Bombay High Court
Meeti Developers vs Punjab National Bank Workers ... on 18 February, 2021
Equivalent citations: AIRONLINE 2021 BOM 477
Author: Vinay Joshi
Bench: S.J. Kathawalla, Vinay Joshi
Digitally signed
Swaroop by Swaroop S.
S. Phadke
Phadke
Date: 2021.02.24
18:58:46 +0530 35 APPL 3739 OF 2021.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPEAL (L) NO.4739 OF 2021
IN
ARBITRATION PETITION (L) NO.1789 OF 2021
Meeti Developers,
a Proprietary concern of Meeti
Investment & Consultancy Services
Pvt. Ltd., having its office at 2nd Floor,
MMC Centre, Near Vikas Park, Mith
Chowk, Link Road, Malad (W),
Mumbai - 400 064 ... Appellant
versus
Punjab National Bank Workers Co-operative
Housing Society Limited,
a Co-operative housing Society registered
under the provision of the Maharashtra
Co-operative Housing Societies Act, 1960,
New M.H.B. Colony, Gorai Road,
Borivali (W), Mumbai - 400 091 ... Respondent
Mr. Anoushak Davar with Mr. P.J.Gada i/by Dhanuka and Partners, for Appellant.
Mr. Rohaan Cama with Mr. Yogesh Pandey, Ms. Snehal More, Mr. Sachin Mhatre
i/by Mhatre Law Associates, for Respondent.
CORAM: S.J. KATHAWALLA &
VINAY JOSHI, JJ.
DATE: 18th FEBRUARY, 2021 P.C. :
1. The present Appeal arises from an order passed by the learned Single Judge of this Court (Coram : G.S.Patel, J.) dated 11 th February, 2021 in Cross Arbitration ssp 1/15 35 APPL 3739 OF 2021.doc Petitions filed under Section 9 of the Arbitration and Conciliation Act, 1996 ('the Act'). The Respondent herein ('Society') was the Petitioner in Arbitration Petition (L) No.8189 of 2020, while the Appellant herein ('Developer') was the Petitioner in Arbitration Petition (L) No.1789 of 2021.
2. The Society in Arbitration Petition (L) No.8189 of 2020 has sought reliefs inter alia to ensure that they could proceed with the redevelopment of their property without interference from the Developer, having terminated the Agreements with the Developer vide a final termination letter dated 12th November, 2020. The Developer on the other hand, in Arbitration Petition (L) No.1789 of 2021 sought orders inter alia to restrain the Society from executing any Agreement for granting development rights in the subject property to any other Developer and from parting with possession of the subject property or applying for any permissions for development thereof. The competing sets of prayers have been reproduced by the learned Single Judge in paragraph Nos.4 and 5 of the impugned order.
3. By the impugned order, the learned Single Judge has allowed the Petition filed by the Society in terms of prayer clauses (c) to (j) thereof, and has dismissed the Petition filed by the developer. Aggrieved by this order, the Developer has filed the present Appeal and has moved the same before us.
4. The facts relevant for deciding the present Appeal are in brief set out hereunder :
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35 APPL 3739 OF 2021.doc 4.1 The subject property which is to be developed comprises of two properties, one being a property leased to the Society by MHADA on which there is a ground plus one floor structure with 16 flats and the second being the adjoining property on which 8 shopkeepers were occupying shops thereon. It was agreed by all the parties concerned to jointly develop the two plots, and towards this end on 15 th December, 2004, the Developer and the Society, together with the 8 shopkeepers as confirming parties, executed a Development Agreement whereunder rights were granted to the Developer to develop the property and obligations were imposed on the Developer to construct the rehab component for the existing flat occupiers and shopkeepers. Under the Development Agreement, the Developer was to construct the alternate accommodation forming the rehab component within 24 months from the obtainment of the Commencement Certificate. Thereafter, certain further documents came to be executed, including a Deed of Rectification cum Confirmation to the Development Agreement in which it was inter alia provided that the Developer was to allot newly constructed premises to the members / shopkeepers within 24 months from the demolition of the existing structure.
4.2 Admittedly, the 16 flat occupiers vacated their respective premises by or about 2008-2009. On 9th December, 2009 the Society of the shopkeepers came to be amalgamated with the Respondent Society herein and on 24 th January, 2011 an agreement was executed inter alia with the Developer noting an amalgamation of the ssp 3/15 35 APPL 3739 OF 2021.doc societies and noting that all decisions pertaining to the shopkeepers would also be taken by the Respondent Society herein, for the purposes of the redevelopment. 4.3 It appears that between 2011 to 2017, no development whatsoever took place at the site and the project was almost entirely stalled. Although, the developer contends that this was due to certain MHADA policy decisions, which contention is disputed by the Society, in view of what has been held by us below, we are not required to enter into this controversy.
4.4 On 13th December, 2017, an Addendum to the Development Agreement ('Addendum') was executed by the parties herein. Pertinently, the Addendum appears to have been signed by the individual members which included the 16 flat occupiers and the 8 shopkeepers. Under this Agreement, it was inter alia provided as under :
(i) Recital C provides that with a view to strictly enforce the time periods set out in the Addendum, which were to be treated as of the essence, and "to give a chance to the developer to expeditiously commence the smooth redevelopment of the Society as per the schedule and terms defined hereunder", the Addendum was being executed.
(ii) Clause 2 provided that the Society was renewing its grant of development rights to the Developer ".... strictly subject to the condition that the Developer shall adhere to the time schedule as recorded in this agreement in the form of a Bar Chart..." which was annexed to the Addendum as Annexure "D". It was further reiterated that the Developer was required to ".... unfailingly adhere to the Schedule as enumerated in ssp 4/15 35 APPL 3739 OF 2021.doc the Bar Chart..."
(iii) Clause 5 provided that the Developer would take full responsibility for the financial burden of the project.
(iv) Clause 13 provides for the detailed timeline, which was undertaken to be strictly adhered to by the Developer. This timeline inter alia required the Developer to obtain :
(a) the NOC from MHADA with all requisite permissions within 90 days of the Addendum;
(b) the IOD from the Municipal Corporation within 90 days from receipt of the NOC from MHADA;
(c) the Commencement Certificate within 30 days of receipt of the IOD subject to the members having vacated;
(v) The actual construction work was to be started within 15 days from receipt of the Commencement Certificate and possession of the new premises was to be given to the members within 30 months from the date of the Commencement Certificate along with the Occupation Certificate covering at least the area allotted to the members.
(vi) At this point only the shopkeepers were/are in occupation, since the flat occupiers had vacated their respective premises in the year 2008 and since then are staying in transit accommodation. The shopkeepers had agreed to vacate their shops ssp 5/15 35 APPL 3739 OF 2021.doc within 30 days from the receipt of the IOD.
(vii) The second clause 12, which followed the above clause 13, provided that if the Developer failed to obtain the approvals and start the construction work within the stipulated period of 255 days (approximately 8.5 months) from the execution of the Addendum, the Developer was liable to pay a penalty of Rs.30,000/- per day for a period of 30 days, failing which the Addendum would be treated as cancelled without recourse to the Developer. It was further specifically agreed that if the Developer failed to start the project work within the stipulated time, then all the Agreements executed between the parties "shall automatically get cancelled and revoked thereafter, without any recourse to the Developer herein. The Society will be entitled to appoint new developer as per the terms and conditions to complete the project without any recourse to the Developer".
(viii) Clause 17 sets out inter alia the rent to be paid in lieu of temporary alternate accommodation and required the Developer to furnish a refundable fixed deposit of Rs.20,00,000/- to the Society, to ensure compliance with the timelines stated above. 4.5 It appears from the record that the Developer eventually only obtained the NOC from MHADA as late as on 15th June, 2020, approximately 2.5 years after the execution of the Addendum. The IOD was never obtained by the Developer. Consequently, the Commencement Certificate obviously was not obtained and the demolition / construction has not even begun till date.
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35 APPL 3739 OF 2021.doc 4.6 The financial requirements including of the fixed deposits which was to be provided on execution of the Addendum have not been complied with and further since June 2019 no rent has been paid to the members.
4.7 There is some correspondence exchanged between the parties in 2019-2020 where the Developer has called upon the Society to negotiate with it and to discuss certain terms, and likewise certain members of the Society have issued correspondence to the Developer setting out their terms for the Developer to proceed with the development, having regard to the obvious delay that had ensued. However, the admitted position is that none of these discussions and negotiations fructified into any written extension or alteration of the terms of the Addendum. In fact, relations have only worsened with the Developers having even filed an FIR against the Society members inter alia for criminal trespass on the subject property. 4.8 Eventually, on 12th November, 2020 the Society terminated the Development Agreement and other documents and shortly thereafter, on 21 st November, 2020 issued a public notice to this effect. Upon receipt of the above termination notice, the Developer did not approach this Court under Section 9 of the Act. The Society then invoked arbitration on 1 st December, 2020 and on 2nd December, 2020 filed its Arbitration Petition seeking the reliefs referred to above. On 17th December, 2020 an ad-interim order came to be passed whereunder certain injunctive reliefs were granted in favour of the Society. Thereafter, after more than a ssp 7/15 35 APPL 3739 OF 2021.doc month had passed, the Developer filed its Arbitration Petition on 18 th January, 2021. 4.9 In the meantime, the Society entered into a Development Agreement with Sailee Developers, a copy of which was tendered across the bar during the hearing, which we are informed has been lodged for adjudication of the stamp duty. Further, on 19th January, 2021, the IOD was received in the name of the Society through the new architect appointed by the Society (admittedly not the architect of the Appellant Developer).
4.10 Both Petitions were heard by the learned Single Judge on 11 th February, 2021 and by the impugned order the learned Single Judge allowed the Petition filed by the Society in terms of prayer clauses (c) to (j) thereof. We are informed that after the order was passed, the Society carried out a bhoomi pooja at the site and thereafter, attempts were made by the Developer's personnel to re-enter the premises on the night of 16th February, 2021, resulting in an FIR being lodged by the Society.
5. We have perused the impugned order and have heard and considered the submissions of the learned Counsel appearing for both sides.
6. At the outset, we must reiterate the well settled legal position that an Appeal Court ought not to lightly interfere with an interim order passed by the learned Single Judge unless it could be shown that there is some perversity or that the order is so unreasonable that it cannot possibly be sustained. The impugned order in the present case suffers from no such infirmity. The learned Single Judge has at considerable ssp 8/15 35 APPL 3739 OF 2021.doc length set out the history of the matter and analysed the various provisions of the 2017 Addendum. The learned Single Judge has thereafter, dealt with the arguments canvassed on behalf of the Developer and has dealt with the same, correctly, in our view. The learned Single Judge has noted the defaults by the Developer and the failure to adhere to the timelines agreed in the Addendum and has eventually concluded that the relief sought for by the Society ought to be granted as the interest of justice warranted the same and the balance of convenience clearly weighed in favour of the Society, several of whose members have been without a roof over their heads for more than 12 years. The learned Single Judge eventually held that if the Developer was aggrieved by the termination, its remedy lay in a damages claim in arbitration and all rights and contentions of the parties were kept open to be agitated in the arbitration. The learned Single Judge has passed the impugned order being entirely cognizant of the legal position and the scope and nature of the relief being sought and being granted. We find no infirmity or perversity with the order of the learned Single Judge, and on this ground alone the Appeal deserves to be dismissed.
7. Despite the above, we are hereinafter dealing with the submissions canvassed on behalf of the Developer and the response thereto by the Advocate for the Society.
8. Mr. Davar on behalf of the developer has submitted that the parties were in negotiations until August, 2020 and he invites our attention to a communication dated ssp 9/15 35 APPL 3739 OF 2021.doc 3rd August, 2020 from one Ajay Parkar, who he states was a committee member of the Society, stating inter alia that if the Developer was agreeable with the terms and conditions set out in the enclosed letter, only then would the Society be willing to meet with the Developer. Mr. Davar submits that from the documents, it is thus clear that the parties were in talks till August 2020 and that the time fixed under the Addendum was thus extended by conduct of the parties.
9. Mr. Cama on the other hand, opposes this submission and points out that the mere fact that the members were discussing with the Developer cannot enure to the benefit of the developer as the members were in a desperate position and were trying to salvage the situation as best as they could having regard to the gross delay by the Developer. He further submits that the discussions did not fructify and there was no extension of time even agreed to by the Society.
10. Having considered this submission, we are not inclined to accept Mr. Davar's contention. To a question posed by the Court, Mr. Davar fairly stated that nothing had come of these various negotiations. Furthermore, admittedly, there is nothing in writing which was shown to us which can be considered to be an extension of the written timelines which have been set out in the Addendum and have been expressly agreed by the Developer to be strictly adhered to. The mere fact that certain discussions were ongoing between the parties does not amount to a waiver or extension of the timelines set out in the Addendum or a waiver of the default ssp 10/15 35 APPL 3739 OF 2021.doc committed by the Developer.
11. Even if we were to ignore the fact that there has been a tremendous (and largely unjustifiable) length of time that has passed since the original Development Agreement and consider events only after the Addendum of 13 th December, 2017, in our view, prima facie, there appears to be a complete failure on the part of the Developer in complying with the timelines set out in the Addendum. Admittedly, the NOC from MHADA which was agreed to be obtained by the Developer within 90 days from the execution of the Addendum, was obtained almost 2.5 years after the execution of the Addendum i.e. only on 15 th June, 2020. Even thereafter, the IOD which was agreed to be obtained within 90 days of the MHADA NOC, was not obtained by the Developer; the same was eventually obtained through the Society's new Architect on 19th January, 2021. There is no cogent justification or explanation given for the delay between 2017 and 2020.
12. Mr. Davart thus contends that certain permissions were in fact obtained by the Developer. The terms of the Addendum and the nature of the permissions to be obtained, as also the timeline within which the same were to be obtained, are clearly set out and have admittedly not been complied with. Clause 13 read with Clause 12 makes it very clear that if the timelines stipulated in the Addendum were not complied with, then all the Agreements culminating in the Addendum, would automatically stand cancelled and revoked and the Society would be entitled to appoint a new ssp 11/15 35 APPL 3739 OF 2021.doc developer without recourse to the Appellant Developer. The Society has accordingly terminated the Agreements with the Developer and has proceeded to take steps for appointment of a new Developer and has in fact obtained the IOD thereafter, through its own Architect. Having regard to the failure by the Developer to comply with the timelines, and having regard to the terms of the contract / Addendum agreed to by the Developer, it does not lie with the Developer to now contend that his having purportedly obtained a few permissions, would justify the written terms of the contract being given a go-by.
13. It is trite that a party must be held to the terms of its bargain. Having failed to fulfill its part of the bargain, the Developer cannot now seek to restrain the Society from enforcing the provisions of the Addendum which entitle it to terminate the Agreements and proceed with the redevelopment through a different builder.
14. Even otherwise, on the factual matrix before us, we cannot allow the developer continuing to hold the project to ransom despite having miserably failed to comply with the timelines which were solemnly agreed to by the Developer. It is also important to note that the Society terminated the Development Agreement on 12 th November, 2020 and for over 2 months, the Developer made no attempt to approach the Court or seek a stay of the termination. In the meantime, the Society has taken steps to appoint a new developer and has obtained the IOD through its new architect. This delay also militates against grant of any interim relief to the Developer pending ssp 12/15 35 APPL 3739 OF 2021.doc the arbitration.
15. A further contention that is raised is in relation to non-payment of rent in lieu of temporary alternate accommodation from June 2019 onwards. Mr. Davar submitted, placing reliance on a letter dated 12 th November 2019 (Exhibit N to the Developer's Petition), that rent had been offered to the members in November 2019 itself. We have perused the letter and we must note that there is no offer as such to pay the rent and nor is any rent in fact tendered. All that there is, is an invitation to the Society members to meet the Developer with a hope expressed that parties would be able to be on the same page regarding pending processes including rental payouts. Admittedly, thereafter no rent was actually tendered to the members of the Society until disputes reached a head in August-September 2020.
16. Mr. Davar submits that his client is ready and willing to pay the arrears of rent at this stage and offered to do so. We are afraid that this offer is too little and too late. Admittedly, the flat occupiers have been out of their flats since 2008-2009; rent has not been paid to them or the shopkeepers since June 2019; the timelines in the Addendum have been entirely breached; for several years the Society members have waited with hope that progress would be made, only to have their hopes dashed at every turn. Coupled with the above is the fact that there is an FIR filed by the Developer against the Society members and recently an FIR filed by the Society members against the Developer's personnel. It is therefore clear that the Society has ssp 13/15 35 APPL 3739 OF 2021.doc lost all confidence in the Developer. This Court has time and again held, including in Jal Ratan Deep CHS V/s. Kumar Builders Realty Mumbai Pvt. Ltd. [Arbitration Petition (L) No. 219/2015] and Gopi Gorwani V/s. Ideal CHSL [Notice of Motion No. 1393 of 2012 in Suit No. 762 of 2012] that once Society has lost confidence in the Developer, it would not be appropriate to foist an unwilling Society with a developer in whom it clearly does not have any faith/confidence. This is of course merely an additional factor, over and above our conclusion that on merits the Developer is not entitled to interim reliefs having regard to its own defaults and delays.
17. For the reasons stated above, and without delving into the other submissions of Mr. Cama that the Developer clearly lacks funds and that there are other projects of this Developer which are similarly stuck, as also proceedings filed under the Insolvency and Bankruptcy Code against this Developer, we are satisfied that the Appeal has no merits and needs to be dismissed.
18. It will no doubt be open for the Developer to seek damages in arbitration if it is in a position to satisfy the Arbitral Tribunal that the termination was wrongful. However, this cannot be at the cost of holding up the Society's redevelopment any longer, especially since the members of the Society have been out of their homes for years. The Arbitral Tribunal has already been constituted and parties are at liberty to make their respective claims before the Arbitral Tribunal, including for the costs of the present litigation.
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19. The Appeal is accordingly dismissed.
( VINAY JOSHI, J. ) ( S.J.KATHAWALLA, J.)
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