated DAGPA as
separable for their property and resorted to termination and appellant
always treated as one composite DAGPA. Development Agreement
entered with respondents 1 to 4 is inconsequential and irrelevant
insofar as DAGPA dated 30.10.2007on land belonging to them.
(2) Appellant has never abandoned the project. Various steps
taken by him from the year 2002 are testimony of his commitment to
stand by the terms of agreement. On the contrary, respondents 5 and
6 breached the terms of agreement.
(3) In reply to the contention on delay and limitation, he
would submit that the registration of DAGPA was not an issue and
time was not the essence of contract. Arbitration clause was invoked
on 03.10.2016, which was within three years of respondents 5 and 6
refusing to perform their obligation under DAGPA.
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
(4) Change of word 'earlier' with that of 'later' was within the
knowledge of respondents 5 and 6 and was never raised and is an after
thought. He would submit a solitary letter dated 25.06.2020 cannot
categorize the appellant as disinclined to carryout his responsibilities.
More so, having regard various steps taken by him later.
(5) He would submit that there was no delay in applying for
building permission. Mutation proceedings were issued in June, 2010.
Thereafter there was inter se correspondence. Appellant applied for
excavation permits, permits from Fire Department and other
permissions. Then, on 27.03.2012 applied for building permission.
6. Learned counsel for the appellant relied on following decisions:
i) Reva Electric Car Company Private Ltd. v. Green Mobil7;
ii) SMS Tea Estates (P) ltd. v. Chandmari Tea Co. (P) Ltd.8,
iii) Lala Durga Prasad and Ors. vs. Deep Chand and Ors.9,
(iv) Adhuik Steels Ltd. v. Orissa Manganee and Minerals (P) Ltd.10
(v) Sushil Kumar Agarwal v. Meenakshi Sadhu & Ors.11
7. The issue for consideration is whether trial Court erred in not
granting interlocutory reliefs sought by the appellant in Section 9 of
the Act, 1996 application ?
(2012) 2 SCC 93
(2011) 14 SCC 66
AIR 1954 SC 75
2007 (7) SCC 125
(2019) 2 SCC 241
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
8. Shorn of details, the issue is in a narrow compass i.e., whether
appellant is entitled to injunction pending commencement and
conclusion of arbitral proceedings.
9. In Arb.O.P.No.1077 of 2015, the trial court held that arbitration
agreement is compulsorily registerable document and as the DAGPA is
not registered the arbitration clause in DAGPA cannot be looked into.
It has further held that though Arb.O.P., was filed in the year 2015,
arbitration proceedings have not commenced within 90 days from the
date of filing of Arb.O.P., and petitioner has not shown interest to refer
the dispute to arbitration and as such the petition is not maintainable.
Further held that injunction cannot be granted when awarding of
damages is an adequate relief.
10. In Arb.O.P.No.10 of 2018, the trial Court held that when the
main agreement is frustrated even the arbitration also goes and even
for the sake of arbitration clause, it cannot be looked into. It is further
observed that as petitioner entered into a separate development
agreement with respondents 1 to 4 after receiving Ex.R1-notice of
cancellation of DAGPA dated 30.10.2007 with respondents 5 and 6, it
is not justified to contend operation of DAGPA dated 30.10.2007. The
contention of petitioner that respondents 8 & 9 though aware of
DAGPA dated 30.10.2007 purchased the property and therefore even
though they are not party to DAGPA in an application under Section 9
of the Act relief can be sought against them is rejected holding that it is
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
an unregistered agreement and invalid. Further, in spite of
respondents complying the conditions of mutation and NOC, petitioner
did not come forward to execute registered DAGPA. The tone and text
of petitioner letter dated 25.06.2010 shows he was not ready to comply
the terms of DAGPA.
11. The trial Court further held that petitioner failed to establish his
possession. The trial Court further observed that when petitioner
admits that 200 square yards of petition schedule property was
included in the land sold by 5th respondent to 9th respondent much
prior to filing of Arb.O.P.No.1077 of 2015, it is clear that petitioner is
not in possession.
12. It is further held that if petitioner has incurred damages he can
only claim damages from respondents 5 and 6. It is further held that
arbitral proceedings did not commence within 90 days of filing of
Arb.O.P.No.1077 of 2015 and therefore not entitled to any relief. That
petitioner failed to establish that land sold by 5th respondent to 9th
respondent is part of DAGPA.
13. The trial Court further observed that respondents 5 and 6 own
Ac.1.00 each out of 9009 square yards which was the subject matter of
DAGPA, 5349 square yards belong to respondents 1 to 4 and 3659
square yards belong to respondents 5 and 6. However, it is not stated
as to what is the specified extent of land belonging to respondents 5
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COMCA No.25 of 2019 and
CMA No.1303 of 2017
and 6 out of 3659 square yards and covered by DAGPA sold by them
separately.
14. The trial Court therefore held that no prima facie case was made
out and balance of convenience is not in favour of the petitioner and
that petitioner is not entitled to any relief.
15. Parties have submitted lengthy pleadings and documents.
Learned counsel made elaborate submissions and also filed lengthy
written submissions. Trial Court also passed a very lengthy orders in
Section 9 applications. The submissions made by learned counsel
touchup on various aspects of terms of contract, alleged failure of
compliance/breach of terms of agreement, scope of arbitration clause
in an unregistered DAGPA so on which are to be urged and decided in
arbitral proceedings. Submissions are also made to grant/not to grant
interlocutory orders in Section 9 applications. The decisions cited at
the bar also touch upon the above aspects. We are confining our
consideration to interlocutory order under Section 9 of the Act, 1996.
16. Granting interlocutory protection/injunction pending
commencement of arbitral proceedings is a discretionary relief that
may be granted by the trial Court under Section 9 of the Act. To
consider to grant injunction, the petitioner has to make out prima facie
case, show balance of convenience and irreparable injury that would be
caused if injunction is not granted. Even when these are satisfied by
the petitioner/appellant, Court is also required to see whether granting
PNR,J & JSR,J
COMCA No.25 of 2019 and
CMA No.1303 of 2017
injunction would prejudice respondents. In both cases trial Court
assigned detailed reasons why it was not inclined to grant interlocutory
orders sought by appellant on both occasions.
17. At this stage, it is necessary to note briefly the decisions relied on
by learned counsel.
17.1. In Kishorsinh Ratanasinh Jadeja (supra), landowners cancelled
development agreement due to long inaction of 19 years and futile
efforts of the developers in developing the land. Landowners sold and
conveyed land in favour of third parties. Land developer filed suit for
Specific performance of contract. Trial Court granted alternative relief
of damages and return of earnest money. Not satisfied with the
judgment, the developer filed appeal before the High Court. He also
sought injunction against sale or further construction on land of
landowners. High Court did not grant the stay and ordered that the
property in question had to be dealt as per the order of the court. On a
second occasion, by an order dated 2-04-2008, High Court granted
stay on sale. In the meantime, landowners sold the land to as many
as 280 purchasers and also conveyed the lands to them. On a third
occasion, by the impugned order dated 07.05.2008, High Court
granted stay on sale and also constructions, directing police action if
required. Injunction was granted on the very next day of filing the
injunction application without hearing the parties to the suit or
PNR,J & JSR,J
COMCA No.25 of 2019 and
CMA No.1303 of 2017
noticing the purchasers of the land in issue. Hon'ble Supreme Court
held,
"36. It is well established, that while passing an interim order of
injunction under Order 39 Rules 1 and 2 CPC, the court is required to
consider three basic principles, namely,
(i) prima facie case;
(ii) balance of convenience and inconvenience; and
(iii) irreparable loss and injury.
None of the said principles have been considered by the High Court
while passing the second and third interim orders dated 22-4-2008
[Maruti Corpn. v. Jayaba Ratansinh Jadeja, First Appeal (Civil) No.
853 of 2008, order dated 22-4-2008 (Guj)] and 7-5-2008 [Maruti
Corpn. v. Jayaba Ratansinh Jadeja, Civil Application for Injunction No.
5618 of 2008, order dated 7-5-2008 (Guj)] , nor has the High Court
taken into account the long silence on the part of Respondent 1
Corporation in filing a suit after 19 years.
xxxx
39. As far as the lands which the appellant and the other joint owners
have been restrained from alienating by the second order dated 22-4-
2008 [Maruti Corpn. v. Jayaba Ratansinh Jadeja, First Appeal (Civil)
No. 853 of 2008, order dated 22-4-2008 (Guj)] are concerned, we are of
the view that in the event the order of 22-4-2008 [Maruti
Corpn. v. Jayaba Ratansinh Jadeja, First Appeal (Civil) No. 853 of
2008, order dated 22-4-2008 (Guj)] is set aside, Respondent 1 can be
compensated in terms of money and no irreparable loss and injury will
be caused to it on account thereof.
40. On the other hand, if the owners of the property remain restrained
from developing the same, it is they who will suffer severe prejudice, as
they will be deprived of the benefit of the user of their land during the
said period. The balance of convenience and inconvenience is against
the grant of such an injunction. The success of the suit for specific
performance filed by Respondent 1 depends to a large extent on
tenuous proof of genuineness of the agreement sought to be enforced
after 19 years, despite the finding of the trial court that the suit was
not barred by limitation.
41. The question of conduct of Respondent 1 also becomes relevant,
inasmuch as, having slept over its rights for more than 19 years, it will
be inequitable on its prayer to restrain the owners of the property from
dealing with the same, having particular regard to the fact that a large
portion of the land has already been conveyed to as many as 280
purchasers who are in the process of erecting constructions
thereupon."
17.2. In Best Sellers Retail (India) Pvt.Ltd., (supra), a franchise agency
agreement was entered into for exclusive sale of goods of respondent-
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plaintiff company through premises leased to appellant-defendant
partnership firm. A suit for specific performance of said agency
agreement was filed by the respondent company, also claiming
alternative relief of damages in case of non-grant of relief of specific
performance along with which, temporary injunction restraining
defendants from leasing/sub-leasing of the said property was filed.
Courts below granted injunction on the ground that refusal would
entail hardship and mental agony to plaintiff-respondent company.
Hon'ble Supreme Court held:
"29. Yet, the settled principle of law is that even where prima facie case
is in favour of the plaintiff, the Court will refuse temporary injunction if
the injury suffered by the plaintiff on account of refusal of temporary
injunction was not irreparable.
30. In Dalpat Kumar v. Prahlad Singh [(1992) 1 SCC 719] this Court
held: (SCC p. 721, para 5)
"5. ... Satisfaction that there is a prima facie case by itself is not
sufficient to grant injunction. The Court further has to satisfy that
non-interference by the Court would result in 'irreparable injury' to
the party seeking relief and that there is no other remedy available to
the party except one to grant injunction and he needs protection from
the consequences of apprehended injury or dispossession. Irreparable
injury, however, does not mean that there must be no physical
possibility of repairing the injury, but means only that the injury must
be a material one, namely, one that cannot be adequately
compensated by way of damages."
34. The High Court has similarly held in the impugned judgment that if
the premises is let out, Respondent 1 will be put to hardship and the
relief claimed would be frustrated and, therefore, it is proper to grant
injunction and the trial court has rightly granted injunction restraining
the partners of Liberty Agencies from alienating, leasing, sub-leasing or
encumbering the property till the disposal of the suit.
35. The High Court lost sight of the fact that if the temporary injunction
restraining Liberty Agencies and its partners from allowing, leasing,
sub-leasing or encumbering the suit schedule property was not granted,
and Respondent 1 ultimately succeeded in the suit, it would be entitled
to damages claimed and proved before the court. In other words,
Respondent 1 will not suffer irreparable injury."
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17.3. In Dalpat Kumar (supra), first Appellant claimed to have entered
into an agreement to purchase a residential house situated in Jaipur.
Appellant filed suit for specific performance of contract for purchase of
house. Court decreed the same ex parte, and executed sale deed.
Respondent's wife filed a suit and sought temporary injunction from
dispossession. Trial court rejected the application for ad interim
injunction which was confirmed on appeal by the High Court.
Thereafter, the suit was dismissed for non-prosecution. The
respondent filed five objections which were dismissed. A third round of
litigation was started by the respondent's sons claiming the house to
be a joint family property and sought for declaration that the sale does
not bind them and also sought for partition. They also filed for an ad
interim injunction which was dismissed and confirmed by the High
Court. A fourth round of litigation was started by the respondent filing
the present suit contending that the first appellant being his counsel
played fraud on him and also sought for an interim injunction from
dispossession. Trial court dismissed the applications, but the High
Court allowed the same and granted interim injunction in favour of the
respondent restraining the appellants from taking possession of the
residential portion. Supreme Court held High Court erred in granting
interim injunction in favour of respondent. Hon'ble Supreme Court
held:
"4. Order 39 Rule 1(c) provides that temporary injunction may be granted
where, in any suit, it is proved by the affidavit or otherwise, that the defendant
threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in
relation to any property in dispute in the suit, the court may by order grant a
temporary injunction to restrain such act or make such other order for the
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purpose of staying and preventing ... or dispossession of the plaintiff or
otherwise causing injury to the plaintiff in relation to any property in dispute
in the suit as the court thinks fit until the disposal of the suit or until further
orders. Pursuant to the recommendation of the Law Commission clause (c)
was brought on statute by Section 86(i)(b) of the Amending Act 104 of 1976
with effect from February 1, 1977. Earlier thereto there was no express power
except the inherent power under Section 151 CPC to grant ad interim
injunction against dispossession. Rule 1 primarily concerned with the
preservation of the property in dispute till legal rights are adjudicated.
Injunction is a judicial process by which a party is required to do or to refrain
from doing any particular act. It is in the nature of preventive relief to a
litigant to prevent future possible injury. In other words, the court, on exercise
of the power of granting ad interim injunction, is to preserve the subject
matter of the suit in the status quo for the time being. It is settled law that the
grant of injunction is a discretionary relief. The exercise thereof is subject to
the court satisfying that (1) there is a serious disputed question to be tried in
the suit and that an act, on the facts before the court, there is probability of
his being entitled to the relief asked for by the plaintiff/defendant; (2) the
court's interference is necessary to protect the party from the species of injury.
In other words, irreparable injury or damage would ensue before the legal right
would be established at trial; and (3) that the comparative hardship or
mischief or inconvenience which is likely to occur from withholding the
injunction will be greater than that would be likely to arise from granting it.
5. Therefore, the burden is on the plaintiff by evidence aliunde by
affidavit or otherwise that there is "a prima facie case" in his favour which
needs adjudication at the trial. The existence of the prima facie right and
infraction of the enjoyment of his property or the right is a condition for the
grant of temporary injunction. Prima facie case is not to be confused with
prima facie title which has to be established, on evidence at the trial. Only
prima facie case is a substantial question raised, bona fide, which needs
investigation and a decision on merits. Satisfaction that there is a prima facie
case by itself is not sufficient to grant injunction. The Court further has to
satisfy that non-interference by the Court would result in "irreparable injury"
to the party seeking relief and that there is no other remedy available to the
party except one to grant injunction and he needs protection from the
consequences of apprehended injury or dispossession. Irreparable injury,
however, does not mean that there must be no physical possibility of repairing
the injury, but means only that the injury must be a material one, namely one
that cannot be adequately compensated by way of damages. The third
condition also is that "the balance of convenience" must be in favour of
granting injunction. The Court while granting or refusing to grant injunction
should exercise sound judicial discretion to find the amount of substantial
mischief or injury which is likely to be caused to the parties, if the injunction
is refused and compare it with that which is likely to be caused to the other
side if the injunction is granted. If on weighing competing possibilities or
probabilities of likelihood of injury and if the Court considers that pending the
suit, the subject matter should be maintained in status quo, an injunction
would be issued. Thus the Court has to exercise its sound judicial discretion
in granting or refusing the relief of ad interim injunction pending the suit."
17.4. In M/s. Landman Ventures LLP vs. M/s.Jubilee Hills Cooperative
House Building (CMA No.216 of 2002), the appellant is a real estate
developer. Respondent is a cooperative society. Both entered into a
DAGPA to develop property. After appellant was put in possession of
property, process of obtaining permissions was initiated. However,
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respondent gave a notice cancelling the agreement. Appellant filed
application for injunction under Section 9 of the Arbitration Act to
restrain the respondent from dispossessing the appellant from the
possession of the property. The appellant pleaded that the agreement
does not envisage that the owner of the property has the right to
terminate the agreement and that the possession must not be
disturbed. This Court held:
"12. To secure an injunction appellant has to satisfy three
ingredients, prima facie case, balance of convenience and irreparable
injury. Further, even fulfilling these conditions may not be sufficient
unless the Court is satisfied that petitioner is bona fidely prosecuting
the litigation and it can extend equity jurisdiction to grant
discretionary relief of injunction. As fairly submitted by the learned
senior counsel for respondent though appellant has made out prima
facie case, but that is not sufficient to secure injunction."
18. Guided by the above principles, coming back to the cases on
hand, by DAGPA (Ex.P4) both parties have come to an understanding
to develop the separate land parcels belonging to respondents 1 to 4
and 5 & 6 respectively. It was an unregistered document. The DAGPA
is compulsorily registerable document. Clause-1 of the DAGPA as it
stood initially envisaged registration within three months or after
mutation was completed, whichever is 'earlier'. The word 'earlier' is
struck-off and word 'later' is written in ink and four persons put their
signatures at the place of correction. It does not contain the signatures
of respondents 5 and 6. Respondents 5 and 6 contend that corrections
were made behind their back while appellant contend that respondents
5 and 6 are aware of the corrections. The issue of correction and its
impact on terms of agreement are not gone into as they have to be
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considered in the arbitral proceedings. Fact remains the DAGPA is not
registered. A document which is compulsorily registerable under
Section 17 of the Indian Registration Act, but not registered is
inadmissible in evidence. Whether arbitration clause in an
unregistered document is enforceable by a party to an agreement is
also not gone into. Again this has to be considered in arbitral
proceedings. Suffice to note, as rightly held by the trial Judge, contents
of Ex.P4 cannot be looked into for any purpose to uphold the
contention of appellant.
19. It is not in dispute that respondents 5 and 6 each owned
Ac.1.00. Out of 9009 square yards on which DAGPA was entered into,
their extent of land shown was 3659 square yards. It is not shown
before the trial Court as to what extent of land of respondents 5 and 6
respectively covered in the 3659 square yards and what extent of their
shares in 3659 square yards are affected by sale deeds executed in
favour of 9th respondent. In the absence of clarity on respective
extents, appellant cannot plead balance of convenience and equities in
his favour. Further, appellant entered into separate agreement with
respondents 1 to 4 covering their extent of land only and obtained
building permission and is constructing the building. On the contrary,
the 9th respondent has also started development activity exclusively
covering the land purchased by him from 5th respondent. Thus, it is
no more possible to develop comprehensively covering the total land as
originally envisaged in DAGPA dated 30.10.2007. Further, respondent
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no.9 was not a party to DAGPA. His purchase from 5th respondent was
not pendente lite. Further, DAGPA was rescinded by respondents 5
and 6. These aspects also have a bearing while considering application
to grant interlocutory orders filed under Section 9 of the Act, 1996.
20. As noticed by the trial Court in both Arbitration O.Ps., the
appellant is not in possession of land belonging to respondents 5 and
6, later sold to 9th respondent. In the facts of this case, if the appellant
succeeds in the arbitration proceedings, he may be entitled to
damages.
21. Thus, prima facie case is not made out, balance of convenience is
not in favour of appellant and it cannot be said that appellant would
suffer irreparable injury to grant injunction. The trial Court considered
all aspects and declined to exercise equity jurisdiction. Trial Court
committed no error in rejecting interlocutory applications. Both Orders
are made on due consideration of issues raised by both parties. They
do not call for interference. For all the aforesaid reasons, Appeals fail.
They are accordingly dismissed. No order as to costs. All pending
miscellaneous applications stand closed.
_______________________
P.NAVEEN RAO, J
_______________________
J.SREENIVAS RAO, J
Date: 10.02.2023
KKM
PNR,J & JSR,J
COMCA No.25 of 2019 and
CMA No.1303 of 2017
HON'BLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SRI JUSTICE J.SREENIVAS RAO
COMMERCIAL COURT APPEAL NO.25 OF 2019
&
CIVIL MISCELLANEOUS APPEAL NO.1303 OF 2017
Date: 10.02.2023
kkm
