Bombay High Court
Shree Sai Prerana Co-Operative Housing ... vs Irshad Abdul Hamid Khan on 14 December, 2018
Author: A.K. Menon
Bench: A.K. Menon
hcs
cap788.18.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION NO.788 OF 2018
Shree Sai Prerana Co-operative
Housing Society Ltd.
having its office at
Penkarpada Taluka,
District Thane .. Petitioner.
Vs
Mr.Irshad Abdul Hamid Khan
Proprietor of M/s.Dream House Realtors
Flat No.103, B-32, Amrapali Building,
Sector 11, Shanti Nagar, Mira Road (E),
District Thane .. Respondent
Mr.Mayur Khandeparkar with Mr.Rashmin Khadekar and A.R.Sawant i/b S.K.
Legal Associates for the petitioner.
Mr.A.R.Pitale i/b Rehana Begum for the respondent.
CORAM : A.K. MENON, J.
DATED : 14TH DECEMBER, 2018.
P.C. :
1. The petitioner is a Co-operative Society registered under the
Maharashtra Co-operative Societies Act, 1960. The respondents are developers engaged for redevelopment of the society. The petitioner is aggrieved by the order dated 4th May, 2018 passed by a sole arbitrator on two applications filed under Section 17 of the Arbitration and Conciliation 1/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt Act, 1996 ("Act"). The petitioner sought two out of several reliefs in its Section 17 Application. The relevant prayer clauses (a) and (e) read as under :
"(a) that pending the Arbitration Proceedings and the passing of an award therein and for a period of 8 weeks thereafter this Hon'ble Court be pleased to restrain the Respondent themself, its servants, agents, representatives or any other person/s claiming/acting through or under them, by an temporary order of injunction of this Hon'ble Court from in any manner proceeding further in accordance with and/or under the Development Agreement dated September, 2010 and Power of Attorney dated 26th February, 2010 for creating any further third party rights of any nature whatsoever and/or taking any steps in respect of the said property and/or any part thereof.
(e) that pending the arbitration proceedings as well as pending the hearing and final disposal of this Petition, this Hon'ble Court be pleased to restrain the Respondent themself, its servants, agents, representatives or any other person/s claiming/acting through them, by an order of injunction of this Hon'ble Court from in any manner entering into the said property, disturbing and obstructions the possession and 2/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt activities of the Petitioner and/or any Contractor/Developer to be appointed by the Petitioner on said Property or any part thereof."
2. The respondent also filed an application under Section 17 claiming the following relief :
"(a) That pending the hearing and final disposal of this Arbitration proceedings the Petitioner be restrained from implementing resolution (if any) passed in the said General Body meeting to be held on 29th April, 2018 for appointing new Developer in place and instead of the Applicant/Original Respondent herein for the project known as "Dream House"
situated Penkerpada, Mira Road (E), Taluka and Dist. Thane on the property bearing old Survey No.259, new survey no.1, Hissa No.18 admeasuring 2300 sq. metres."
3. The Tribunal heard both applications and by a common order restrained the respondent from proceeding with work under the development agreement of September 2010 and Power of Attorney dated 26th February, 2010. The Tribunal recorded an undertaking on behalf of the respondent that pending hearing and final disposal of the arbitral proceedings, the petitioner society was restrained from entering into 3/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt executing and registering a new Development Agreement with any new developer. However, short of executing and registering an agreement, the order does not preclude the society from taking such steps and in assisting the new developer chosen, to enable him to make appropriate applications before the concerned statutory authorities. Anything done in this regard shall be subject to final outcome of the arbitration proceedings. The Tribunal directed a copy of the impugned order to be placed before the new developer chosen by the society and in the meantime physical status quo on the property was not to be altered by either party. In effect both parties were directed to maintain status quo. The petitioner society is aggrieved by this order.
4. Mr.Khandeparkar, learned counsel on behalf of the petitioner submitted that the building to be redeveloped consisted of members who are retired Government employees. After the development agreement was signed, on 4th November, 2010 a commencement certificate was issued in favour of the society. Although construction initially commenced, the same came to standstill. He submitted that the developer had in breach of agreement, agreed to sell certain flats without consent of the petitioner. The building having not been completed, the society invoked the arbitration agreement between parties, issued notice of termination and filed an application under section 9 of the Act. Mr.Khandeparkar submitted that there is no challenge to notice terminating the agreement and the society 4/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt had also appointed a new developer. It is therefore submitted that the respondent was not justified in continuing with the project.
5. Mr.Khandeparkar relied upon contents of section 9 petition, affidavit in reply, rejoinder and the pleadings before the Arbitral Tribunal. In particular my attention was invited to the application filed on behalf of the respondent in which the only prayer was for restraining the society from implementing the resolution appointing a new developer in place of the respondent and in relation to project forming subject matter of arbitral reference.
6. Mr.Pitale, learned counsel on behalf of the respondent submitted that termination was bad. It is submitted that the said plot was alloted to the petitioner society on 27th August, 2009, however, possession letter of the said plot was not granted. The petitioner society had no funds for depositing the value of plot and hence the respondent deposited Rs.26,79,290/- with the State Government pursuant to which a possession letter came to be issued. After receipt of the possession letter and upon taking possession of the land, the respondent found that the land was not levelled and a large sum of money was required to be spent for leveling the land. In addition, there were encroachments and disputes had to be settled, litigation also ensued. The respondent claim to have spent money in leveling the said land and building compound. Thereafter the development agreement came to be executed. He submitted that total FSI available from the said plot was 29,697 sq. ft. out 5/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt of which 19,780 sq. fts. were to be utilised for housing 52 members of the society. The remaining FSI could be utilised for free sale along with TDR loaded. The IOD was obtain later in the name of the respondent and the petitioner society.
7. The Commencement certificate from Mira Bhayandar Municipal Corporation was issued in joint name of the petitioner society and the respondent through their architect. It is contended that plinth completion has been achieved in March 2011 and by December 2013 65% of the work was completed. The architect meanwhile was pursuing the matter of TDR and such efforts continued. Mr.Pitale submitted that the issue of utilisation of TDR was time consuming and the District Collector, Thane had informed the society about the requirements for grant of TDR. It was submitted that there were various communications entered into between the Office of the Collector and Mira Bhayandar Municipal Corporation on the aspect of permission for use of TDR. The petitioner society did not have necessary funds to remit the premium amount payable for loading of TDR. Accordingly, a sum of Rs.22,37,900/- has been paid over by the respondent towards premium to load TDR.
8. Mr.Pitale, learned counsel for the respondent submitted that on 4th April 2016 the District Collector had issued a letter in respect of approval of 42 new members and Mira Bhayandar Municipal Corporation was expected to issue a commencement certificate for use of TDR on completion 6/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt of formalities such as NOC of the fire department and approval of the basic plan. In this view of the matter when the respondent approached the Corporation to pursue issue of grant of TDR, they were told that they could not be entertained since the society vide letter dated 27th October, 2015 contended that without consent of the society, no person connected with the said project should be entertained. In view of this communication the Corporation did not process the request for loading of TDR. In the meantime the application under section 9 the Act came to be filed and arbitrator came to be appointed. He, therefore, contended that the order passed by the Tribunal is a fair order since the arbitration proceedings are currently underway. Mr.Pitale submitted that both parties were directed to maintain status quo. The order is one which is fair and protects interest of the parties and that no interference is called for.
9. According to Mr.Pitale, the society has during pendency of the interim application called a Special General Body meeting and issued a letter dated 30th April 2018 seeking to appoint another developer. The society has even sought to collect monies in respect of free sale property and which was contrary to original agreement dated September 2010 and supplementary agreement said to have been proposed mutually. Mr.Pitale submitted that the respondent is ready and willing to complete the project. The respondent has till date completed 65% construction work as per the sanctioned plan and 35% remaining is only finishing work. It is stated that 7/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt when TDR loading was in contemplation the society's office bearers have been interfering and creating obstructions because they have a personal interest in trying to exclude the respondent from the project and including the new developer. The respondent's claim to have invested about Rs.12 crores in the project.
10, I have heard learned counsel for the parties at length and in the course of hearing, I had occasion to refer to procedural order dated 5th September, 2018 by which a meeting was fixed for framing points for determination. The arbitrator has framed 17 issues, the first of which is whether the society proves that it has cause of action to terminate the Development Agreement dated September 2010 and whether the said termination is legal, valid and binding upon the respondent. In view of fact that such issue has been framed, the claimant - petitioner's contention that termination is not subject matter of challenge in the arbitral reference cannot be accepted. There is specific issue which deals with validity of termination and its legality and validity. The other issues relate to monetary claims and also readiness and willingness of the respondent to complete the work forming subject matter of the development agreement. The schedule of further progress in arbitration has been fixed and both parties are proceeding with the reference. The order passed by the arbitrator after recording the submission of the parties, took note of the fact that the 8/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt claimant pressed only prayer clauses (a) and (e) reproduced above. Prayer
(e) was not granted.
11. The impugned order sets out the factual background in which the plot of land came to be allotted and how the society resolved to enter into the development agreement. The development was to be completed within 15 months from commencement certificate which was issued on 4th November, 2010. The case against the respondent has been recorded. Admittedly, there was no construction activity since July 2011 but the society has issued legal notice and invoked arbitration in 2017 and it is only in January 2018, that the society has terminated the agreement. A decision was taken on 21st January, 2018 at General Body meeting to terminate the development agreement. On 8th February, 2018 another notice was issued to the respondent to which they did not reply and later in February 2018 an attempt was made to arrive at a settlement. Further correspondence ensued and the claimant society filed an application under section 9 of the Act. The society thus appears to have invoked arbitration, even before termination of the agreement.
12. As far as the respondent is concerned, it is contended that they had put an enormous efforts for removal of encroachments, large sums of monies have been spent for leveling the land, constructing a water pond and putting up a bore well. The construction activity was in full swing till 2013 and it came to halt only in view of attempts to load TDR. Since this was plot 9/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt allotted for purpose of retired Government employees, in free sale component, there were 38 persons out of which 35 were disapproved by the Collector of Thane resulting in refund to be made to those persons. The respondent claims to have made several payments to society including a sum of Rs.22,37,900/- to enable the respondent to obtain permissions for loading TDR and that subsequent development has been obstructed on account of conduct of the claimant society.
13. On the other hand, the petitioner society has contended that it is on account of default of the respondent that the society had to engage a new developer and had resolved to do so at the meeting held on 29th April, 2018. According to them the respondent had accepted large sums of monies from various persons in name of the respondent and their sister concern which facts have been suppressed and has resulted in breach of the order passed by this Court on 6th April, 2018. The crux of the petitioner's case is that it is the society of Government middle class strata, who are waiting for houses for several years. The respondent has denied that 15 months period began from 4th November, 2010 since commencement certificate pursuant to the additional TDR is still awaited and that the municipal corporation was reluctant to grant further permission on account of the letters addressed by the members of society.
14. Having considered the pleadings and documents, the Tribunal observed that commencement certificate was obtained on 4th November, 10/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt 2010 several payments had been made by the respondent. Save and except an alleged payment of cash of Rs.30,00,000/- and Rs.3,88,000/- in respect of Wing "A" of the proposed building, the payments are not disputed by the society. Obviously no construction has been carried out after July 2013. The respondent has apparently taken steps for obtaining approvals. The claimant society has addressed letters to the corporation complaining about conduct of the respondent. Without prejudice meetings were held in February 2018. Under the development agreement, the respondent has paid a sum of Rs.26,79,290/- to the society towards payment of cost of land to the Government. To that extent, the contention of the respondent is that they had initiated project and made remittances. It is in this background that the Tribunal observed that it would be necessary to interpret the provisions of the agreement after parties had led evidence although prima facie it did appear that period of 15 months for completion of project would commence from the date of commencement certificate for TDR and permissions to be issued by the authority. The Tribunal has considered the fact that the society chose to terminate agreement only in the year 2017 although it has contended that period of commencement began from 4th November, 2010. In paragraph 34 of the order, the Tribunal recorded that the respondent had not made out prima facie case as prayed for in its application. However, the Tribunal has come to conclusion that it is necessary to test the rival claims especially since the society waited till 11/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 ::: cap788.18.odt February 2018 and continued to have without prejudice meetings and no prejudice would be caused by waiting for few more months for a decision apropos the rights of the parties. The tribunal, therefore, found that physical status quo should not be altered.
15. I am unable to find fault with the approach. Although Mr.Khandeparkar's case was to the effect that paragraph (iii) of the operative order recorded that the society is not precluded from taking steps and enable the developer to make appropriate application yet, it was subject to the final award and the developer chosen by the society was made aware of the order passed by the arbitral tribunal. In my view the approach of the arbitral tribunal is a balanced one and not the one which finally affects rights of the parties. The petitioner society had moved petition under section 9 and perusal of the order dated 19th April, 2018 reveals that consent order was passed appointing the arbitrator. The section 9 petition was to be treated as petition under section 17 and in the meantime the respondent had undertaken not to create third party rights till further orders. If the society was so keen to proceed with project through another developer it could have no doubt pursued its application under section 9 to the logical end but they consented to go before the arbitral tribunal. The parties also agreed that the respondent's counter claim could also be referred to arbitration. The approach of sole arbitrator in my view is fair. There is nothing perverse about the order impugned in this petition.
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16. Moreover, the points for determination were framed by consent and included an issue as to whether a cause of action had arisen in 2010 to terminate the development agreement and that termination was legally valid and binding. If this issue is decided against the claimant it might well be that the order of status quo would be fully justified, however, since the issue is now open it would in my view appropriate not to disturb the interim order. For the aforesaid reasons, I am not inclined to interfere with the impugned order. In the circumstances, the challenge fails and I pass the following order :
(a) Arbitration Petition is dismissed.
(b) No order as to costs.
(A.K.MENON,J.) 13/13 ::: Uploaded on - 14/12/2018 ::: Downloaded on - 27/12/2018 07:42:06 :::