Bombay High Court
Limited vs Mumbai International Airport Private on 23 August, 2013
Author: Ranjit More
Bench: Ranjit More
Arb. Pet. Ld. 902/13.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION [Ld.] PETITION NO. 902 OF 2013
Housing Development and infrastructure )
Limited, a company incorporated under )
the Companies Act,1956, having its )
registered office at 9-01, HDIL Tower, )
Anant Kanekar Marg, Bandea (Esat), ) .. Petitioner
Munbai 400051. )
Versus
1 Mumbai International Airport Private )
Limited, a private limited company )
incorporated under the Companies )
Act, 1956, having its registered office )
at Terminal 1B, Chhatrapati Shivaji )
International Airport, Santa Cruz )
(East), Mumbai 400 099 )
)
2 Airport Authority of India having its )
office at TS Complex, Near Sahara )
Cargo, Sutar Pakhadi Road, Andheri )
East, Mumbai- 400 099 )
)
3 The State of Maharashtra through )
Urban Development Department & )
Housing Department served through )
Government Pleader, High Court, )
(Original Side),Bombay )
)
4 The Collector, Mumbai Suburban )
District, Bandra, Mumbai. )
)
patilsr 1/ 74
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5 The MMRDA having its office at )
BandraKurla Complex, Bandra (East), )
Mumbai 400 051. )
)
6 The Slum Rehabilitation Authority )
having its office at Administrative )
Building, Anant Kanekar Marg, Bandra )
(East), Mumbai 400 051. ) .. Respondents
)
Mr. Mukul Rohatgi, Mr. Ravi Kadam, Mr. T. N. Subramaniam, Mr.
Arif Bookwala, Mr. P. K. Dhakephalkar Senior Advocates with
Mr. Rajesh Shah, Gaurav Joshi, Mahesh Agarwal, Satyen Vora,
Piyush Raheja, Chetan Yadav, Sahil Gandhi i/b Markand Gandhi
& Co., for the Petitioner.
Mr. Janak Dwarkadas, Mr. Virag Tulzapurkar Senior Advocates
with Dr. Birendra Saraf, Farid Karachiwala, Ms. Shoma Maitra
i/b Wadia Ghandy & Co., for Respondent No. 1.
Mr. Satish Upadhay i/b M. V. Kini & Co., for Respondent No. 2.
Mr. U. S. Upadhay, AGP for Respondent Nos.3 and 4.
Ms. Kiran Bagalia for Respondent No.5.
Mr. Shailesh Shah, Senior Advoate with Mr. G. Utangale i/b
Utangale & Co., for Respondent No. 6.
Coram : RANJIT MORE, J.
Arguments were concluded on : July 23, 2013. Judgment is pronounced on : August 23, 2013.
Oral Judgment :
1. The Petitioner by invoking the provisions of section 9 of the Arbitration and Conciliation Act, 1996 [for patilsr 2/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
short "the said Act"] is seeking following interim measures from this Court :
"(a) that pending the hearing and final disposal of the arbitral proceedings, this Hon'ble Court may be pleased to restrain the Respondent No.1 by an order and injunction from acting in furtherance of the notices of termination both dated 6 th February 2013 (at EXHIBTS "U" and "V" hereto) including by seeking to re-tender or re-award the SRA project or carry out the balance work through or any third party and seeking to create any third party rights on the encroached areas;
(b) that pending the hearing and final disposal of the arbitral proceedings, this Hon'ble Court be pleased to restrain the Respondent No.1 from in any manner either by itself or through its servants, agents and assigns from dealing with or in any manner seeking to alienate, encumber, transfer or create any third party rights in respect of the 65.2 acres as provided in Annexure-5 to the said slum rehabilitation agreement which are to form part of the Petitioner's entitlement and are to be included within 187 acres of non-
transfer assets available at the Airport;
(c) that pending the hearing and final disposal of the arbitral proceedings, this Hon'ble Court be pleased to order and direct Respondent No.1, their servants and agents to maintain status quo in respect of non- transfer assets and restrain from constructing in any manner non-transferable assets on the entire airport land;
(d) that pending the hearing and final disposal of the arbitral proceedings, this Hon'ble Court may be pleased to order and direct the Respondents to maintain status quo in respect of the residential colonies project contemplated under Clause 5 of the said slum rehabilitation agreement including utilising patilsr 3/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
the excess FSI in respect thereof;
(e) that pending the hearing and final disposal of the arbitral proceedings, the Respondents by themselves, their servants and agents be restrained from in any manner whatsoever seeking to take possession of the said rehabilitation tenements constructed by the Petitioner and/or seeking to rehabilitate any slum dwellers thereon without withdrawing the notice of petition;
(f) that pending the hearing and final disposal of the arbitral proceedings, the Respondents be directed to deposit and not to appropriate the amount of Rs.25 Crores received by Respondent No.1 on invocation of the said Bank Guarantee in a "NO LIEN ACCOUNT"
and hold the said amount as a deposit with Respondent No.1;
(g) that pending the hearing and final disposal of the arbitral proceedings the Respondents, their servants and agents be restrained from in any manner revoking and/or cancellinig various sanctions or permissions already granted to the Petitioner. The Respondents, their servants and agents be further directed to grant further permissions, sanctions, if any, required to complete the construction of rehabilitation units and sale components as undertaken by them."
2. FACTUAL MATRIX :
A] Airports Authority of India [for short "AAI"], established under the provisions of the Airports Authority of India Act, 1994 is responsible for establishment, management and operation of airports in India. By an agreement dated 4 th April 2006 entered into between AAI and Respondent No.1, patilsr 4/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
AAI granted exclusive rights to Respondent No.1, interalia, to develop, operate, manage and maintain Chhatrapati Shivaji International Airport at Mumbai [for short "the Airport"] on certain terms and conditions mentioned therein. [For the sake of brevity and convenience agreement dated 4th April 2006 between AAI and Respondent No.1 is hereinafter referred to as "OMDA".] In pursuance of OMDA, AAI executed a deed of lease in favour of Respondent No.1 in respect of certain airport land for the period of 30 years from the effective date. At the time of aforesaid agreement, approximately 276 acres of airport land was encroached upon by the slum-dwellers.
Respondent No.1 in order to clear the said slums, appointed Respondent No.5 (MMRDA) as the Project Implementation Agency by entering into an agreement dated 12th December 2006. On 18th April 2007 Respondent No.1 issued an invitation seeking Expression of Interest to undertake the slum clearance work for the airport land.
The Petitioner responded to the said invitation by its letter of intent dated 15th October 2007. Respondent No.1 awarded the said slum rehabilitation project to the patilsr 5/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
Petitioner. Simultaneously on the same day, i.e, on 15 th October 2007 the Petitioner and Respondent No.1 entered into Slum Rehabilitation Agreement [for short "the SR Agreement"] setting out the terms and conditions for the execution of slum rehabilitation project by the Petitioner.
B] Respondent No.1 by its letter dated 24 th June 2011 informed the Petitioner that Petitioner had failed to perform various obligations as undertaken by it in SR Agreement and called upon the Petitioner to remedy the same. On 27 th November 2012 Respondent No.1 invoked the bank guarantee. The Petitioner, therefore, filed a petition under section 9 of the said Act in this Court, being Arbitration Petition (Ld.) No. 1538 of 2012. The petition was dismissed on 29th November 2012. Appeal filed by the Petitioner against Single Judge's order being Appeal No. 228 of 2012 also came to be dismissed.
C] Vide its letter dated 30th January 2013, Respondent No.1 informed the Petitioner about various defaults of terms and conditions of SR Agreement committed by the Petitioner and that therefore the Petitioner is liable to pay the liquidated damages to the tune of Rs.276,46,00,000/-.patilsr 6/ 74 ::: Downloaded on - 27/08/2013 21:20:33 :::
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Respondent No.1 by its letter dated 6th February 2013 terminated the SR Agreement with immediate effect. The Petitioner sought resolution of dispute through mediation as provided under clause-35 of SR Agreement, however, Respondent No.1 refused to go for mediation. Hence, the Petitioner has approached this Court.
3. CASE OF THE PETITIONER :
In the year 2007-2008 the Petitioner purchased 7 plots of land admeasuring about 89 acres at the cost of Rs.1700 crores for the purpose of construction of slum rehabilitation units for housing eligible slum dwellers who would be evicted from the encroached airport land and those plots have been conveyed in favour of Respondent No.6-SRA.
The Petitioner submitted a slum rehabilitation scheme under DCR 33(10) to SRA and SRA has issued LoI in respect of these 7 plots of land. The Petitioner thereafter obtained requisite permission and commenced the construction. As on the date of filing of petition, 7012 tenements are ready and 17605 tenements are under construction, majority of which are in an advanced stage of construction. Out of these constructed patilsr 7/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
tenements, 796 tenements have already been handed over for rehabilitation of slum-dwellers, who were evicted for the construction of Sahar Elevated Road and 6315 tenements are lying vacant. The Petitioner has incurred expenditure of Rs.2,400 cores for putting up the construction of these tenements. In addition to this, by private negotiations in the year 2008, which the Petitioner had with 1008 slum-dwellers, got vacated their slums and demolished the said slums. In this process the Petitioner has got cleared 5.5 acres of land. In order to carry out the obligations under SR Agreement, namely, to evict the ineligible slum-dwellers from the airport land and to rehabilitate the eligible slum-dwellers on the lands purchased by the Petitioner, co-operation of various Departments/Agencies of Government of Maharashtra and the Competent Authorities under the Slum Act was absolutely necessary. The Competent Authority under the slum Act failed to prepare the Annexure-II which contains a list of eligible and ineligible slum-dwellers despite repeated requests by the Petitioner. In the absence of Annexure-II, though the Petitioner constructed 7,000 tenements and construction of 17,000 tenements is almost complete, it could not shift and patilsr 8/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
rehabilitate the slum-dwellers, except 697 slum-dwellers referred to above, from the airport land.
. Regarding replacing of bank guarantee and promissory note by cash deposit of Rs.300 crores, it is the stand of the Petitioner that said condition is waived off by Respondent No.1 by its subsequent conduct. Thus, the Petitioner cannot be blamed for non completion of the project within the stipulated time. In the absence of co-operation of State Agencies, including the MMRDA and SRA it is impossible for the Petitioner to complete the project and therefore it has invoked Clause-26 of SR Agreement which provides for force majeure. It is the stand of the Petitioner that invocation of bank guarantee was done by Respondent No.1 illegally and termination of the SR Agreement is illegal and malafide and cannot be sustained. The Petitioner claims interim measures as stated above to protect its rights during the pendecny of arbitration proceedings.
4. CASE OF RESPONDENT NO.1.
Respondent No.1 raised preliminary
objection as to the maintainability of petition as
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Respondent Nos.2 to 6 are not parties to arbitration
agreement. Respondent No.1 also claimed dismissal of the
petition on the ground of delay inasmuch as the Petitioner has approached this Court on 26th June 2013 though contract was terminated on 6th February 2013.
. If the reliefs claimed by the Petitioner in this petition, are granted the same would seriously hamper the public project of expansion of Airport and would prejudicially affect the public interest at large. The SR Agreement was entered into for ensuring that approximately 276 acres of Airport land which was encroached upon by the slums is freed from slum and made available for airport development to improve the operational efficiency and carry out modernisation of the airport. Since this was unique project, it required participation of a party/entity who was familiar with the slum rehabilitation process and who had knowledge and expertise in this field. Therefore Respondent No.1 decided to invite tenders from the bidders who would be in a position to execute a project of such nature. It was made clear at the time of inviting expression of interest that the primary criteria for selecting a bidder would be the level of experience in patilsr 10/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
executing slum rehabilitation projects and also availability of a land bank with the bidder where the slum-dwellers can be rehabilitated. On the basis of representation made by the Petitioner that they are familiar with and expert in executing the slum rehabilitation projects, the contract was awarded to them. It was the responsibility of the Petitioner alone to obtain all necessary approvals from the relevant authorities, SRA and environmental approvals. The Petitioner in terms of Clause-7 of SR Agreement was expected to complete the entire project in Phase-wise manner by October 2012. However, as on the date of termination, the Petitioner could not clear even a single slum from the area under Phase 1(i), 1(ii) and 1(iii).
. Completion of project within time was the essence of the contract and consequences for default are provided in the contract itself. The Petitioner did not comply with its obligation to replace the bank guarantee and promissory note by cash deposit of Rs.300 crores. The Petitioner was informed from time to time about the breach of obligations and requested to remedy the same, however, it did not comply with these requests. Respondent No.1 has, therefore, rightly invoked the bank guarantee in consonance with the terms and patilsr 11/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
conditions of SR Agreement and thereafter terminated SR agreement for valid reasons. Since the Petitioner has committed breaches of terms and conditions of SR Agreement, it is not entitled for specific performance of the contract and therefore in these circumstances no relief can be granted in this petition.
5. Petitioner's Submissions :
Learned Senior Advocate appearing on behalf of the Petitioner submitted that under SR Agreement, the Petitioner has undertaken the work of clearing the slums from the airport land by evicting the ineligible slum-dwellers and rehabilitating the eligible slum-dwellers on a land purchased by it. Respondent No.1 was aware that clearing of airport land is not possible without the participation and co-operation of the State Government and Central Government and therefore it has entered into State Support Agreement with the Central Government and State Government, and for that reason only, Respondent No.1 has appointed MMRDA as project implementation agency.
. He submitted that in order to discharge patilsr 12/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
obligations of rehabilitating the eligible slum-dwellers, the Petitioner after purchasing 89 acres of land has completed construction of 7,000 tenements and construction of 17,000 is nearing completion and thus the Petitioner is ready with 25,000 tenements for rehabilitating the eligible slum-dwellers.
The Petitioner though more than willing to shift the eligible slum-dwellers to rehabilitation buildings constructed by it and get vacated the airport land, could not do so for want of co-
operation and support from Respondent No.1, State, its instrumentalities and MMRDA.
6. Learned Senior Advocate further submitted that under Maharashtra Slum Areas (Improvement, Clearance And Redevelopment) Act, 1971, for short "the Slum Act" and related Governmental policies, the protection is granted to certain class of slums which are in existence since prior to certain cut-off date and slums which have come up on the airport land after the said cut-off date are not protected. He submitted that the survey is required to be carried out by the competent authorities under the Slum Act to determine which slum-dwellers are eligible and which are not eligible by patilsr 13/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
preparing Annexure-II and therefore unless and until this exercise is done, it is impossible for the Petitioner to perform its obligations to rehabilitate the eligible slum-dwellers and evict the unauthorised slum-dwellers. He submitted that despite repeated requests, none of these authorities have co-
operated with the Petitioner and despite the fact that it has constructed 25,000 tenements, only 695 slum-dwellers could be shifted to rehabilitation tenements whose slums were demolished for facilitating the work of Sahar Elevated Road.
He submitted that these facts attract Clause-26 of SR Agreement which provides for force majeure.
. He submitted that the Petitioner has incurred huge expenditure of Rs.4,000 crores for purchasing 7 plots of land and for construction of rehabilitation tenements on the said plots of land. He further submitted that though the Petitioner received Rs.2,400 crores by selling TDR which it had received from SRA for slum rehabilitation scheme under DCR 33(10), still the Petitioner is out of pocket by Rs.1,500 crores.
7. Regarding scope of the petition, learned senior counsel submitted that section 9 of the said Act is wider than patilsr 14/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
section 17 of the said Act. Under section 17, the party to the arbitration agreement can seek interim measures only against the person who is a party to such agreement; interim measures cannot be asked against a person who is not a party to the arbitration agreement. Such restriction is not there in section 9. Under section 9, interim measures can be asked even against a person, who is not a party to the arbitration agreement. Power of the Court under section 9 is that of the Civil Court. He submitted that though the agreement between the Petitioner and Respondent No.1 and other individual agreements executed by Respondent No.1 with the State Government, Central Government, MMRDA are separate, they are inextricably interconnected under which the objective set is the removal of slum-dwellers from the airport land.
Therefore, according to him, though there is no direct arbitration agreement between the Petitioner on the one hand and the MMRDA and/or State and/or SRA on the other hand, the arbitration clause contained in the SR Agreement will bring all these parties into its sweep. He submitted that under section 9 of the said Act, the Court has the power to grant interim measures against a person who is not a party to the patilsr 15/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
arbitration agreement if it is found to be just and convenient.
8. Learned Senior Advocate also submitted that neither the SRA nor the State Government or MMRDA has made any accusation against the Petitioner on facts and also there is no reply from them on this petition, which is an indication of their own shortcomings in providing desired support to the Petitioner. In support of his contentions, learned senior Advocate placed reliance on various decisions of the Apex Court and High Courts, which will be dealt with in later part of judgment.
9. Respondent No.1's Submissions :
Learned senior advocate for Respondent No.1 vehemently contested the petition. He submitted that by this petition, Petitioner is seeking to re-write the bargain between the parties through this Court.
. He invited my attention to the statement of object and reasons of the Airports Authority of India (Amendment) Act, 2003 and submitted that the amendment Act was enacted to improve the standard of services and facilities at airports to patilsr 16/ 74 ::: Downloaded on - 27/08/2013 21:20:33 ::: Arb. Pet. Ld. 902/13.
bring them at par with international standards. Keeping these objects and reasons in mind, OMDA was executed between AAI and Respondent No.1. Respondent No.1 has become the principal lessee of AAI, bound by various duties and obligations to AAI. Respondent No.1 is answerable to AAI for timely execution of the project.
. Regarding SR Agreement between the Petitioner and Respondent No.1, learned Senior Advocate submitted that all the obligations of the respective parties, stages of performance are formulated / set up in minute details. SR agreement sets out respective responsibilities, rights and obligations of the respective parties. The Petitioner is entitled, by way of consideration, to the developer's portion of land only after fulfillment of the terms and conditions as to the performance of his obligations within a time bound schedule as precisely provided in the agreement.
10. Learned senior advocate then invited my attention to the provisions of section 28(3) of the said Act and submitted that all the proceedings under the said Act are governed by the terms of the contract between the parties and while considering the grant of any relief in a proceedings under the patilsr 17/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
said Act, the Court must restrict itself to the contents of the contract and Court cannot travel beyond what is written in the contract. He invited my attention to various Clauses of SR Agreement, especially Clause-13 wherein the Petitioner has made representation to Respondent No.1 that he has necessary skill, expertise and financial ability to complete the slum rehabilitation projects. He further submitted that the Petitioner was very much aware about the implications and nature of slum rehabilitation project. He submitted that the said project was to be completed in a time bound manner and time was the essence of the contract. He further submitted that it was the responsibility of the Petitioner to obtain co-
operation from the Governmental Agencies and to take action under the applicable laws against the slum-dwellers. The Petitioner was obliged to obtain necessary approvals and clearances from the concerned authorities. He submitted that entire cost of the slum rehabilitation project was to be borne by the Petitioner and in consideration of all these obligations, the Petitioner was entitled for developer's portion of land, namely, handsome of 65 acres of airport land, provided he completes the project in time-bound manner as stipulated in patilsr 18/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
the contract.
11. Learned senior advocate further submitted that the Petitioner was obliged to replace the bank guarantee and promissory note by cash deposit of Rs.300 crores within a year which period was further extended by forty-five days, yet, the Petitioner has not complied with the said term. The Petitioner has not removed a single slum from the area notified in Phase 1(i), 1(ii) and 1(iii). He submitted that despite repeated reminders to the Petitioner to take remedial measures to comply with the breaches, the Petitioner has not taken any step.
12. Learned counsel then urged that specific performance can be granted in favour of a party only if that party shows readiness and willingness to perform his part of the contract. In the instant case, correspondence shows that the Petitioner is not ready and willing to perform his part of the contract which he has undertaken to perform with full knowledge. As a corollary, in the instant case the Petitioner is not entitled to and he can never seek specific performance of the contract. Since interim relief is always in aid of the final relief that can be granted in favour of a party, he submitted patilsr 19/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
that, in the present case in view of the fact that the Petitioner can never seek specific performance of the contract, the interim relief sought in this petition for specific performance of that contract cannot be granted.
13. Respondent Nos. 5 and 6's Submissions :
. Learned Counsel for Respondent No.5 as well as learned counsel for Respondent No.6 submitted that petition is not maintainable as against them since they are not parties to the SR Agreement wherein arbitration clause is provided and on the basis of which the Petitioner has filed this petition.
Learned counsel for Respondent No. 6 submitted that at any rate no relief can be granted in favour of the Petitioner in so far as the rehabilitation tenements are concerned as the Petitioner has availed the benefit of TDR in terms of the Deed of Conveyance between itself and Respondent No. 6 and sold the same in market. They prayed for dismissal of the petition.
14. Findings :
Maintainability of Petition :
At the outset, I will deal with the preliminary objection of the Respondents that present petition, filed under section 9 of said Act is not maintainable as Respondent Nos.2 patilsr 20/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
to 6 are not parties to the arbitration agreement. Reliefs claimed under prayer clauses (a), (b) and (c) are directed against Respondent No.1 only and those under clauses (d) to
(g) are directed against all the Respondents. The SR Agreement is between the Petitioner and Respondent No.1 only and Respondent Nos.2 to 6 are not parties to the said agreement. Admittedly, SR Agreement contains an arbitration clause. The question which deserves consideration is whether the Petitioner can seek interim measures against Respondent Nos.2 to 6.
15. The reliefs claimed vide prayer clauses (a) to (d) and (f) are in respect of the subject matter of the dispute in arbitration, however, reliefs claimed vide prayer clauses (e) and (g) are in respect of the property which the Petitioner has independently purchased for the purpose of rehabilitation of slum-dwellers from the airport land,
16. The Petitioner applied to Respondent No.6 for slum rehabilitation scheme under Regulation 33(10) of DCR for Greater Mumbai. This scheme was sanctioned by Respondent No. 6 under which it was mandatory for the Petitioner to rehabilitate the slum-dwellers from airport land. In terms of patilsr 21/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
this scheme, the Petitioner has executed a conveyance deed dated 30th June 2008 whereunder said land is transferred in favour of Respondent No.6. In turn, Respondent No.6, as and by way of consideration, released in favour of the Petitioner TDR admeasuring about 8,37,403 sq. meters, which admittedly the Petitioner has sold in open market for an handsome sum of Rs.2,500 crores (approximately). The title of this property has already passed to Respondent No.6.
17. The subject matter of the petition is termination of SR Agreement. The Petitioner, as a condition precedent, has purchased the land in order to rehabilitate the slum-dwellers from the airport land. Under the SR Agreement, the Petitioner agreed to undertake the slum rehabilitation project for the consideration of Developer's Portion of land, i.e., 65 acres of prime airport land. Thus the land which was purchased by the Petitioner and conveyed in favour of Respondent No. 6 is not the subject matter of SR Agreement.
18. Section 9 of the Arbitration and Conciliation Act, 1996 reads as follows :
"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 patilsr 22/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
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) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection ig 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 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) interim injunction or the appointment of a receiver;
(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."
. The term "party" as defined in clause (h) of section 2 of the said Act means "a party to an arbitration patilsr 23/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
agreement". Thus, the proceedings for interim measures under section 9 can be taken out only by a party to an arbitration agreement. The plain reading of section 9 shows that provisions of this section can be resorted to by a party to an arbitration agreement, however, that does not limit the jurisdiction of the Court to pass orders only against a party to an arbitration agreement. Thus, a party to an arbitration agreement can apply to the Court invoking section 9, which consists of two parts. Part-I deals with the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitration proceedings. Part-II enumerates 5 types of interim measures of protection : Clause (a) deals with preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement. The words "any goods" in Clause (a) postulates that interim measures mentioned therein can be taken against movable property.
Clause (b) provides for securing the amount in dispute in arbitration. Clause (c) provides for detention, preservation or inspection of any property or thing which is the subject matter of dispute in arbitration or as to which any question may arise therein or authorising for any of the aforesaid purposes any patilsr 24/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
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. The careful reading of first part of Clause (c) would show that orders under this clause can be passed only in respect of the property or thing which is the subject-matter of dispute in arbitration which may be in possession of any party. Section 9 occurs in Chapter II in Part I which defines an arbitration agreement and provides the power of a judicial authority to refer the parties to arbitration, where there is an arbitration agreement and provides further, for interim measures by Court. These are three provisions contained in Chapter II of Part I. So much so, the interim measures which are conceived by the Legislature while enacting Section 9 are those interim measures which relate to the arbitration agreement between the parties and being interim, they are to confine to the matters relating to the arbitration agreement between parties. In the present case we are not concerned with second part of clause (c) of sec. 9(ii).
The issuance of interim injunction or appointment of receiver patilsr 25/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
provided in Clause (d) and the residuary provision to issue such interim measure of protection as may appear to be just and convenient in terms of Clause (e) will have to be understood according to ejusdem generis rule.
. Learned senior advocate appearing on behalf of the Petitioner in this regard relied upon decisions rendered by various High Courts, namely, Girish Mulchand Mehta & Anr v.
Mahesh S. Mehta & Anr [2010(1) Bom.C.R. 31], Mohammad Ishaq Bhat v. Tariq Ahmad Sofi & Anr [2010(3) Arb. L.R. 197 (J&K)] and Anun Kapur v. Vikram Kapur & Ors [95(2002) Delhi Law Times 42]. He also heavily relied upon the decision of the Apex Court in Chloro Controls India (P) Ltd v. Severn Trent Water Purification Inc [(2013) SCC 641] and submitted that SR Agreement which is the subject matter of arbitration agreement and other agreements between Respondent No.1 with Respondent No.3 and Respondent No.5 and agreement between Respondent No.1 and the Petitioner are intrinsically interlinked and inter-connected and therefore relief under section 9 can be claimed against all the Respondents.
19. Learned senior counsel for Respondent No.1, however, submitted that Respondent Nos.2 to 6 are not parties patilsr 26/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
to SR Agreement. They are independent parties and they are not claiming any right through or under Respondent No.1, therefore, they cannot be made parties to the present petition.
He relied upon decision of the Division Bench of this Court in the case of Hemant D. Shah vs. Chittaranjan D. Shah & Ors in Appeal No.658 of 2006, order dtd 5th September 2006, and decisions of the Apex Court in MR Engineerings & Contractors Pvt. v. Som Datta Builders [(2009) 7 SCC 696], Indowind Energy Limited v. Wescare (India) Ltd & Anr. [(2010) 5 SCC 306] and SBP & Co., v. Patel Engineering Ltd [(2005) 8 SCC 618].
20. The Apex Court in Chloro Controls (supra) held that a non-signatory or third party could be subjected to arbitration without their prior consent but this would only be in exceptional cases. The Apex Court further held that expression "any person claiming through or under" appearing in section 45 takes within its ambit persons who are in legal relationships through or under multiple and multi party agreements, though they may not all be signatories to anyone agreement or arbitration clause. Section 45 of the said Act falls in Part-II of the said Act which deals with the enforcement patilsr 27/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
of certain foreign awards. Part-II is applicable to the foreign awards and same is not applicable to the domestic awards for which Part-I of the said Act is applicable. Provisions of section 8 and provisions of section 45 of the said Act are pari materia inasmuch as both the provisions speak about power of the judicial authority to refer the parties to arbitration. The plain reading of section 45 shows that reference can be made to the arbitration when a party or any person claiming through or under him approaches the Court and Court is satisfied that the agreement is valid and enforceable. However, reading of section 8 shows that reference to arbitration can be made at the request of a party to the arbitration agreement. In that case, the Apex Court highlighted substantial variance between section 45 and section 8 of the said Act and held that liberal interpretation of section 45 is warranted especially in view of phrase "any person claiming through or under him" contained therein. The Apex Court was dealing with the foreign award which falls in Part-II of the said Act. The Apex Court was not considering the scope and purport of section 9 which deals with the interim measures in respect of protection and preservation of the subject matter of dispute in arbitration patilsr 28/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
before or during the arbitral proceedings. This judgment, therefore, cannot be made applicable to the facts and circumstances of the present case.
21. The Division Bench of this Court in Girish Mulchand (supra) considered the scope and purport of section 9 of the said Act. In this case, Respondent No.2 (housing society) in pursuance of unanimous resolution of the general body, entered into a Development Agreement with Respondent No.1 authorising him to re-develop building of the society. Ten out of Twelve members of the society also executed independent agreements, confirming the Development Agreement and undertaking to perform the same. Two members of Respondent No.2 (Society) by filing a dispute before the Co-operative Court, challenged the terms and conditions referred to in the Development Agreement.
However, they did not challenge the resolution to redevelop the property. Respondent No.1 in view of the arbitration clause contained in Development Agreement, approached to the learned Single Judge of this Court for interim measures under section 9 of the said Act against Respondent No.2 to perform its part of obligation under the Development Agreement. The patilsr 29/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
said two members were impleaded as party Respondents in the said petition, as proposed relief was incidentally affecting them. Learned Single Judge allowed section 9 application and therefore those two members approached the Division Bench.
After considering various judgments, the Division Bench held that section 9 can be invoked even against a person who is not a party to the arbitration agreement if he were to be a person claiming under the party to the arbitration agreement and likely to be affected by the interim measures. The ratio of this judgment makes it clear that interim measures under section 9 can be invoked against third party provided said third party is claiming through or under a party to the arbitration agreement.
22. The question whether stranger to an arbitration agreement can be impleaded as a party to the proceedings under section 9 of the Jammu & Kashmir Arbitration and Conciliation Act, 1997 fell for consideration of learned Single Judge of Jammu and Kashmir High Court in Mohammad Ishaq Bhat v. Tariq Ahmad Sofi & Anr [2010(3) Arb. L.R. 197 (J&K)].
The Petitioner in this case had acquired tenancy in respect of the suit shop. Respondent No.2, son of the Petitioner, patilsr 30/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
executed a partnership deed with Respondent No.1. The Petitioner thereafter filed declaratory suit seeking declaration that the partnership deed executed by Respondent No.2 in favour of Respondent No.1 is null and void as against his rights. The learned trial Court granted ad-interim relief in favour of the Petitioner directing the parties to maintain status quo. Respondent No.1 making use of arbitration agreement contained in the partnership deed dated 7/10/2006, filed application under section 9 to protect the partnership business and assets thereof. Respondent No.1 pleaded that dispute between Respondent No.1 and Respondent No.2 had already been referred to arbitration and pending award, as an interim measure Respondent No.1 be allowed to run the business in suit shop in accordance with the terms and conditions of the partnership deed and Respondent No.2 be restrained from causing interference in the smooth running of business. The Petitioner filed application before the District Court praying that he be pleaded as Respondent in the application. That application was rejected by the District Court and therefore the Petitioner filed revision before the Jammu & Kashmir High Court. The learned Single Judge of J & K High Court held that patilsr 31/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
section 9 of the J & K Arbitration and Conciliation Act, 1997 cannot be interpreted to forbid impleadment of a person, who is not a party to arbitration agreement, to proceedings under section 9. It was further held that stranger may be impleaded as party where the Court is convinced that Applicant is a proper and necessary party to the proceedings and his presence is bound to enable Court to arrive at a just and proper conclusion. This judgment involved an issue whether party who might be affected by a nature of relief sought by the Petitioner, ought to be permitted in section 9 proceedings inasmuch as the Petitioner claimed a right in the subject matter of the agreement, namely, shop.
23. Learned Single Judge of Delhi High Court in Arun Kapur (supra) held that section 9 is distinct from section 17 inasmuch as that application under section 17 is to be moved before Arbitrator for an order against a party to the proceedings whereas section 9 vests remedy in a party to the arbitration proceedings to seek interim measures of protection against a person who need not be either party to the arbitration agreement or to the arbitration proceedings. This judgment does not consider a situation where relief under patilsr 32/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
section 9 can be claimed in respect of a property which is not the subject matter of arbitration agreement. In fact in this judgment the Court held that application made by the Petitioner before the Arbitrator was sufficient for protection of the Petitioner and, therefore, did not entertain the petition under section 9.
24. A Division Bench of this Court in Hemant D. Shah (supra) held that in a dispute between the parties to the arbitration, if the property belonging to a third party is brought in dispute, such property belonging to third party cannot be the subject matter of dispute between the parties to arbitration. It was further held that if what cannot be done finally on the conclusion of arbitration proceedings, surely it cannot be done in the proceedings under section 9.
25. The Apex Court in M.R. Engineer(supra) held that the wording of sub-section (5) of section 7 of the said Act makes it clear that mere reference to a document would not have the effect of making an arbitration clause from that document, a part of the contract. There should be a special reference indicating a mutual intention to incorporate the arbitration clause from another document into the contract.
patilsr 33/ 74 ::: Downloaded on - 27/08/2013 21:20:34 :::Arb. Pet. Ld. 902/13.
26. The Apex Court in Indowind Energy Limited (supra) held that there cannot be an oral arbitration agreement. The Constitution Bench of Apex Court in Patel Engineering (supra) held that when a party seeks an interim relief asserting that there was a dispute liable to be arbitrated upon in terms of the Act, and the opposite party disputes the existence of an arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause, or that the Court which was approached had no jurisdiction to pass any order in terms of section 9 of the Act, that Court has necessarily to decide whether it has jurisdiction, whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by that agreement.
27. On careful reading of section 9 along with ratios laid down by the Apex Court and various High Courts discussed above, following propositions of law can be deduced :
(I) Jurisdiction under section 9 can be invoked only by a party to an arbitration agreement.
(II) Section 9 does not limit the jurisdiction of the Court to pass an order of interim measures only patilsr 34/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
against a party to the arbitration agreement or arbitration proceedings. However such third party must be claiming through or under a party to the arbitration agreement.
(III) Interim measure under First Part of section 9(ii)(c) can be claimed only in relation to the subject matter of dispute in arbitration which may be in possession of any party.
(IV) igInterim measures under clauses (d) and
(e) of section 9(ii) will have be construed in accordance with ejusdem generis rule. As a corollary, interim measures under these two clauses are of the species/type of or akin to interim measures contained in earlier clauses (a) to (c), i.e., only a party to an arbitration agreement can invoke these provisions not only against a party to an arbitration agreement but also against a person who is claiming through or under a party to an arbitration agreement; and secondly, the property in respect of which the interim measure is sought cannot be the property belonging to a third party and it has to be the subject matter of patilsr 35/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
dispute in arbitration.
28. The facts of the present case are required to be examined in the light of propositions of law mentioned above.
As stated above, only the Petitioner and Respondent No. 1 are the parties to SR Agreement which contains an arbitration clause. The subject matter of the arbitration agreement is the slum rehabilitation project. Relief claimed in prayer clauses (a)
(b) and (c) is directed against Respondent No. 1 alone and the relief claimed in prayer clauses (a) to (d) and (f) are in respect of the subject matter of dispute in arbitration. Therefore, the Petitioner can maintain this petition against Respondent No. 1 in respect of the reliefs claimed in prayer clauses (a) to (d) and
(f). So far as relief claimed in prayer clauses (d) to (g) are concerned, same are in respect of rehabilitation tenements constructed by the Petitioner on the plots of land independently purchased by it. Surely, the subject matter of the arbitration agreement is not the land purchased by the Petitioner and conveyed in favour of Respondent No.6.
Respondent No.6 cannot be said to be claiming right in the said land through or under Respondent No.1. Respondent No. 6 claims separate and independent right in the said land and patilsr 36/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
tenements by virtue of its agreement with the Petitioner, namely the Deed of Conveyance dated 30th June 2008.
Admittedly, there is no arbitration clause in this agreement.
The land purchased by Respondent No. 6 is also not the subject of SR Agreement. Therefore, I am of the view that petition under section 9 is not maintainable against Respondent No. 6 and the Petitioner cannot get any relief in this regard. So far as Respondent Nos. 2 to 5 are concerned, they also are not party to the arbitration agreement. They are not claiming through or under a party to an arbitration agreement. Therefore, no relief can be granted against Respondent Nos.2 to 6. The entitlement of the Petitioner for reliefs against Respondent No. 1 in respect of prayer clauses
(a) to (d) and (f) will have to be considered separately.
29. Broad Principles Governing Grant of Interim Relief :
This takes me to consider the Petitioner's entitlement for grant of interim reliefs. The claim contained in prayer clauses (a) to (d) and (f) is against Respondent No.1.
Before entering into merits of the respective cases of the Petitioner and Respondent No.1, I would like to discuss broadly patilsr 37/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
the principles governing the grant of interim relief. Though the Code of Civil Procedure, 1908 is not strictly applicable, it is settled legal position that interim measures claimed under section 9 of the Arbitration and Conciliation Act, 1996 can be considered on similar principles underlying the provisions of Order-XXXIX Rules 1 & 2 of the Code of Civil Procedure, 1908.
The Petitioner in order to succeed in grant of interim relief, firstly, must prove that prima facie case is in his favour, secondly, he must prove that balance of convenience is in his favour, and thirdly that he will suffer irreparable loss in case of refusal of interim relief.
30. The Apex Court in Kashi Math Samsthan & Anr v.
Srimad Sudhindra Thirtha Swamy & Anr [AIR 2010 SCC 296] considered the principles on which the injunction can be granted under Order-XXXIX Rule-1 of the Code of Civil Procedure, 1908. In para-13 of the said decision, the Apex Court has made following observations :
"13. It is well settled that in order to obtain an order of injunction, the party who seeks for grant of such injunction has to prove that he has made out a prima facie case to go for trial, the balance of convenience is also in his favour and he will suffer irreparable loss and injury if injunction is not granted. But it is equally well settled that when a party fails to prove prima facie case to go for trial, patilsr 38/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
question of considering the balance of convenience or irreparable loss and injury to the party concerned would not be material at all, that is to say, if that party fails to prove prima facie case to go for trial, it is not open to the Court to grant injunction in his favour even if, he has made out a case of balance of convenience being in his favour and would suffer irreparable loss and injury if no injunction order is granted.
31. Above observations make it abundantly clear that party claiming injunction must prove prima facie and in the absence of prima facie case injunction cannot be granted even if such party makes out a case of inconvenience and irreparable loss.
32. In the commercial contracts, the parties are bound by its terms and conditions. Even under section 28(3) of the said Act, the arbitral tribunal is obliged to decide the dispute in accordance with the terms and conditions of the contract. The Court while adjudicating the dispute between the parties arising out of commercial contract, cannot re-write or replace the existing terms of the contract. Reference can be made to the decision of the Apex Court in Orissa State Financial Corporation v. Narsingh Ch. Nayak & Ors. [2003(10) SCC 261].
In addition to this, while deciding prima facie case, balance of convenience or irreparable loss, we must keep in mind patilsr 39/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
provisions of the Specific Relief Act, 1963 as well as the Indian Contract Act, 1872. Reference to sections 14, 16 and 20 of the Specific Relief Act, 1963 which respectively deal with the contracts which are not specifically enforceable, personal bars to relief and discretion as to decreeing specific performance would be relevant.
33. Important Clauses of SR Agreement :
In the case in hand, in considering the prima facie case, we must ascertain who is at breach of the terms and condition of SR Agreement. In this regard, reference to the relevant Clauses of SR Agreement is necessary.
[A] Clause-1 of SR Agreement deals with definitions and interpretation. Few of the relevant definitions for our purpose are as under :
"Commencement Date" means the date of the execution of SR Agreement, namely, 15th October 2007. "Event of Default"
means the occurrence of any of the events or circumstances specified in Clause 24 of SR Agreement. "Plane Table Survey"
means the survey to determine the eligibility of slum-dwellers for rehabilitation and finally verified under the applicable law.
. "Project Completion" or "Completion" means the patilsr 40/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
day on which the following are achieved to the satisfaction of MIAL :
(i) the entire Scope of Work as described in Clause 3 in the SR Agreement is completed;
(ii) All statutory approvals relevant to the completion of Slum Rehabilitation Project, construction of tenements and social infrastructure from MMRDA or other relevant authority is obtained in relation to the Completion of Slum Rehabilitation Project after shifting of slum-dwellers and allotment of tenements.
. "Slum Rehabilitation Project" means the following activities, all in accordance with Applicable Laws :
(i) Rehabilitation of the Protected Slum-dwellers; and
(ii) Demolition / removal of unauthorised structures and eviction of Unauthorised Slum-dwellers not protected by law (without any cost to MIAL) more fully described in the Scope of Work in Clause 3.
[B] Clause 3 sets out the scope of the work. As per this Clause, the Petitioner is required to take all steps necessary for the completion of slum rehabilitation project and make available to Respondent No.1 encroached airport land free of encroachments/hutments in accordance with the provisions of SR Agreement within the time-lines prescribed in the agreement. The scope of work includes the completion of patilsr 41/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
plane table survey in timely manner. Under sub-clause (c) of Clause 3, the Petitioner is solely responsible at its own cost and expenses to rehabilitate the protected slum dwellers and evict and remove the unauthorised slum-dwellers from the airport land. In case any person or airport slum-dweller does not co-operate with the Petitioner, then it is the Petitioner's responsibility to take action under the relevant provisions of all applicable laws and approvals against such airport slum-
dweller. Under this Clause, it is the Petitioner's responsibility to demolish or remove the unauthorised structures and remove all unauthorised slum-dwellers not eligible for rehabilitation and resettlement under the applicable laws. It is also the Petitioner's responsibility to co-ordinate with the government agencies. Under sub-clause (h), it is the sole responsibility of the Petitioner to obtain, at its own cost and expense, all necessary approvals from the relevant authorities and the SRA including if required, all environmental approvals in relation to the slum rehabilitation project. Without diluting the responsibility of the Petitioner to obtain all approvals for slum rehabilitation project, Respondent No. 1 is to co-operate with the Petitioner and provide reasonable assistance and patilsr 42/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
support to the Petitioner in obtaining the same. Under sub-
clause (q) of Clause-3, cost of the entire slum rehabilitation work is to be borne by the Petitioner, which includes the cost for procuring the land for rehabilitation of the eligible slum-
dwellers, cost of the construction of tenements on this land, cost for construction of transit tenements, cost of compliance and all charges to be paid to MMRDA including Rs.20,000 per tenement pursuant to the agreement dated 12th December 2006 between MIAL and MMRDA.
[C] Clause 4 deals with consideration. Under this clause the Petitioner is to get developer's portion of land only upon completion of complete scope of work for Phase-1(i), 1(ii) and portion of Phase-1(iii) for a minimum of 28,000 hutments.
If the Petitioner fails to meet minimum requirement in that case he is not entitled to any right in the developer's portion, which has been defined as 55% of the released land.
[D] Clause 5 of the SR Agreement speaks about the residential colonies project. The Petitioner is to get the said project of residential colonies provided same were made available to Respondent No.1 by the concerned agencies.
Under Clause 5.3.2, it is provided that in case any residential patilsr 43/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
colony land is not available or the developer opts not to proceed with any of the residential colonies project, other rights and obligations of either party under the SR Agreement shall not be affected in any manner whatsoever. Under Clause 5.3.6 it is recorded that Respondent No.1 does not make any commitment that the land on which the residential colonies are located will be available as the same is dependent on the respective agencies [E] Clause 7 lays down completion Schedule. In this Clause it is provided that slum rehabilitation project shall be completed by the Petitioner in two Phases as follows :
(a) Phase 1(i) Under Phase 1(i), the petitioner shall commence, not later than 6 (six) months from the Commencement Date, rehabilitation and eviction of the Airport Slum Dwellers from approximately 78.31 acres of the Phase 1 Land as listed out in table to Annexure 1 (the "Phase 1 (i) Land") and identified by their corresponding pocket numbers on the Plan annexed hereto at Annexure 1 and complete the Scope of Work and deliver vacant and peaceful occupation of all such Phase 1 (i) Land to MIAL not later than 18 (eighteen) months from the Commencement Date, time being of the essence.
Phase 1(ii) Under Phase 1 (ii), the petitioner shall commence, not later than 18 (eighteen) months from the Commencement Date, rehabilitation, and eviction of the Airport Slum Dwellers from approximately 19.77 acres of the Phase 1 Land as listed out in table to Annexure 1 (the "Phase 1(ii) Land") and identified by their corresponding pocket numbers on the Plan annexed thereto at Annexure 1 and complete the Scope of Work and deliver patilsr 44/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
vacant and peaceful occupation of all such Phase 1(ii) Land to MIAL not later than 24 (twenty four) months from the Commencement Date, time being of the essence.
Phase 1(iii) Under Phase 1(iii), the petitioner shall commence, not later than 24(twenty four) months from the Commencement Date, rehabilitation and eviction of the Airport Slum Dwellers from approximately 59.85 acres of the Phase 1 Land as listed out in table to Annexure 1 (the "Phase1(iii) Land") and identified by their corresponding pocket numbers on the Plan annexed hereto at Annexure 1 and complete the Scope of Work and deliver vacant and peaceful occupation of all such Phase 1(iii) Land to MIAL not later than 36 (thirty six) months from the Commencement Date, time being of the essence.
(b) Phase 2 Under Phase 2 the petitioner shall commence, not later than 36 (thirty six) months from the Commencement Date, rehabilitation and eviction of the Airport Slum Dwellers residing on pockets totally admeasuring approximately 118.53 acres as listed out in table to Annexure 1 (hereinafter referred to as the "Phase 2 Land") and identified by their corresponding pocket numbers on the Plan annexed hereto at Annexure 1 and complete the Scope of Work and deliver vacant and peaceful possession of all such Phase 2 Land to MIAL (except the possession of the petitioner's Portion, which shall ispso facto vest in the Developer) not later than 48 (forty eight) months from the Commencement Date, time being of the essence.
Clause 7.1(c) of clause 7 is also very relevant which reads as follows :
(c) Provided that, with mutual discussions, the time lines prescribed in Clause 7.1 may be extended in case of each part under each Phase by a period not exceeding 6 (six) months, in MIAL's discretion. Extension of time granted by MIAL for each Phase or part thereof does not tantamount to extension of time for another Phase or part.
[F] Clause 8 talks about performance guarantee.
Under this Clause, the Petitioner was required to furnish patilsr 45/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
security deposit of Rs.300 crores as performance security for due performance of SR Agreement. At the time of signing of the SR Agreement, the said amount of Rs.300 crores was provided by the Petitioner by giving an unconditional and irrevocable bank guarantee for a sum of Rs.25 crores and an on demand promisorry note of Rs.275 crores. The said bank guarantee and promisory note was to be replaced within 12 months of SR Agreement with an interest free cash deposit of Rs. 300 crores. Upon the request of the Petitioner, the time for replacing the same was further extended by a period of 45 days. Clause 8.3 provides that if at any time the performance security is invoked, drawn down, appropriated or adjusted, the Petitioner shall ensure that the value of performance security is always maintained at Rs.300 crores by replenishing or issuing additional security.
[G] Under Clause 9, the Petitioner had represented to Respondent No.1 that they are having with them lands enumerated in Annexure 3 which will be utilised for the slum rehabilitation project. Clause 13 deals with representations and warranties of the Petitioner. Under sub-clause (e) of Clause 13, the Petitioner has represented that it has necessary patilsr 46/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
skills, experience and financial ability to complete the slum rehabilitation project.
[H] Clause 15 speaks about the Developers Covenants and Undertakings. Under sub-clause (b) of this Clause, the Petitioner undertook to obtain, comply with, the terms of and do all that is necessary to maintain in full force and effect all approvals as may be required to enable to enter into and perform its obligations under SR Agreement. Under sub-clause
(d) the Petitioner has undertaken that it shall promptly inform Respondent No. 1 of the occurrence of any event which it become aware which might adversely affect the Petitioner or its ability to perform its obligations under SR Agreement.
Clause 15.2.(a) provides that the Petitioner shall not create any encumbrance on the developer's land or any part thereof.
[I] Clause 17 deals with the Liquidated Damages and Set Off. Under this Clause, in case of delay in handing over vacant and peaceful occupation of any pocket of the encroached airport land to Respondent No. 1 as set out in Clause 7, the Petitioner is liable to pay liquidated damages to Respondent No. 1 calculated at Rs.15 lacs per acre per month per pocket, payable within 15 days. This liability was capped patilsr 47/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
at Rs. 1 crore per acre. It is further provided that in case of delay in payment of such liquidated damages by the Petitioner of more than 180 days, Respondent No. 1 would be entitled to terminate the SR Agreement.
[J] Clauses 24, 25 and 26 deal with Events of Default, Termination and Force Majeure respectively which read thus :
"24. EVENTS OF DEFAULT The occurrence of any of the following events shall constitute an Event of Default:
(i) Failure of the Developer to replace the bank guarantee and promissory note with the interest free cash deposit of Rs.300 crores in accordance with Clause 8.
(ii) Completion of any Phase in accordance with Clause 7 is delayed by 6 months.
(iii) Failure of the Developer to pay liquidated damages in accordance with Clause 17.
(iv) Breach of or failure by the Developer to comply with any of the terms and conditions of this Agreement or any further agreement to be executed between MIAL and the Developer amounting to a material breach of this Agreement or such further agreements.
(v) Breach by the Developer of any provision of OMDA or other Project Agreements;
(vi) If any misrepresentation/fraud by the Developer in implementing the Scope of Work or any part thereof is found by MIAL or any Governmental authority; or
(vii) If the Developer is barred, disqualified or prevented from undertaking Slum Rehabilitation Project at the Airport.patilsr 48/ 74 ::: Downloaded on - 27/08/2013 21:20:34 :::
Arb. Pet. Ld. 902/13.
25. TERMINATION.
25.1 Upon occurrence of an Event of Default as per Clause 24, MIAL will inform the Developer of the occurrence of the Event of Default and provide a cure period of 30 days to the Developer to remedy the Event of Default that has occurred. In case the Developer fails to remedy the default within the aforesaid time period MIAL shall have a right to terminate this Agreement in whole or part by serving a notice ("Termination Notice") on the Developer.
MIAL may at any time terminate the agreement by issuing the termination notice to the developer, if the developer passes a resolution for voluntary winding up or a petition for winding up or insolvency of developer is admitted by a competent Court and not vacated within a period of forty five (45) days of admission.
25.2 In the event MIAL terminates the Agreement in whole or in part pursuant to Clause 25.1, the following consequences shall apply :
(i) The Developer shall discontinue the work and remove itself and all its employees and tools, equipments, machinery and raw materials belonging to the Developer and/or his agents, contractors and sub-
contractors from such portions of the Encroached Airport Land as directed by MIAL.
(ii) MIAL shall be entitled to complete the terminated Scope of Work through a third party.
(iii) All the appointments of sub-contractors by the patilsr 49/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
Developer under Clause 20 shall stand terminated.
(iv) In case of termination of this agreement prior to the completion of the Scope of Work for Phase 1(i), 1(ii) and portion of Phase 1(iii) for minimum 28,000 hutments as specified in Clause 4.2(a) by the Developer as per this Agreement, the Developer's rights in the Developer's Portion and the Developer's Development potential shall not arise to the Developer; and
(v) In case of termination of this Agreement subsequent to completion of the Scope of Work for Phase 1(i), 1(ii) and portion of Phase 1(iii) for minimum 28,000 hutments as specified in Clause 4.2(a) as per this Agreement :
(a)the Developer shall have the Developer's rights in Developer's portion and Developer's development potential only with respect of the Developer's portion in such released land as have been completely vacated and in relation to which MIAL has issued/deemed to have issued the hand over receipt and the Developer's rights in Developer's portion and the Developer's development potential in relation to all other Developer's portion shall lapse/not be granted.
(b)if MIAL, in its sole discretion decides to cause the Completion of the Scope of Work by themselves or through any other person or persons at the cost of the Developer, and recover such costs from the Developer, upon reimbursement of such costs to MIAL, the Developer shall be entitled to the Developer's rights in Developer's portion and Developer's development potential.
The Developer hereby undertakes to execute all such instruments and complete all formalities in relation thereto at patilsr 50/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
its cost, as may be required to release its right, title and interest in any such Developer's portion in relation to which such rights, title and interest of the Developer has been terminated in accordance with the terms hereof.
25.3 Upon termination of this Agreement, MIAL shall save and except as provided in this agreement have no liability of any nature towards the Developer, its employees, contractors and any third parties in relation to the work done or not done by the Developer and the Developer shall have no claims against MIAL for any completed Scope of Work, including all or any costs incurred by the Developer.
26. FORCE MAJEURE.
26.1 For the purposes of this Clause, "force majeure" means the following events and/or circumstances to the extent that they or their consequences satisfy the requirements set forth in this Clause :
(i) war (whether declared or undeclared), invasion, act of terrorism, armed conflict or act of foreign enemy;
(ii) nuclear explosion, radioactive or chemical contamination or ionizing radiation;
(iii) any effect of the natural elements, including lightening, fire, earthquake, unprecedented rains, tidal wave, flood, storm, cyclone, typhoon or tornado;
(iv) Order of any competent Court, Tribunal or Authority that suspends or renders performance of this Agreement not possible;
(v) Change in law or Policies by the Government, whether Central, State of local that suspends or renders performance of this Agreement not possible.patilsr 51/ 74 ::: Downloaded on - 27/08/2013 21:20:34 :::
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26.2 MIAL or the Developer, as the case may be, shall be entitled to suspend or excuse performance of its respective obligations under this Agreement to the extent that MIAL or the Developer, as the case may be, is unable to render such performance by an event of force majeure as defined above (a "force majeure").
26.3 Procedure for Force Majeure
(a) If a party seeks to claim relief on account of a Force Majeure event, then the party claiming to be affected by the Force Majeure event shall, immediately on becoming aware of the force majeure event and in any event no later than 15 days from the occurrence of the Force Majeure event, give notice of and describe in detail : (I) the Force Majeure event(s) that has occurred (ii) the dates of commencement and estimated cessation of such event of Force Majeure and (iii) the manner in which the Force Majeure event(s) affect the party's obligation(s) under this Agreement.
(b) The affected party shall have the right to suspend the performance of the obligation(s) affected only upon delivery of notice of the occurrence of a Force Majeure event in accordance with sub-clause (a) above.
(c) The time for performance by the affected party of any obligation or compliance by the affected party with any time limit affected by Force Majeure, and for the exercise of any right affected thereby, shall be extended by the period during which such Force Majeure continues.
26.4 Mitigation patilsr 52/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
The party claiming to be affected by an event of Force Majeure shall take all reasonable steps to prevent, reduce to a minimum and mitigate the effect of such event of Force Majeure.
26.5 Termination due to Force Majeure
(a) If Force Majeure event continues for more than 365 days either party shall have the right to terminate this Agreement by giving a notice of termination in respect thereof.
(b) In the event that the termination of this Agreement occurs pursuant to Clause 26.5(a) prior to the successful completion of the scope of Work for Phase1(i), 1(ii) and portion of Phase 1(iii) for minimum 28,000 hutments as specified in Clause 4.2(a) as per this Agreement, the Developer shall not be entitled to development rights for the Developer's portion or any other compensation or costs from MIAL. However, in the event that the termination of this Agreement occurs pursuant to Clause 26.5(a) subsequent to the successful completion of the scope of work for Phase 1(i), 1(ii) and portion of Phase 1(iii) for minimum 28,000 hustments as specified in Clause 4.2(a) as per this Agreement, the Developer shall be entitled only to development rights that are earmarked for it on only such pockets of the Developer's Portion that have been fully cleared and not in any other pocket.
For the avoidance of doubt :
(i) Other than the entitlements as specified in Clause 26.5, MIAL shall not be liable to make any other payments or have any other liability or obligation to the Developer in relation to the existence of the force majeure conditions patilsr 53/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
and neither party shall have any other claim against the other; and
(ii) occurrence of any event force majeure or otherwise does not entitle the Developer to seek reimbursement of any cost/increase in cost of performance/implementation of the Slum rehabilitation project by the Developer including without limitation imposition of any taxes, duties, fees etc. or charges in rates of the same."
[K] Under Clause 31 it is provided that modifications shall not be permitted unless they are in writing and agreed, signed and registered by both the parties. Clause 33 speaks about waiver. Under this Clause any waiver of any provision of SR Agreement by Respondent No.1 shall be effective if in writing and shall not affect any other provision of the agreement and shall not be deemed to be a waiver of any subsequent action.
[L] Clause-35 is an arbitration clause. It is provided that any and all claims, disputes, questions or controversies involving the parties and arising out of or in connection with or relating to SR Agreement shall first be referred to mediation. If mediation fails then the disputes shall be referred to an arbitral tribunal comprising three Arbitrator, one to be appointed by each party and third to be appointed by the patilsr 54/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
arbitrators so appointed.
[M] Clause 40 contains Disclaimers by Respondent No.
1. SR Agreement categorically sets out in Clause 40.2 that the Petitioner has to perform its scope of work regardless of the availability of benefits or change in applicable law. It further provides that Respondent No. 1 assumes no responsibility or liability for such damages. Clause 40.3 provides that Respondent No.1 will have no liability in respect of any indirect or consequential losses whatsoever, including loss of profit, business or opportunity.
34. Consideration of Prima Facie case.:
Learned senior counsel for the Petitioner pointed out that several steps were taken by the Petitioner to perform its obligations and huge expenses were incurred by it. The main thrust of arguments of learned Counsel for the Petitioner is that in the absence of co-operation from the Government, MMRDA and finalisation of Annexure-II, the Petitioner was not in a position either to evict the ineligible slum dwellers or rehabilitate the eligible slum-dwellers. The Petitioner alleged breaches on the part of Respondent No.1 which include the failure to obtain the tripartite agreement / get rectification patilsr 55/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
from MMRDA/ to get MMRDA to perform its obligation under its agreement with Respondent No.1, failure on the part of Respondent No.1 to provide support to the project, failure to invoke the State support agreement, breach by Respondent No. 1 in respect of the residential colonies project, etc. The Petitioner also alleges that breach of obligation on the part of Respondent No. 1 under SR Agreement has occurred prior in point of time of the Petitioner which Respondent No. 1 claims to have breached.
ig In this regard, learned Counsel for the Petitioner relied upon section 54 of the Indian Contract Act, 1872 and decision of the Apex Court in Nathulal v/s.
Phoolchand [1969(3) SCC 120]. Learned Counsel for the Petitioner also relied upon Clause 26 of the SR Agreement and contended that the Petitioner could not perform its obligations because of force majeure conditions.
35. Learned Senior Counsel for Respondent No.1 did not seriously dispute the petitioner's acquisition of seven plots of land and construction of tenements thereon by it, as alleged by the Petitioner. Learned Senior Counsel for Respondent No.1 heavily relied upon the terms and conditions of SR Agreement and submitted that the Petitioner professed that it has patilsr 56/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
necessary skills, expertise and financial ability to complete/execute the slum rehabilitation project and took up the responsibility to complete the project in a defined timeframe. He further submitted that under the SR Agreement, no obligation is cast upon Respondent No.1. He also submitted that the Petitioner failed to perform its obligations under the said SR Agreement. It was also submitted that SR Agreement does not contemplate any tripartite agreement amongst Respondent No.1, the Petitioner and MMRDA and it was for the Petitioner to deal with the Governmental agencies. Learned Senior Counsel also submitted that the Petitioner's reliance on force majeure clause is misconceived. It was lastly submitted that the Petitioner has failed to show its readiness and willingness to perform SR Agreement and therefore it is not entitled to seek specific performance of SR Agreement.
36. Careful reading of SR Agreement shows that inter alia following obligations are cast upon the Petitioner :
i] The completion of plane table survey. Clause 3.1.a ii] Rehabilitation of protected slum-dwellers and removal of ineligible slum-dwellers. Clause 3.1.c iii] Obtaining approvals and sanctions. Clause 3.1.h.patilsr 57/ 74 ::: Downloaded on - 27/08/2013 21:20:34 :::
Arb. Pet. Ld. 902/13.
iv] Bearing cost and expenses relating to entire slum rehabilitation project. Clause 3.1.q v] Completing the slum rehabilitation project in timely manner.
Clause 7 vi] Furnishing performance security of Rs.300 crores. Clause 8 Vii] Liquidated damages for delay. Clause 17.
37. It is unequivocally clear from the reading of terms and conditions of SR Agreement that the Petitioner represented to Respondent No.1 that it has necessary skills, expertise and igfinancial ability to complete the slum rehabilitation project. The Petitioner solely undertook the responsibility to complete the project in timely manner. It was the Petitioner's obligation to co-ordinate with the Governmental agencies. Under the SR Agreement no obligation is cast upon Respondent No.1, save and except that Respondent No.1 is required to provide support to the Petitioner to complete the said project. However, this support is to be provided by Respondent No.1 without diluting the Petitioner's obligations to complete the project on its own. The SR Agreement also does not contemplate execution of a tripartite agreement amongst the Petitioner, Respondent No. 1 and MMRDA.
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38. Respondent No.1 terminated the SR Agreement vide its letter dated 30th January 2013 as according to them Petitioner was in breach of various Clauses of SR Agreement.
The Petitioner in this regard contends that termination is ex-
facie bad as Respondent No.1 itself has committed various breaches of SR Agreement. Let us consider who is at fault, whether the Petitioner or Respondent No.1.
. As stated above, Clause-8 of SR Agreement provides that Petitioner is required to furnish a performance security of Rs.300 crores. At the time of signing of SR Agreement, the said amount of Rs.300 crores was provided by the Petitioner by giving a bank guarantee of Rs.25 corers and an demand promissory note of Rs.275 crores. The said bank guarantee and promissory note were to be replaced within 12 months of SR Agreement with an interest-free cash deposit of Rs.300 crores. Upon the request of Petitioner, by a deed of confirmation, the parties agreed to extend the period for furnishing the interest free cash deposit of Rs.300 crores by 45 days. The bank guarantee and demand promissory note were to be simultaneously released by Respondent No.1 with the receipt of interest free cash deposit. It is not in dispute that patilsr 59/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
the Petitioner has not replaced the bank guarantee and promissory note with the interest free cash deposit. In these circumstances, it can be safely said that the Petitioner has committed breach of the obligation contained in Clause-8. The Petitioner in this regard contends that the obligation to replace the bank guarantee and promissory note by interest free cash deposit of Rs.300 crores was waived by Respondent No.1 by its conduct. I do not find any merit in the contention of the Petitioner about waiver of this obligation in the light of provision of Clause-31 of SR Agreement which provides that any modification to the SR Agreement shall be in writing and signed by both the parties and also in view of Clause-33 which provides that waiver of any provision of the SR Agreement shall be in writing. It is not the case of the Petitioner that SR Agreement was modified or waived by consent in writing or that Respondent No.1 has waived the condition of deposit of interest free cash security of Rs.300 crores, in writing.
39. The Phase-wise completion schedule of slum rehabilitation project is given in Clause-7 of the SR Agreement.
Under the said Clause, the Petitioner was obliged to clear the airport land amdeasuring 157.93 acres covered under Phase-1 patilsr 60/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
within 36 months from the commencement date, i.e., within 36 months from 15th October 2007. The airport land admeasuring 118.53 acres covered under Phase-2 was required to be cleared within 48 months from the commencement date, i.e., on or before 15th October 2011. It was categorically set out in SR Agreement that time is the essence of the contract.
40. As stated above, the entire project was to be completed by 15th October 2011 with a provision that extension of six months can be granted. In such case the project could have and ought to have been completed by 15 th April 2012, time being the essence of the contract.
41. The Petitioner has not disputed that it has not cleared a single slum from the airport land covered under Phase-1 or Phase-2. The Petitioner, however, submitted that time was not the essence of the contract. The Petitioner relied upon the provision regarding extension of time for completion of slum rehabilitation project and provision for liquidated damages. Learned Counsel for the Petitioner relied upon the decision of the Apex Court in Hind Construction Contractors v/s. State of Maharashtra [AIR 1979 SC 720].
42. I am not agreeable with the submissions made on patilsr 61/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
behalf of the Petitioner. It is clear from the reading of Clause-7 that each Phase was to be completed within the time stipulated therein. It is also stipulated that time is of the essence of the contract. Under the proviso to Clause 7.1, the parties have agreed for extension of a period which shall not be exceeding 6 months. However, in that case also the entire project ought to have been completed by 15th April 2012. This proviso regarding extension will have to be read alongwith Clause-17.2, which reads thus :
"17.2 If there is a delay of more than 180 (one hundred and eighty ) days, for the removal and eviction of any of the pockets comprised in the slum rehabilitation project, then, without prejudice to MIAL's other rights under this agreement, MIAL shall be entitled to terminate this agreement in respect of such pocket comprised in the slum rehabilitation project, and shall be further entitled to complete the eviction and removal of airport slum-dwellers from such pocket through any third party and the cost incurred for such eviction and removal of airport slum-dwellers shall be reimbursed by the developer. Time is the essence of the contract."
43. Under Clause 24, if completion of any Phase in accordance with Clause-7 is delayed by six months, same will be construed as an event of default.
44. The conjoint reading of Clauses-7, 17 and 24 patilsr 62/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
makes it clear that the Petitioner was under obligation to complete the SR project on or before 15 th October 2011. The extension of six months could have been granted at the sole discretion of Respondent No. 1 for each part of Phase-1 and Phase-2. It further makes it clear that extension beyond six months is not at all contemplated and the Petitioner is duty bound to complete the project within that extended time, time being the essence of the contract.
45. The delay of six months in completion of any Phase in accordance with Clause-7 is to be construed as an event of default under Clause-24. As stated above, under Clause-17.2, Respondent No.1 was entitled to terminate SR Agreement in case of delay of more than 180 days. It is unequivocally clear from above Clauses that parties intended to complete the entire project within the stipulated timeline with a provision of extension of 6 months, but not later than six months' extension. Parties also intended that time is of the essence of the contract.
46. The decision of the Supreme Court in Hind Construction Contractors v. State of Maharashtra [1979 SC 721] relied upon by learned Counsel for the Petitioner is clearly patilsr 63/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
distinguishable. In this case, the Supreme Court held that even where parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental. The Apex Court also held that intention of the parties is important. In the present case, the parties have specifically provided that time is of the essence of the contract despite there being a provision for extension of six months to complete each part of Phase-1 and Phase-2. On plain reading of the terms and conditions of SR Agreement I find that parties intended to complete the work within the stipulated time. I prima facie find that completion of work by a particular date was intended to be fundamental.
Though provision of six months' extension to complete the work was provided in sub-clause (c) of Clause 7.1, such extension was circumscribed to the period of six months only.
47. The Petitioner attributes the delay in completion of project within the time-lines prescribed under SR Agreement to the force majeure conditions. In this regard, the Petitioner patilsr 64/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
heavily relied upon sub-clause (v) of Clause 26.1 of the SR Agreement which deals with force majeure. Let us, therefore, see whether the Petitioner's case is covered by the force majeure clause provided under the SR Agreement.
48. Clause 26.1 [reproduced hereinabove] defines the force majeure means the occurrence of five events set out therein. Event (v) thereof is relevant for our purpose, under which change in law or policies by the Government, whether Central, State or local that suspends or renders performance of the agreement impossible would tantamount to force majeure.
The main limb of argument of the Petitioner's advocate is that Annexure-II was not being issued by the Collector because of change in the policy or freeze imposed by the State Government on the policy for determination of eligibility of airport slum-dwellers. The Petitioner has at Annexure-N to the petition, given a list of changes in Government Policies, which reads thus :
Sr. Date. Particulars.
No.
1. 16.04.2008 1. Carpet area of the rehab unit to be provided to the slum-dwellers increased from 20.90 mts. to 25 sq. mts.
2. In situ FSI is increased from 2.5 to 3.
2. 23.10.2008 Slum-dwellers allowed to transfer the eligible huts upon payment of transfer fees.
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3. 14.05.2009 Directives under section 37(1) and 154 of MRTP Act, amending the permissible FSI consumption in situ in respect of area where tenements density is more than 650 per hector from FSI of 3 to 4.
4. 19.09.2009 Requirement of the land for public space in the slum rehabilitation scheme under clause 3.11 of Appendix IV or Regulation 33(10) in respect of industrial zone lands converted to residential zone amended and reduced to 10%.
5. 25.10.2010 Policy formed by the Government for the excavation of sand from nullah, river and creek, introducing tendering process, resulting in short supply of sand.
6. 10.01.2011 Interim order passed by Hon'ble High Court in WP No.97 of 2011, staying the award of contract for excavation of sand.
7. 31.12.2011 Notification issued for amendment to Development Control Regulation 33(1), substantially changing the eligibility criteria.
8. 02.01.2012 Government resolution, amending the policy of transfer of huts by the slum-dwellers.
9. 06.01.2012 Substantial amendment to development Control Regulations for Gr. Mumbai, 1991, parts of which are made also applicable to slum rehabilitation scheme under clause 3.11 of Appendix IV of DCR 33(10).
10. 19.06.2012 Amendment of slum rehabilitation Act, which included new definition of eligible slum-dwellers, slum rehabilitation work.
. Changes alleged at serial Nos.1 to 6 of the above list would only be relevant for our purpose inasmuch as the Petitioner had undertaken to complete the entire work on or before 15th October 2011. In my prima facie view, none of patilsr 66/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
these changes will have the effect of rendering the performance of the agreement impossible or suspending or excusing the performance of any obligation on the part of the Petitioner. It is relevant at this stage to advert to Petitioner's representation and warranties as contained in Clause-13 and Clause-40.2 of the SR Agreement, under which the Petitioner undertook to complete the slum rehabilitation project regardless of any change in applicable law. The Petitioner was taken to be aware of the fact that the relevant legal, regulatory, fiscal, economic and operational circumstances relevant to slum rehabilitation project may change from time to time.
49. Be that as it may, under Clause-26.3(a) of the SR Agreement, if the party seeks to claim relief on account of a force majeure event then it was obliged to do so within 15 days from the date of occurrence of such event, by giving notice of the same. The Petitioner for the first time by its letter dated 1st February 2013 invoked the force majeure clause on the ground that the Government has failed to decide the eligibility criteria for eviction and rehabilitation of the slum-
dwellers from the airport land. The invocation of force patilsr 67/ 74 ::: Downloaded on - 27/08/2013 21:20:34 ::: Arb. Pet. Ld. 902/13.
majeure clause at such belated stage and that too after the time fixed for the completion of project is over, without following the procedure laid down in SR Agreement goes to show that the Petitioner has taken this stand in order to cover-
up its failures to perform its obligations under the SR Agreement. The Petitioner in this regard relied upon the Planning Committee Report dated 30.09.2012 on the interim draft development plan of the airport and the Minutes of the Meeting by the Chief Minister on 18.06.2012. In my prima facie view neither this report nor the minutes of the meeting will help the Petitioner inasmuch as the stipulated deadline for the completion of project had already gone.
50. On 24th June 2011, Respondent No. 1 gave a cure notice to the Petitioner, setting out various breaches committed by the Petitioner and called upon it to cure the same within the period of 30 days. On Petitioner's failure to cure the defects, on 27th November 2012, Respondent No.1 invoked the bank guarantee. The Petitioner challenged the invocation of bank guarantee by filing petition under section 9 of the said Act. That petition came to be dismissed by the learned Single Judge. The Petitioner carried in appeal the said patilsr 68/ 74 ::: Downloaded on - 27/08/2013 21:20:35 ::: Arb. Pet. Ld. 902/13.
order before the Division Bench of this Court, however, that also failed.
51. On 30th January 2013, Respondent No.1 addressed a letter to the Petitioner pointing out failures on its part to complete any part of any Phase of the project within the stipulated time. By this letter, Respondent No.1 also asked for the liquidated damages as provided in Clause-17 of the SR Agreement. The Petitioner replied to this letter on 1 st February 2013, denying its liability to pay the liquidated damages. It is also stated that they are not in a position to carry out their obligations due to the circumstances beyond its control.
52. I have already reproduced Clause 24 of the SR Agreement which deals with the event of default. Under this Clause, occurrence of any of the events enumerated therein shall constitute an event of default. In my prima facie view, the present case is covered by at least first three events, namely,
(i) Failure of the Developer to replace the bank guarantee and promissory note with the interest free cash deposit of Rs.300 crores in accordance with Clause 8.
(ii) Completion of any Phase in accordance with Clause 7 is delayed by 6 months.
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(iii) Failure of the Developer to pay liquidated damages in accordance with Clause 17.
53. Respondent No.1 in terms of Clause-25 is entitled to terminate the SR Agreement in the event of Petitioner's failure to remedy the event of default within the period of 30 days. The first cure notice was given by Respondent No. 1 on 24th June 2011. Respondent No. 1 also gave another notice on 30th January 2013. In reply thereto, the Petitioner admitted that it is not in a position to carry out its obligations.
Respondent No.1 has, therefore, terminated the SR Agreement. In these circumstances, prima facie I am of the view that Respondent No.1 was justified in terminating the SR Agreement.
54 Reference must also be made to the Petitioner's reliance on the provisions of section 54 of the Indian Contract Act, 1872 and decision in Nathulal v. Phoolchand (supra). The reliance placed on this provision and decision is misconceived.
In Nathulal the Supreme Court has held that if under the terms of contract, obligations have to be performed in a certain sequence, then one party cannot require compliance without first performing his own part of the contract which in the sequence of the obligations is to be performed by him earlier.
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In the present case, the SR Agreement does not stipulate the obligations have to be "performed in a certain sequence". The performance of the obligations by the Petitioner is not dependent on any obligation or circumstance to be performed by Respondent No. 1. In fact, there is no obligation cast upon Respondent No. 1 under the SR Agreement.
55. Under section 16 of the Specific Relief Act, 1963, specific performance of the contract cannot be enforced in favour of a person who has failed to aver and prove that he is ready and willing to perform the essential terms of the contract which are to be performed by him. Prima facie, the Petitioner has failed to show that he is ready and willing to perform his obligations cast upon him under the SR Agreement. The stand of the Petitioner as disclosed from the correspondence is that it is unable to perform its obligations under the SR Agreement. In order to maintain an action for specific performance, the Petitioner ought to have shown its willingness and readiness to perform obligations cast upon it.
The interim relief is always in aid of the final order. If the Petitioner is not entitled to the final order, interim relief cannot be granted in his favour.
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56. BALANCE OF CONVENIENCE AND IRREPARABLE LOSS :
As I am of the view that prima facie case is not made out by the Petitioner, there is no need to go into the question of considering the balance of convenience or irreparable loss. Reference can be made to decision of the Apex Court in Kashi Math (supra).
That apart, Respondent No.1 is executing a public utility project. In pursuance of the OMDA executed between Respondent No.1 and Respondent No.2 on 4th April 2006, approximately 276 acres of airport land is leased to Respondent No.1 by Respondent No.2 for the period of 30 years. The said land is encroached upon by the slum-dwellers.
The said encroachment has been severely hindering the operations, upgradation, expansion, modernization and development of Mumbai airport. The SR Agreement was executed between Respondent No.1 and the Petitioner in order to improve the operational efficiency and to carry out expansion and modernization of the airport. The slums surrounding Mumbai airport are abutting the air-side operational boundary and can be a security risk to the airport.
The slum are, therefore, required to be cleared on priority patilsr 72/ 74 ::: Downloaded on - 27/08/2013 21:20:35 ::: Arb. Pet. Ld. 902/13.
basis to ensure the security. In that sense Respondent No. 1 is executing a public utility project. The delay in executing the same will affect the public at large. Under section 14(1) clause
(a) of the Specific Relief Act, 1963 a contract for the non performance of which compensation in money is adequate relief cannot be specifically enforced. If the Petitioner ultimately succeeds in the arbitration proceeding and arbitral tribunal finds that Respondent No.1 has terminated the SR Agreement illegally, then, in that case, the Petitioner would be certainly entitled for the damages. In these circumstances, I am of the view that balance of convenience does not lie in favour of the Petitioner or the Petitioner will suffer irreparable loss.
57. By the prayer clause (f), the Petitioner has claimed direction to the Respondent No.1 to deposit the amount of Rs.25 crores in a no lien account. The Petitioner challenged the invocation of bank guarantee by filing petition under section 9, which came to be dismissed. The Petitioner went in appeal challenging Single Judge's order, however, subsequently he withdrew the same. The relief claimed under this clause is final relief to which the Petitioner is entitled in patilsr 73/ 74 ::: Downloaded on - 27/08/2013 21:20:35 ::: Arb. Pet. Ld. 902/13.
case he ultimately succeeds in the arbitral proceedings. Such relief cannot be granted by way of interim measures under section 9 of the said Act.
58. Taking overall view of the facts and circumstances, I find that the Petitioner has failed to make out prima facie case or balance of convenience in its favour. In that view of the matter, petition is dismissed.
59. It is expressly made clear that above observations are prima facie in nature and made for the limited purpose of disposal of this petition and arbitral tribunal shall not be in any manner influenced by these observations and shall decide the arbitral proceedings on its own merits.
[RANJIT MORE, J.]
60. At this stage, learned Counsel for the Petitioner requested for the continuation of interim relief granted by this Court on 1st July 2013. In the interests of justice and in order to enable the Petitioner to approach the superior Court, interim relief granted by this Court on 1st July 2013 shall remain in force for till 16th September 2013.
[RANJIT MORE, J.] patilsr 74/ 74 ::: Downloaded on - 27/08/2013 21:20:35 :::