Bombay High Court
Forefront Realty Private Limited vs Nalanda Usha B-2 Building Chs Ltd on 29 July, 2021
Author: B. P. Colabawalla
Bench: B.P.Colabawalla
6-arbp(L)-881-2018.doc
Digitally IN THE HIGH COURT OF JUDICATURE AT BOMBAY
signed by
GANESH
GANESH SUBHASH ORDINARY ORIGINAL CIVIL JURISDICTION
SUBHASH LOKHANDE
LOKHANDE Date:
2021.08.18 IN ITS COMMERCIAL DIVISION
14:36:20
+0530
ARBITRATION PETITION (L) NO. 881 OF 2018
Forefront Realty Private Limited .. Petitioner/
Org. Claimant
Vs.
Nalanda Usha B-2 Building CHS Ltd. .. Respondent
Mr.Farhan Dubash a/w. Tanvi Gandhi & Jigar Shah i/b. Markand
Gandhi & Co., Advocate for the Petitioner.
Mr.Jagdish S. Hegde & Deepak K. Malkani, Advocate for the
Respondent.
CORAM :- B.P.COLABAWALLA, J.
DATE :- 29th JULY, 2021.
(THROUGH VIDEO CONFERENCE) P. C.:
1. The above Petition is filed seeking to challenge the impugned award dated 23rd March, 2018 (signed on 6 th April, 2018) as well as the order passed by the Arbitral Tribunal in the Minutes of Meeting dated 14th March, 2018 under which the Arbitral Tribunal rejected the Petitioner's oral request for an adjournment to enable them to file an application to amend the statement of claim to introduce a prayer for damages in the alternative to the prayer for specific performance which was Ganesh Lokhande 1/16 6-arbp(L)-881-2018.doc originally sought before the Arbitral Tribunal. The Petitioner herein was the Claimant before the Arbitral Tribunal.
2. The facts of the case would reveal that the Respondent-
Society had a building located on land bearing No. B-2, CTS No. 307/46/41 of Village Valnai, Evershine Nagar, Malad, Mumbai admeasuring approx. 2582 Sq Mts. For the sake of convenience, the said building and the land on which it stands, shall collectively be referred to as the "said property".
3. Since, the said property was in a dilapidated condition and required substantial repairs, the Respondent-Society decided to re-develop the said property. Accordingly, a Special General Body Meeting of the Respondent-Society was held on 19 th January, 2014 wherein the offer received from several developers was considered and the offer of three developers, including the Petitioner, was shortlisted by the Respondent-Society. Thereupon, after careful consideration, the Respondent-Society unanimously resolved to grant development rights in respect of the said property to the Petitioner.
Ganesh Lokhande 2/16
6-arbp(L)-881-2018.doc Pursuant to the aforesaid decision, a Letter of Intent (LOI) dated 21st January, 2014 was also issued to the Petitioner appointing it as the Developer for re-development of the said property. Thereafter, a Development Agreement was entered into between the parties on 31st July, 2015 and which was subsequently registered on 30th March, 2016.
4. Since disputes arose between the Petitioner and Respondent-Society regarding the Development Agreement, the Respondent-Society, by its letter dated 1st December, 2016 terminated the Development Agreement and the LOI issued in favour of the Petitioner. The ground of termination inter-alia included non-compliance of the terms of the Development Agreement by the Petitioner. Being aggrieved by this termination, the Petitioner filed Arbitration Petition (L) No. 385 of 2017 in this Court wherein an order was passed on 24 th May, 2017 appointing Mr. Gaurav R. Joshi, a learned Senior Advocate of this Court, as a Sole Arbitrator to adjudicate the disputes and differences between the parties arising from the Development Agreement.
5. Accordingly, a preliminary meeting was held by the Ganesh Lokhande 3/16 6-arbp(L)-881-2018.doc Arbitral Tribunal on 24th May, 2017 and directions were issued for filing of pleadings, documents, inspection documents and admission/denials thereof. At the said preliminary meeting, the Respondent-Society made a statement that they did not have any intention of creating third party rights of re-development of the said property. Thereafter, in the third Meeting held on 18 th August, 2017 the parties completed the filing of pleadings and inspection of documents. However, they failed to file their respective affidavit of document/affidavit of evidence and rather requested to re-schedule the dates for filing the evidence completing the other formalities.
6. Thereafter, parties engaged in settlement talks to try and amicably resolve their disputes. However, the settlement talks did not fructify and the Respondent-Society through its advocate's letter dated 5th February, 2018 informed the Arbitral Tribunal about the failure of the settlement talks. In these circumstances, the Arbitral Tribunal held a meeting on 22nd February, 2018 wherein the Respondent-Society through its advocate, stated that it was ready and willing to perform its obligation under the Development Agreement notwithstanding the Ganesh Lokhande 4/16 6-arbp(L)-881-2018.doc termination thereof. When the advocates for the Petitioner were faced with this statement, they took time to seek instructions from the Petitioner and the matter was adjourned to 8 th March, 2018. At the hearing held on 8th March, 2018, the Petitioner however was unable to make any firm commitment on the Development Agreement and the matter was thereafter stood over to 14 th March, 2018.
7. On 14th March, 2018, a statement was made on behalf of the Petitioner that it was not commercially feasible/practicable for the Petitioner to perform and enforce the said Development Agreement. The statement recorded in the Minutes of the Meeting is as follows:
"It is further stated on behalf of the Claimant, that it is not commercially viable for the claimant to carry out the development as per the Development Agreement which is the subject matter of the present proceedings, without there being an agreement in respect of the additional areas/ benefits which have accrued and/or are likely to accrue on the said property. What the Claimant therefore seeks is a fresh agreement/ modification of the Development Agreement, which admittedly the Tribunal has no power to grant."
8. After making the aforesaid statement, the Petitioner's Ganesh Lokhande 5/16 6-arbp(L)-881-2018.doc erstwhile advocate sought time since the Petitioner was desirous of amending the statement of claim to include a plea and claim for compensation in lieu of specific performance, which according to the Petitioner was a remedy always open and available to a party to claim even after filing of the pleadings seeking only specific performance. This request of the Petitioner was denied by the Arbitral Tribunal for the reasons stated in the Minutes of Meeting held on 14th March, 2018. Thereafter, in view of the statement made by the Petitioner that it is commercially unviable to go ahead with the Development Agreement (as it stood), the impugned Award came to be passed by the Arbitral Tribunal dismissing the claim of the Petitioner.
9. In this factual background, Mr. Dubash, the learned counsel appearing on behalf of the Petitioner, principally challenged the impugned award and the Minutes of the Meeting on three grounds:
(i) Under law, the Petitioner was entitled to amend its plea and convert the suit for specific performance to one for damages more so when admittedly their claim for damages was not barred by the law of limitation;Ganesh Lokhande 6/16
6-arbp(L)-881-2018.doc
(ii) The Arbitral Tribunal ought to have taken a liberal approach while considering the amendment application as that is the law laid down by several Courts of this Country; and
(iii) The Arbitral Tribunal has given a finding on an issue which was a point of dispute between the parties without giving an opportunity to the parties of being heard. To put it differently, Mr. Dubash submitted that the award ought to be set aside as there was a breach of principles of natural justice.
10. As far as ground (i) is concerned (regarding granting time to the Petitioner to prefer an application to amend the Statement of Claim), Mr. Dubash contended that the Arbitral Tribunal's findings in relation thereto are completely perverse, especially when one takes into consideration that the Respondent- Society agreed for the specific performance of the Development Agreement only on 22nd February, 2018 and the application for an adjournment to file an amendment application was made on 14 th March, 2018. In these circumstances, there was no inordinate delay on the part of the Petitioner to file an amendment application and time ought to have been given by the Tribunal to Ganesh Lokhande 7/16 6-arbp(L)-881-2018.doc the Petitioner to file the application for amending the Statement of Claim to seek damages in the alternative to the claim for specific performance.
11. I have heard Mr. Dubash on this aspect at great length and I have also carefully perused the Minutes of the Meeting held on 14th March, 2018. The Minutes of the Meeting held on 14th March, 2018 categorically record a statement on behalf of the Petitioner that it is not commercially viable for the Petitioner to carry out the development as per the Development Agreement which is the subject matter of the present proceedings, without there being an agreement in respect of the additional areas/ benefits which have accrued and/or are likely to accrue on the said property. It is in view of this statement that the Tribunal comes to a finding, and in my view correctly so, that the Petitioner therefore seeks a fresh agreement/modification of the Development Agreement which admittedly the Tribunal has no power to grant. To put it differently, the Petitioner was not ready and willing to perform the Development Agreement as it stood. Thereafter, the Arbitral Tribunal goes on to record that the Statement of Claim as it stands, only seeks specific performance of Ganesh Lokhande 8/16 6-arbp(L)-881-2018.doc the Development Agreement and till date no application is made for amendment seeking damages. The Tribunal records that an adjournment was sought at a belated stage after the Petitioner's bluff was caught out by the statement made by the Respondent that notwithstanding the termination, they were ready and willing to perform their obligations under the Development Agreement if the Petitioner was willing to do the same. The Tribunal therefore holds that (i) there has been a gross and inordinate delay on the part of the Petitioner requesting for an adjournment to file an amendment application; (ii) no such application has been filed till date; (iii) the Petitioner has been in default and not even made payment of the initial amount of hardship compensation as contemplated under the Development Agreement; and (iv) in any event, no claim for damages in law can be made by a party who itself candidly admits that it is not willing to perform its obligation under the agreement on the grounds that it is commercially unviable.
12. Having gone through the Minutes of Meeting, the details of which are also reiterated in the impugned award, I do not find anything perverse, either in the impugned award or in the Ganesh Lokhande 9/16 6-arbp(L)-881-2018.doc Minutes of the Meeting dated 14th March, 2018 that would entitle me to interfere under Section 34 of the Arbitration and Conciliation Act, 1996. As can be seen from the petition itself, and more particularly paragraph 3 (ddd) thereof, it is the case of the Petitioner that the Petitioner's erstwhile advocate sought time before the Tribunal as they were desirous of amending the Statement of Claim to include a plea and a claim for compensation in lieu of specific performance. Once having stated before the Tribunal that the Petitioner is not desirous of seeking specific performance, in law, it could not have made any claim for compensation in lieu thereof. In other words, the compensation in lieu of specific performance (under Section 21 of the Specific Relief Act) is quite distinct and different from a claim for damages for breach of contract under Section 73 of the Contract Act. This distinction is in fact brought out very succinctly by Supreme Court in the case of Jagdish Singh v/s. Nathu Singh [(1992) 1 SCC 647], and more particularly paragraphs 15 & 16 thereof, which read thus:
"15. Section 21 of the Specific Relief Act, 1963 corresponding to Section 19 of 1877 Act enables the plaintiff in a suit for specific performance also to claim compensation for its breach either in addition to or in substitution of, such performance. Sub-sections (2), (4) and (5) of Section 21 are material and they provide:Ganesh Lokhande 10/16
6-arbp(L)-881-2018.doc "21.(2) If, in any such suit, the Court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly.
*** (4) In determining the amount of any compensation awarded under this section, the Court shall be guided by the principles specified in Section 73 of the Indian Contract Act, 1872, 9 of 1872.
(5) No compensation shall be awarded under this section unless the plaintiff has claimed such compensation in his plaint:
Provided that where the plaintiff has not claimed any such compensation in the plaint, the Court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation.
Explanation.-- The circumstance that the contract has become incapable of specific performance does not preclude the Court from exercising the jurisdiction conferred by this section."
(emphasis added)
16. So far as the proviso to sub-section (5) is concerned, two positions must be kept clearly distinguished. If the amendment relates to the relief of compensation in lieu of or in addition to specific performance where the plaintiff has not abandoned his relief of specific performance the Court will allow the amendment at any stage of the proceeding. That is a claim for compensation falling under Section 21 of the Specific Relief Act, 1963 and the amendment is one under the proviso to sub-
section (5). But different and less liberal standards apply if what is sought by the amendment is the conversion of a suit for specific performance into one for damages for breach of contract in which case Section 73 of the Contract Act is invoked. This amendment is under the discipline of Rule 17 Order 6, CPC. The fact that sub-section (4), in turn, invokes Section 73 of the Indian Contract Act for the principles of quantification and Ganesh Lokhande 11/16 6-arbp(L)-881-2018.doc assessment of compensation does not obliterate this distinction."
(emphasis supplied)
13. In the facts of the present case, considering that admittedly the Petitioner abandoned his relief for specific performance, I do not think that the Arbitral Tribunal was in any way incorrect in holding that no claim for damages in lieu of specific performance can lie or be made by the party who itself candidly admits that it is not willing to perform its obligations under the Development Agreement on the ground that it has become commercially unviable. I therefore have no hesitation in rejecting the aforesaid argument canvassed by Mr. Dubash.
14. The second argument canvassed by Mr. Dubash is that the Arbitral Tribunal ought to have taken a liberal approach while considering the amendment application. I find this argument to be completely fallacious. Firstly, there is no amendment application for it to consider. All that was done by the Tribunal was to reject the plea of the Petitioner seeking time to file an application for amendment. The Petitioner did not even have an amendment application ready on the date when they informed the Tribunal Ganesh Lokhande 12/16 6-arbp(L)-881-2018.doc that they did not want to go ahead with the Development Agreement (as it stood). This being the case, I think that this argument is misconceived in the present case. In any event, in view of my findings given earlier upholding the decision of the Tribunal that no claim for damages in lieu of the specific performance can lie when a party itself abandons the relief of specific performance, the question whether amendments should be considered liberally or otherwise, would not really arise. I therefore find that even this argument will not carry the case of the Petitioner any further.
15. The last argument canvassed by Mr. Dubash was that the Arbitral Tribunal has given a finding on an issue which was in dispute between the parties without giving an opportunity to the Petitioner of being heard on the said issue. I find this argument also to be without any substance. The impugned award basically proceeds on the basis that the Statement of Claim seeks specific performance of the Development Agreement which the Petitioner on its own statement is not willing to perform. It is in these circumstances that the Tribunal proceeds to dismiss the claim in toto and awards cost of Rs. 2,26,000/- payable to the Respondent. Ganesh Lokhande 13/16
6-arbp(L)-881-2018.doc The observations of the Tribunal in paragraph 12 regarding the non-payment of hardship compensation will not change the outcome of the award. This is for the simple reason that the Petitioner itself had made a statement before the Tribunal that it was not ready to perform the Development Agreement in its current form. I therefore do not think that any observation made regarding non-payment of hardship compensation would vitiate the entire award.
16. I must mention that there have been several grounds of challenge set out in the Petition. In fact, one of the grounds set out in the Petition is that the Tribunal failed to appreciate the circumstances under which the Petitioner's erstwhile advocate made a statement to the effect that in view of the amended Development Plan, which is pending, it would not be commercially viable for the Petitioner to perform the Development Agreement. It is mentioned in the Petition that the Arbitral Tribunal erred in considering the said statement to mean that the Petitioner was not ready and willing to perform its obligation under the Development Agreement. Though these bold statements are made in the Petition, Mr. Dubash has fairly not pitched his case at such height Ganesh Lokhande 14/16 6-arbp(L)-881-2018.doc and correctly so. This is for the simple reason that the Minutes of the Meeting dated 14th March, 2018 specifically record the statement on behalf of the Petitioner that it is not commercially viable for the Petitioner to carry out the development as per the Development Agreement without there being any agreement in respect of the additional areas/benefits that have accrued and/or are likely to accrue on the said property. In other words, this statement makes it amply clear that the Petitioner was not willing to perform the Development Agreement in the form it stood and was actually seeking either a fresh agreement or modification thereof. This being the case, I think Mr.Dubash was fair to the Court when he did not pitch his case to such a level. He has only pressed into service the arguments already recorded by me earlier and which I have already dealt with in this order.
17. In view of the forgoing discussion, I find that no case is made out for interference under Section 34 of the Arbitration and Conciliation Act, 1996, either with the impugned award or the Minutes of the Meeting dated 14th March, 2018. The Arbitration Petition is accordingly dismissed.
Ganesh Lokhande 15/16
6-arbp(L)-881-2018.doc
18. I must mention that whether the Minutes of the Meeting could have been challenged in the present Petition is an issue that I have not considered and I have proceeded on the basis that the same could be challenged. This order should not be construed to mean that any Minutes of the Meeting passed by an Arbitral Tribunal can be challenged under section 34 of the Act.
19. At this stage, Mr. Hegde submitted that though the cost of Rs.2,26,000/- has been paid on 19 th July, 2021, they have claims for interest as recorded in the impugned award. If the Respondent-Society has any claim for interest under the award, it is free to execute the same in accordance with law.
20. All parties to act on a copy of this order digitally signed by the Personal Assistant/Private Secretary/Associate of this Court.
(B. P. COLABAWALLA, J.) Ganesh Lokhande 16/16