Bombay High Court
Veervikash Estates Pvt. Ltd vs Fima Properties Pvt. Ltd And 7 Ors on 26 November, 2021
Author: B. P. Colabawalla
Bench: B.P.Colabawalla
7. CARBP 422-21.doc
LAXMI
SUBHASH IN THE HIGH COURT OF JUDICATURE AT BOMBAY
SONTAKKE
Digitally signed by
LAXMI SUBHASH
SONTAKKE
ORDINARY ORIGINAL CIVIL JURISDICTION
Date: 2021.11.26
11:36:11 +0530
IN ITS COMMERCIAL DIVISION
COMM. ARBITRATION PETITION NO. 422 OF 2021
Veervikash Estates Pvt. Ltd. .. Petitioner
Vs.
Fima Properties Pvt. Ltd & Ors .. Respondents
Mr. Akshay Patil with Mohan Salian i/b MGS Legal for the Petitioner.
Dr. Virendra Tulzapurkar, Senior Counsel, with Mr. Kunal Mehta, Mamta Sadh
& Vaishnavi Mungekar i/b Manish R. Bohra for Respondent No.1.
Mr. Arif Ali M. Ali for Respondent No. 2 to 8.
CORAM :- B.P.COLABAWALLA, J.
DATE :- NOVEMBER 26, 2021.
P. C.:
1. The above Section 9 Petition is filed seeking the following reliefs:
(a) that pending the hearing and final disposal of the Arbitral proceedings, pronouncement of Award and execution thereof, this Hon'ble Court be pleased to pass an order of injunction restraining Respondent No.1, its Directors or any other group companies, employees, Laxmi 1/33
7. CARBP 422-21.doc agents, associates, assignees or any other entity/ person claiming through or under Respondent No.1 from in any manner directly or indirectly dealing with the project and selling, transferring or creating any third party rights of any nature including but not limited to mortgage, charge etc with respect to the project and the flats allotted to the Petitioner as more particularly described in Exhibit "A" to this Petition and proportionate car parking spaces and in the alternative to the flats as more particularly described in Exhibit "A"
an area of admeasuring 94,831.06 sq. ft in the project and the proportionate parking spaces;
(b) that pending the hearing and final disposal of the arbitral proceedings and the making, implementation and execution of the award therein, Respondent No.1 by way of temporary mandatory injunction be ordered and directed to revalidate all requisite approvals and sanctions and obtain all necessary approvals and sanctions for completion of the project as per the permissions and sanctioned plan within a period of 2 months or any other period which this Hon'ble Court may deem fit and proper.
(c) that pending the hearing and final disposal of the arbitral proceedings, pronouncement of Award and execution thereof, this Hon'ble Court be pleased to pass on order directing Respondent No.1 to disclose on oath the following particulars:-
(1) all the permissions and sanctions with respect to the project, (2) the names of the persons/entities who have purchased the flats/premises in the project and other material particular such as the Agreements, amount paid by the purchasers and the balance consideration.
(d) this Hon'ble Court be pleased to appoint Court Receiver, High Court Bombay and/or any other person to act as a Receiver, having all powers under order 40 Rule 1 of code of Civil Procedure, 1908 to take over possession the project being the development of pending the hearing and final disposal of the arbitral proceeding and making implementation and execution of the Award.Laxmi 2/33
7. CARBP 422-21.doc
2. When the matter had come up on the 1st occasion, namely, on 2nd July, 2021, this Court passed an order recording a statement made on behalf of Respondent No.1 in terms of prayer clause (a). A direction was also given in the said order that the affidavit in reply to be filed by Respondent No.1 must contain the information sought for in prayer clause (c), although this may be stated on a without prejudice basis. All rights and contentions were expressly kept open.
3. Mr. Patil, the learned Advocate appearing on behalf of the Petitioner, submitted at the outset that the Respondent has not complied with the order passed by this Court on 2nd July, 2021. He therefore, submitted the Respondent ought not have to be heard in the above matter until such compliance is forthcoming. Be that as it may, I have heard the parties on the merits of the matter at great length.
4. The disputes between the parties arise out of the Agreement dated 16th February, 2013 (Exhibit-G to the Petition). This Agreement is entered into by the Petitioner (described therein as the party of the 2nd part), Respondent Nos. 2 to 8 (described therein as party of the 1st part) and Respondent No.1 (described therein as the party of the 4th part). The party of the 3rd part in the said Agreement is Laxmi 3/33
7. CARBP 422-21.doc the Kajani Family.
5. Respondent Nos. 2 to 8, the Kajani Family, and Respondent No.1 are the owners of the various plots of land situate at Village - Shaikpet, Mandal- Shaikpet, District Hyderabad more particularly described in the schedule annexed to the Agreement dated 16th February, 2013. Respondent No.1 entered into various development agreements with Respondent Nos. 2 to 8 as well as the Kajani Family where under the aforesaid parties respectively granted development rights of their respective plots to Respondent No.1. A list of the said development agreements is annexed as annexure "A" to the Agreement dated 16th February, 2013. Under the aforesaid development agreements the construction of the entire project was to be completed by 31st December, 2009.
6. Prior thereto, the Petitioner lent and advanced, an aggregate sum of Rs.21 Crores to Respondent Nos. 2 to 8 under Loan Agreements dated 25th September, 2007 and 19th December, 2007, respectively. With the intent to create security for repayment of the said Loan, Respondent Nos. 2 to 8 created a mortgage by deposit of title deeds of the lands belonging to them in favour of the Petitioner. Out of this amount of Rs.21 Crores, Respondent Nos. 2 to 8 advanced an Laxmi 4/33
7. CARBP 422-21.doc aggregate sum of Rs.16,28,53,854/- to Respondent No.1 in respect of the Development Project entrusted to them.
7. It appears that Respondent No.1 committed various breaches of the Development Agreements entered into between them and Respondent Nos. 2 to 8, and the Kajani Family. Since disputes and differences arose by and between them, they decided to resolve their disputes by executing an Agreement dated 18th February, 2010 pursuant to which Respondent No.1 agreed to allot to the Petitioner and Respondent Nos.2 to 8 constructed tenements as provided therein and on the terms and conditions set out thereunder.
8. Despite this, Respondent No.1 could not provide the aforesaid constructed tenements within the stipulated period and committed breaches of the terms and conditions of the said Agreement dated 18th February, 2010. In these circumstances, the Petitioner as well as Respondent Nos. 2 to 8 inter-alia intimated Respondent No.1 that they shall take action for termination of all the agreements. It is in order to resolve those disputes that the current Agreement dated 16th February, 2013 is entered into. The project in question is a real estate development known as 'VALANCIA' on various plots of the land admeasuring 8830 sq. yard in block K of ward No.12, in TPS No.26 Laxmi 5/33
7. CARBP 422-21.doc corresponding to Survey No.129/77 of shaikhpeth Village and Mandal situated at Sayed Nagar, First lancer, 12th No. Road, Banjara Hills, Hyderabad. The total constructed area of project is 2,23,670 sq.ft. Under the aforesaid Agreement dated 16th February, 2013, the Petitioner is entitled to 26 flats admeasuring in total of 94,831.06 sq.ft. along with proportionate car parking spaces (under Clause 5 of the said Agreement). Clause 6 of the Agreement gives a right to the Petitioner to take over the entire project in the event Respondent No.1 fails to complete the project by 31st December, 2014. Under the very same clause, the Petitioner is also entitled to recover liquidated damages from Respondent No.1.
9. It is an undisputed position that Respondent No.1 failed and neglected to hand over 26 flats to the Petitioner admeasuring 94,381.06 sq.ft. In fact, the said flats have not been handed over to the Petitioner even till date. Be that as it may, it is the case of the Petitioner that from 2015 to 2017, Respondent No.1 assured the Petitioner from time to time of the early completion of the project. Respondent No.1 also sent status reports of the project to the Petitioner. It is the case of the Petitioner that the Petitioner and Respondent No.1 had multiple discussions for resolution of the disputes. Finally in 2018, the Petitioner was informed by Respondent No.1 that the project would be completed Laxmi 6/33
7. CARBP 422-21.doc by the middle of 2019. It is the further case of the Petitioner that in the year 2019 Respondent No.1 represented to the Petitioner that it had identified an investor who was willing to buy out the Petitioner's interest in the project. The Petitioner was informed that the buyer was willing to take over the entire project and the rights of the Petitioner and Respondent Nos. 2 to 7 would be valued in the range of Rs.75 to 85 Crore.
10. From the record it appears that correspondence was exchanged between the parties whereby Respondent No.1 was inter-alia called upon to execute registered sale deeds qua the 26 flats mentioned in the Agreement dated 16th February, 2013. There are also averments in the Petition stating statements/talks between the parties which did not fructify into anything concrete. For the purposes of the present petition, I am not really required to analyze in great detail the correspondence that has been exchanged between the parties and which is annexed to the Petition. Suffice to the state that finally, on 14th June, 2021, the Petitioner invoked the arbitration clause (Clause 22 of the Agreement dated 16th February, 2013) and thereafter filed the present Petition on 22nd June, 2021.
11. In this factual backdrop, Mr. Patil, the learned Advocate for Laxmi 7/33
7. CARBP 422-21.doc the Petitioner, submitted that under the Agreement dated 16th February, 2013, the Petitioner is entitled to be allotted flats aggregating to an area of 94,831.06 sq.ft. as more particularly set out in annexure 'B' to the said Agreement. In addition to the aforesaid, Mr. Patil pointed that under the said Agreement, Respondent No. 1 was to also allot car parking spaces in the ratio proportionate of the area allotted to the Petitioner and Respondent Nos. 2 to 8 respectively. Mr. Patil submitted that there is no excuse for not allotting the aforesaid flats and car parking spaces to the Petitioner and Respondent No.1 is in willful breach of its obligations under the said Agreement. He therefore, submitted that this is a fit case where Respondent No.1 ought to be restrained from in any manner, directly or indirectly, dealing with the said project and/or selling, transferring or creating any third party rights of any nature whatsoever with respect to the project and the flats to be allotted to the Petitioner as more particularly described in Exhibit- 'A' to the Petition along with the proportionate car parking spaces. He submitted that in the alternative to the flats as more particularly described in Exhibit 'A', the 1st Respondent be restrained from creating any third party rights and/or interest of an area admeasuring 94,831.06 sq.ft. in the project as well as the proportionate car parking spaces. To substantiate his arguments Mr. Patil took me through the Agreement dated 16th February, 2013 in great detail. He therefore, submitted that Laxmi 8/33
7. CARBP 422-21.doc the above Petition be made absolute in terms of prayer clause (a). In addition, he submitted that the Petition also be made absolute in terms of prayer clause (c) and Respondent No.1 be directed to disclose on oath the details which have been sought for in the said prayer clause.
12. On the other hand, Dr. Tulzapurkar, the learned Senior Counsel appearing on behalf of Respondent No.1, opposed the above Petition on the following three grounds:
(a) There is no live dispute because the claim of the Petitioner in the proposed arbitration is barred under Article 54 of the Limitation Act, 1963. In this regard, Dr. Tulzapurkar submitted that under the Agreement dated 16th February, 2013 the project was to be completed by 31st December, 2014. He submitted that Article 54 stipulates that in a suit for specific performance of a contract, the limitation begins to run from the date fixed for the performance, and if no such date is fixed, then the limitation begins to run from when the plaintiff has notice that performance is refused.
Dr. Tulzapurkar submitted that in the present case, the date fixed for specific performance was 31st December, 2014 and therefore, the claim had to be made within 3 years from the said date. He submitted that admittedly the claim is not Laxmi 9/33
7. CARBP 422-21.doc made within 3 years from 31st December, 2014 and, hence, any claim that would be made by the Petitioner in the proposed arbitration would be ex-facie barred by the law of limitation. He therefore submitted that there is no question of granting any interim relief to the Petitioner.
(b) The disputes in the present case are not arbitrable because a mortgage is created in favour of the Petitioner and any dispute in relation to a mortgage is not arbitrable as held by the Hon'ble Supreme Court in the case of Booz Allen & Hamilton Inc Vs. SBI Home Finance Ltd. & Ors.
[(2011) 5 SCC 532]. In this regard and to support his argument that there is a mortgage which is created in favour of the Petitioner, Dr. Tulzapurkar relied upon clause 6 of the Agreement dated 16th February, 2013. If the disputes and differences are ex-facie not arbitrable, there is no question of granting any relief to the Petitioner under Section 9, was the submission of Dr. Tulzapurkar.
(c) The Agreement dated 16th February, 2013, is an unregistered document and therefore, the Petitioner cannot claim any relief on the basis of such an unregistered Laxmi 10/33
7. CARBP 422-21.doc document, was the last argument canvassed by Dr. Tulzapurkar.
13. For all the aforesaid reasons, Dr. Tulzapurkar submitted that there was no merit in the above Section 9 Petition and therefore, the same ought to be dismissed with costs.
14. I have heard the learned Counsel for the parties at great length and have perused papers and proceedings in the above Section 9 Petition. The Agreement in question and under which the disputes arise between the parties, is the Agreement dated 16th February, 2013. The arbitration agreement between the parties can be found at clause 22 thereof which reads thus:
"22. If any disputes or differences arise between the parties in connection with the validity, interpretation, implementation and/or alleged breach of any term or provision of these presents and/or any document related or incidental hereto, and/or otherwise howsoever arising from or in respect of these presents and/or any document related or incidental hereto (hereinafter referred to as the "Dispute"), the parties shall endeavor to settle the Dispute amicably within 30 (thirty) days from the date of occurrence thereof, failing which, the Dispute shall be referred to arbitration under the provisions of the Arbitration and Conciliation Act, 1996 or any modification or re-enactment thereof for the time being in force. The reference shall be made to the sole Arbitrator Mr. Pravin H. Mehta, Solicitor, Mumbai and failing him such other person as the parties may agree upon. The venue of the arbitration shall be at Mumbai and the language of the arbitration proceedings Laxmi 11/33
7. CARBP 422-21.doc shall be English. The Arbitral Award shall be reasoned and given in writing and shall be final and binding on the parties. The Arbitrator shall also decide on the sharing of costs of the arbitration proceedings between the parties hereto. The Arbitrator will also have summary powers and shall be entitled to give interim directions and awards from time to time. Notwithstanding the pendency of any Dispute or other differences between the parties hereto and/or any arbitration proceedings, the party of the Fourth Part shall continue to be fully entitled and at liberty to continue and complete the development of the Property and exercise all its rights, powers, privileges, discretions and authorities contained in this Agreement and all documents related or incidental hereto."
15. Clauses 3, 4, 5, 6, & 8 of the Agreement dated 16th February, 2013 are also relevant to decide the controversy before me. As mentioned earlier, the Petitioner is described as the party of the 2nd part; Respondent Nos. 2 to 8 are described as the party of the 1st part; and Respondent No.1 is described as the party of the 4th part. The party of the 3rd part in the said Agreement 16th February, 2013 is the Kajani Family. The aforesaid Clauses 3, 4, 5, 6, & 8 read as under:-
"3. The Party of the Fourth Part shall construct multi- storied residential apartments upon the lands mentioned in the Schedule hereunder written as per the permit and sanction plans accorded and approved by the GHMC, HUDA and other Competent Authorities and as per the details/specifications to be agreed upon at the entire cost and expense of the Party of the Fourth Part. The Party of the Fourth Part will not be entitled to enter into any agreement or arrangement with any other party to be taken as a co- promoter, co-developer or into a joint venture or joint development Agreement with any other person or persons in Laxmi 12/33
7. CARBP 422-21.doc respect of the captioned development project.
4. The Party of the Fourth Part have obtained necessary permissions and approvals of the plans and thereafter complete the construction of the buildings within 21 months from the date of execution of this Agreement and in any event not later than 31st day of December 2014.
5. The Party of the Fourth Part has represented that out of the total area for residential flats, 1,12,580.61 sq. ft. is available for being divided between the Party of the First Part and the Party of the Second Part and it is agreed by and between the Party of the Party of the First Part and the Party of the Second Part that the Party of the Second Part will be allotted flats aggregating to an area of 94,831.06 sq. ft. and the Party of the First Part shall be allotted flats aggregating to an area of 17,749.55 sq. ft which the Party of the Fourth Part has agreed and undertaken to allot to the Party of the First Part and the Second Part respectively in the newly constructed building as more particularly set out in Annexure 'B' hereto. In addition to the said flats, the Party of the Fourth Part shall also allot to the Party of the First Part and the Party of the Second Part car parking spaces in the same ratio and proportion of the respective areas allotted to them under this clause or areas finally allotted in terms of this ratio. The Party of the Fourth Part shall execute the necessary/transfer/allotment deeds and documents in favour of the Party of the First Part and the Party of the Second Part for allocation of their respective areas set out hereinabove forthwith. The said documents shall be executed in favour of the Party of the First Part and Second Part as the case may be and/or their nominees. It is further agreed that notwithstanding anything stated herein the Party of the First Part and Party of the Second Part in respect of their entitlement shall be entitled to execute necessary agreement/ transfer/allotment deeds/documents of one or more units with parking in favour of any person/s and respectively entitled to receive the consideration/ sale proceeds and appropriate the same for themselves. Notwithstanding anything stated in the agreement the party Laxmi 13/33
7. CARBP 422-21.doc of the fourth part shall be liable to discharge their obligations under this agreement in favour of the party of the first part and party of the second part and their respective nominees/transferees.
6. The Party of the Fourth Part will complete the construction of the project as per the time schedule set out herein at Annexure 'C'. After completion of construction and receiving possession of the flats and parking spaces in terms of this agreement, the Party of the Second Part will release the Title Deeds in its possession in respect of the lands of the Party of the First Part and the said Properties shall be redeemed and freed as a security under the Loan Agreements between the Party of the First Part and the Party of the Second Part to enable the Party of the First Part to sign and execute the Conveyance in respect of the said Properties in favour of the Party of the Fourth Part or such person or persons as the Party of the Fourth Part or such person or persons as the Party of the Fourth Part may direct. Likewise after completion of construction and receiving possession of the flats and parking spaces in terms of this agreement, the Party of the First Part will adjust the advance amount referred to in Recital 4 hereinabove towards the full and final consideration for the areas/flats/parking spaces allotted by the Party of the Fourth Part to the Party of the First Part. In the event that the Party of the Fourth part is unable to complete the Project and construction work within the time mentioned in clause 2 hereinabove, the Party of the Second Party will be without any further documentation, be entitled to take over the control of the entire Project from the Party of the Fourth Part by entering upon the said lands and also be at liberty to complete the Project through any other person without prejudice to the right of the Party of the Second Part to claim damages from the Party of the Fourth Part and the cost of completing the project. In such an event, the Party of the Fourth Part alone shall be responsible and liable for all liabilities and claims in respect of Agreements entered into between the Party of the Fourth Part and Third Parties and the Party of the Fourth Part will be entitled to represent it self or be associated with the project thereafter. Without Laxmi 14/33
7. CARBP 422-21.doc prejudice to the rights conferred under this agreement if the project is delayed beyond stipulated period the Party of the Fourth Part shall pay an agreed liquidated damages to the Party of the Second Part quantified at the rate of Rs.75 per sq.ft. per month of the constructed area and the parking of which the construction is not completed and possession is not given and the Party of the Second part shall have charge for the same on the said entire property. The said amount shall be paid on expiry of each month of delay failing which such amount shall carry interest at the rate of 24% per annum and the interest shall be compounded every quarterly.
****************
8. It has been agreed by and between the Parties that until possession of all the flats and car parking spaces as agreed hereunder are handed over to the Party of the First Part and the Party of the Second Part, the Party of the Second Part will not part with the Title Deeds pertaining to the lands belonging to the Party of the First Part and the Party of the Fourth Part will not give possession of the balance flats to anyone else."
16. Clause 3 of this Agreement inter-alia provides that Respondent No.1 shall construct multi-storied residential apartments and will not be entitled to enter into any agreement or arrangement with any other party to be taken as a co-promoter, co-developer or enter into a joint venture or a joint development agreement with any other person or persons in respect of the captioned development project. Clause 4 inter-alia stipulates that Respondent No.1 shall complete the construction of the buildings by 31st December, 2014.
17. Clause 5 talks about the entitlement of the Petitioner as Laxmi 15/33
7. CARBP 422-21.doc well as that of Respondent Nos. 2 to 8. In the said Clause, Respondent No.1 has agreed that out of the total area of the project, an area of 1,12,580.61 sq.ft. will be available for being divided between the Petitioner and the Respondent Nos. 2 to 8. This clause further stipulates that out of the area of 1,12,580.61 sq.ft., an aggregate area of 94.831.06 sq.ft. will be allotted to the Petitioner, and the balance 17,749.55 sq.ft. will be allotted to Respondent Nos. 2 to 8. The 26 flats that are to be allotted to the Petitioner (aggregating to 94.831.06 sq.ft.) are also identified in Annexure 'B' to the said Agreement.
18. Clause 6 of the Agreement inter-alia contemplates that after completion of construction and receiving possession of the flats and car parking spaces in terms of the Agreement, the Petitioner will release the Title Deeds in its possession in respect of the lands owned by Respondent Nos. 2 to 8 and will be freed as a security under the Loan Agreements entered into between the Petitioner and Respondent Nos. 2 to 8. This will be done in order to ensure that Respondent Nos. 2 to 8 can sign and execute a conveyance in respect of the said properties in favour of Respondent No.1 or such other person or persons as Respondent No.1 may direct. There is also a stipulation for payment of liquidated damages in the said Clause. I must mention over here that there is no dispute between the Petitioner and Respondent Nos. 2 to 8. Laxmi 16/33
7. CARBP 422-21.doc In fact, the learned Counsel appearing on behalf of the Respondent Nos. 2 to 8, has stated before me that they are supporting the Petitioner.
19. Thereafter, clause 8 stipulates that until possession of all the flats and car parking spaces (as agreed to in the Agreement) are handed over to Respondent Nos. 2 to 8 and the Petitioner, the 1st Respondent will not give possession of the balance flats to anyone else.
20. Having analysed the Agreement dated 16th February, 2013 and more particularly the clauses reproduced earlier, I shall now consider the three defences canvassed by Dr. Tulzapurkar to deny relief to the Petitioner under Section 9 of the Arbitration Act.
21. The 1st argument canvassed by Dr. Tulzapurkar was that there is no live dispute between the parties because the claim proposed to be made by the Petitioner in the proposed arbitration, namely, seeking specific performance of Agreement dated 16th February, 2013, is barred under Article 54 of the Limitation Act, 1963. Article 54 of the Limitation Act, 1963 reads thus:
Description of suit Period of Time from which period limitation begins to run For specific Three years The date fixed for the Laxmi 17/33
7. CARBP 422-21.doc performance of a performance, or, if no contract such date is fixed, when the plaintiff has notice that performance is refused.
22. On a plain reading of Article 54, it is clear that (i) if a date is fixed for performance of a contract, a suit for specific performance has to be filed within three years from the said date; and (ii) If no such date is fixed, then the suit has to be filed within three years from the date when the plaintiff has notice that performance is refused. It is now well settled that the question of limitation is a mixed question of fact and law. The applicability of the 1st or the 2nd part of Article 54 will have to be judged having regard to the facts of the case. The question as to whether a suit for specific performance of a contract will be barred by the law of limitation or not would not only depend upon the nature of the agreement but also on the conduct of the parties and also as to how they understood the terms and conditions of the agreement. It can hardly be disputed that a suit for specific performance of a contract would be governed by Article 54. However, while determining the applicability of the 1st or the 2nd part of the said provision, the Court will firstly see as to whether any time was fixed for the specific performance of the agreement, and if it is so fixed, whether the suit is filed beyond the Laxmi 18/33
7. CARBP 422-21.doc prescribed period, unless any case of extension of time for performance was pleaded and established. In a situation where no time is fixed for performance, the Court may determine the date on which the Plaintiff had notice of refusal on the part of the Defendant to perform the contract and in that event the suit is required to filed within a period of three years from the date of such refusal. As mentioned earlier, under Article 54, if the date is fixed for performance of the contract, a suit would have to be filed within three years from the said date unless any case of extension of time is pleaded. One must not lose sight of the fact that extension of time for performance of a contract is not necessarily to be inferred from the written document alone. It could be implied also. The conduct of the parties would also be extremely relevant. It is only once the Court examines all this and comes to a finding of fact, would the Court be able to come to a definite conclusion on whether the suit is barred by the law of limitation or otherwise. The observations I have made herein in relation to Article 54 and its interpretation are supported by a decision of the Supreme Court in the case of Panchanan Dhara & Ors. Vs. Monmatha Nath Maity (Dead) Through Lrs. & Anr. dead through Lrs & another [(2006) 5 SCC 340], and on which heavy reliance was placed by Mr. Patil in answer to the submission of Dr. Tulzapurkar on the issue of limitation. The relevant portion of this decision reads thus: Laxmi 19/33
7. CARBP 422-21.doc "20. Contention of Mr. Mishra as regards the applicability of the first or the second part of Article 54 of the Limitation Act will have to be judged having regard to the aforementioned findings of fact. A plea of limitation is a mixed question of law and fact. The question as to whether a suit for specific performance of contract will be barred by limitation or not would not only depend upon the nature of the agreement but also the conduct of the parties and also as to how they understood the terms and conditions of the agreement. It is not in dispute that the suit for specific performance of contract would be governed by Article 54 of the Limitation Act, 1963. While determining the applicability of the first or the second part of the said provision, the court will firstly see as to whether any time was fixed for performance of the agreement of sale and if it was so fixed, whether the suit was filed beyond the prescribed period unless any case of extension of time for performance was pleaded and established. When, however, no time is fixed for performance of contract, the court may determine the date on which the plaintiff had notice of refusal on the part of the defendant to perform the contract and in that event the suit is required to be filed within a period of three years therefrom.
21. In this case, before the Trial Court, the parties proceeded on the basis that the Second Respondent herein refused to execute and register a deed of sale in terms of the said agreement on 21.8.1985. The courts below have also arrived at a finding of fact that the time for performance of the said agreement for sale had all along been extended and even as on 16.3.1985, a Director of the second respondent assured the first respondent that it would be honoured. In a suit for specific performance of contract in respect of any immovable property, time would ordinarily not be the essence of the contract. The Appellant herein also did not raise any plea to the said effect.
22. A bare perusal of Article 54 of the Limitation Act would show that the period of limitation begins to run from the date on which the contract was to be specifically performed. In terms of Article 54 of the Limitation Act, the period Laxmi 20/33
7. CARBP 422-21.doc prescribed therein shall begin from the date fixed for the performance of the contract. The contract is to be performed by both the parties to the agreement. In this case, the first respondent was to offer the balance amount to the Company, which would be subject to its showing that it had a perfect title over the property. We have noticed hereinbefore that the courts below arrived at a finding of fact that the period of performance of the agreement has been extended. Extension (sic time for performance of a) of contract is not necessarily to be inferred from written document. It could be implied also. The conduct of the parties in this behalf is relevant.
Once a finding of fact has been arrived at, that the time for performance of the said contract had been extended by the parties, the time to file a suit shall be deemed to start running only when the plaintiff had notice that performance had been refused. Performance of the said contract was refused by the Company only on 21.8.1985. The suit was filed soon thereafter. The submission of Mr. Mishra that the time fixed for completion of the transaction was determinable with reference to the event of perfection of title of the second respondent cannot be accepted. The said plea had never been raised before the courts below. Had such a plea been raised, an appropriate issue could have been framed. The parties could have adduced evidence thereupon. Such a plea for the first time before this Court cannot be allowed to be raised. Even otherwise on a bare perusal of the agreement for sale dated 18.4.1971, it does not appear that it was intended by the parties that the limitation would begin to run from the date of perfection of title."
23. I will now examine whether the above ratio would apply to the facts of the present case. In the present case, it is the specific case of the Petitioner that the time to perform the contract was duly extended. In fact, in paragraph 3.14 of the Petition, it is categorically averred that Laxmi 21/33
7. CARBP 422-21.doc between the year 2016 to 2019, the construction of the project was carried out at an extremely slow pace. Whenever the Petitioner raised grievances about the same, Respondent No.1 assured the Petitioner of early completion of the project. It is further stated in the Petition that in the middle of the year 2018, the Petitioner was informed by Respondent No.1 that the project would be completed by the middle of 2019. It is further stated that if the Petitioner could not wait for completion of the project, Respondent No.1 would get buyers for the Petitioner's flats in the project and would help the Petitioner to dispose of the same. This apart, even in the affidavit in rejoinder filed by the Petitioner, in paragraph 11 thereof, the Petitioner has specifically pleaded that time for performance was extended by the parties. Paragraph 11 of the said affidavit in rejoinder reads thus:
"11. With reference to paragraph 8, it is denied that the claim underlying the Arbitration Agreement as well as the Arbitration Petition itself is ex-facie barred by limitation. It is denied that the Petitioner is not entitled to any ad-interim or interim reliefs for the reasons alleged or otherwise. It is correct that the Petitioner is seeking specific performance of the agreement dated 16th February 2013. Although, clause 4 of the agreement stipulates that the Respondent No.1 is liable to complete the construction of the building within 21 months from the date of execution of the agreement and in any event, no later than 31st December, 2014. It is an admitted position that at the request of Respondent No.1, the Petitioner had extended the time for completion of construction of the building from time to time. As stated in the Petition, Respondent No.1 from time to time requested for postponing the date of completion of construction of the building and the Laxmi 22/33
7. CARBP 422-21.doc Petitioner acceded to the request. The aforesaid position was never challenged or denied by Respondent No.1. It is well settled that the agreement to extend the time for performance need not be reduced in writing. The fact that Respondent No.1 from time to time updated the Petitioner regarding the progress of construction as well as agreed and acknowledged and confirmed the right of the Petitioner to 26 flats, admeasuring an area of 94.831.06 square feet alongwith the proportionate car parking spaces and also engaged with the Petitioner in protracted negotiations for settling the Petitioner's claim clearly indicates that the time for performance was extended subject to payment of liquidated damages as more particularly stated in the agreement dated 16th February, 2013. As more particularly stated in the Petition, the cause of action for seeking specific performance arose when Respondent No.1 refused to execute the Sale Deeds of 26 flats admeasuring 94,831.06 square feet some time in the middle of May 2021. Thus, the period of limitation to seek specific performance of the agreement of dated 16th February, 2013 does not start from the date fixed for completion of the construction, i.e. 31st December, 2014 but in the middle of May, 2021 when the Respondent refused to execute the Sale Deeds as alleged in the Petition. The objection with regard to limitation raised by Respondent No.1 clearly shows the dishonesty and malafide intention of Respondent No.1. It is reiterated that the claim of the Petitioner as well as this Arbitration Petition is well within limitation and this Hon'ble Court has jurisdiction to try, adjudicate and grant reliefs under the provisions of Section 9 of Arbitration and Conciliation Act, 1996."
24. This being the case, I am unable to agree with Dr. Tulzapurkar that the claim is ex-facie time barred and therefore, no relief ought to be granted to the Petitioner. This, being a mixed question of law and fact, would have to be determined by the arbitral tribunal Laxmi 23/33
7. CARBP 422-21.doc when such an issue is raised before it. I cannot today deny the Petitioner relief under Section 9 by proceeding on the basis that the claim is time barred. Prima facie, considering that there is already a pleading that the time for performance was extended, I do not think that the claim is ex- facie barred by the law of limitation as contemplated under Article 54 of the Limitation Act, 1963. I, therefore, do not find any merit in the aforesaid argument canvassed by Dr. Tulzapurkar to deny the Petitioner relief on this ground.
25. The second argument canvassed by Dr. Tulzapurkar was that since the agreement in question involved a mortgage, the dispute is not arbitrable as held by the Hon'ble Supreme Court in the case of Booz Allen and Hamilton Inc. & Vs SBI Home Finance Ltd. & Ors. (supra) and hence, there is no question of granting any relief under Section 9 in favour of the Petitioner. I find this argument to be completely misconceived. Firstly, the equitable mortgage that is created, is not by Respondent No.1 in favour of the Petitioner. The mortgage is created on the lands belonging to Respondent Nos. 2 to 8 in favour of the Petitioner. There is no dispute as on today between the Petitioner and Respondent Nos. 2 to 8. In fact, as mentioned earlier, Respondent Nos. 2 to 8 are supporting the Petitioner in the present Petition. I therefore, fail to see how this argument can be canvassed to deny the Laxmi 24/33
7. CARBP 422-21.doc Petitioner relief. In fact, the aforesaid judgment of the Supreme Court has categorically held that an agreement to sell or an agreement to mortgage does not involve any transfer of right in rem but creates only a personal obligation. Therefore, if specific performance is sought either in regard to an agreement to sell or an agreement to mortgage, the claim for specific performance will be arbitrable. What the Supreme Court has held is that a mortgage suit for sale of the mortgaged property is an action in rem, for enforcement of a right in rem. A suit on mortgage is not a mere suit for money. A suit for enforcement of mortgage being enforcement of a right in rem, will have to be decided by the Courts of law and not by the arbitral tribunals. It is in this light, the Supreme Court opined that a suit for sale, foreclosure or redemption of mortgaged property should only be tried by a public forum and not by an arbitral tribunal. The relevant portion of the aforesaid Judgment of the Supreme Court in the case Booz Allen and Hamilton Inc Vs SBI Home Finance Ltd. & Ors. (supra) reads thus:
"46. An agreement to sell or an agreement to mortgage does not involve any transfer of right in rem but creates only a personal obligation. Therefore, if specific performance is sought either in regard to an agreement to sell or an agreement to mortgage, the claim for specific performance will be arbitrable. On the other hand, a mortgage is a transfer of a right in rem. A mortgage suit for sale of the mortgaged property is an action in rem, for enforcement of a right in rem. A suit on mortgage is not a mere suit for money. A suit for enforcement of a mortgage being the enforcement of a right Laxmi 25/33
7. CARBP 422-21.doc in rem, will have to be decided by courts of law and not by Arbitral Tribunals.
49. A decree for sale of a mortgaged property as in the case of a decree for order of winding up, requires the court to protect the interests of persons other than the parties to the suit/petition and empowers the court to entertain and adjudicate upon rights and liabilities of third parties (other than those who are parties to the arbitration agreement). Therefore, a suit for sale, foreclosure or redemption of a mortgaged property, should only be tried by a public forum, and not by an Arbitral Tribunal. Consequently, it follows that the court where the mortgage suit is pending, should not refer the parties to arbitration."
26. In the facts of the present case, the Petitioner is seeking specific performance of the Agreement dated 16th February, 2013 and/or damages towards delay in completion of project. The claim of the Petitioner is neither for sale, foreclosure or redemption of mortgaged property. In these circumstances, I find that the reliance placed by Dr. Tulzapurkar on the decision of Supreme Court in the case of Booz Allen and Hamilton Inc Vs SBI Home Finance Ltd. & Ors. (supra) is wholly misplaced.
27. Before parting on this issue, I must mention that a learned Single Judge of this Court in the case of Tata Capital Financial Services Ltd. Vs. Deccan Chronicle Holdings Ltd. & Ors. [2013 (3) BomCR 205] has inter-alia opined that if the statement of Laxmi 26/33
7. CARBP 422-21.doc claim before the arbitral tribunal is not before the Court while hearing an Application under Section 9 of the Arbitration and Conciliation Act, 1996, the Court cannot reject the application for interim relief on the ground that the Petitioner may ultimately apply for enforcement of mortgage which would be beyond the jurisdiction of the arbitral tribunal. The learned Judge opined that it is for the Petitioner to decide what claims the Petitioner would make before the arbitral tribunal. However, if the Petitioner chooses not to apply for enforcement of mortgage and files a claim simplicitor for recovery of money or for enforcement of property which was not mortgaged by the Respondent in favour of the Petitioner, such proceedings would be proceedings in personam and not in rem which obviously would be within the jurisdiction of the arbitral tribunal to adjudicate upon. The learned Judge has further gone on to observe that if any relief for enforcement of mortgage is claimed before the arbitral tribunal, the Petitioner would always have the liberty to decide whether to withdraw such claims and/or seek amendment for moulding its reliefs, which would be within the jurisdiction of the arbitral tribunal. The learned Judge has further held that a proceeding under Section 9 for interim measures cannot be equated with proceedings filed in a pending suit for referring the parties to arbitration under Section 8 of the Arbitration Act. The learned Single Judge was of the view that the reliance placed by the Respondent on the Laxmi 27/33
7. CARBP 422-21.doc decision of the Supreme Court in the case of Booz Allen and Hamilton Inc Vs SBI Home Finance Ltd. & Ors. (supra) was of no assistance while opposing an application under Section 9 of the Arbitration Act. The relevant portion of this decision reads thus:
"35. On perusal of Judgment of Supreme Court in case of Booz Allen (supra), it is clear that Supreme Court, after considering the prayers in the plaint in a mortgage suit, has held that as the suit was for enforcement of mortgage and was a suit in rem, issue of arbitrability having raised by the defendant in such suit and the application filed under Section 8 of the Act, such issue of arbitrability has to be decided by the Court hearing the suit and cannot be left to be decided by the arbitral tribunal. Question, however, arises for consideration of this Court in the present proceedings is whether in an application under Section 9 of the Act while deciding a relief in the nature of interim measures and in the absence of the plaint before this Court, whether this Court shall decide the issue of arbitrability of the claims which are not even before this Court and on that ground, dismiss the application under Section 9 for interim measures ?
It is not in dispute that the petitioners have not filed any statement of claim before the arbitral tribunal seeking any enforcement of the mortgaged property under deeds of mortgage in so far as ARBP No.1321 of 2012 is concerned. The learned counsel appearing for the petitioner in both the matters submit that considering the law laid down by the Supreme Court in case of Booz Allen (supra), petitioner would not apply for enforcement of mortgage in the arbitration proceedings and on this ground, this Court cannot reject the present application under Section 9 on the presumption that even in the arbitration proceedings, the petitioner would apply for enforcement of mortgage and which would be beyond the jurisdiction of the arbitral tribunal. On perusal of the Supreme Court judgment in case of Booz Allen2 (supra), in my view, it is clear that if the plaint and/or statement of claim before the arbitral tribunal is not before the Court while hearing application under Section 9 of the Act, Court cannot reject the application for interim measures on the ground that the petitioner may ultimately apply Laxmi 28/33
7. CARBP 422-21.doc for enforcement of mortgage which would be beyond the jurisdiction of the arbitral tribunal. In my view, it is for the petitioner to decide what claims the petitioner would make before the arbitral tribunal. If the petitioner chooses not to apply for enforcement of mortgage and files a simplicitor suit for recovery of money or for enforcement of any other properties which were not mortgaged by the respondents in favour of the petitioners, such proceedings would be the proceedings in personam and not in rem which obviously would be within the jurisdiction of the arbitral tribunal to adjudicate upon. In my view, even if any such relief by way of enforcement of mortgage is claimed before the arbitral tribunal, petitioner would always have liberty to decide whether to withdraw such claims and/or seek amendment for moulding its reliefs, which would be within the jurisdiction of the arbitral tribunal. In my view, if any such reliefs are claimed which are beyond the jurisdiction of the arbitral tribunal and cannot be adjudicated upon, mechanism under Section 16 is provided by the legislature to raise issue of jurisdiction by the respondents before the arbitral tribunal. On hearing such application under Section 16, an arbitral tribunal can always decide whether any of the claims made by the claimants were within its jurisdiction to adjudicate upon. In my view, proceedings under Section 9 filed in this Court by the petitioner for interim measures, cannot be equated with the proceedings filed in a pending suit for referring the parties to arbitration under Section 8 of the Act of 1996. Thus, in my view, reliance placed by the respondents on the Judgment of Supreme Court in case of Booz Allen2 (supra) is of no assistance to the respondents while opposing application under Section 9 of the Act of 1996."
28. I am therefore, clearly of the view that in the facts of the present case, the reliance placed by Dr. Tulzapurkar on the decision of the Supreme Court in the case of Booz Allen and Hamilton Inc Vs SBI Home Finance Ltd. & Ors. (supra) is wholly misplaced and is Laxmi 29/33
7. CARBP 422-21.doc of no assistance to the 1st Respondent to deny the Petitioner relief under Section 9 of the Arbitration Act.
29. The last argument canvassed by Dr. Tulzapurkar is that no relief can be granted to the Petitioner as the Agreement dated 16th February, 2013 is not a registered document. I find no merit in the aforesaid argument either. Section 49 of the Registration Act reads thus:
"49. Effect of non-registration of documents required to be registered. - No document required by section 17 [or by any provision of the Transfer of Property Act, 1882,] to be registered shall-
(a) affect any immovable property comprised therein, or
(b) confer any power to adopt, or
(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has such been registered:
[Provided that an unregistered document affecting immovable property and required by this Act, or the Transfer of Property Act, 1882, to be registered may be received as evidence of a contract in a suit for specific performance under CHAPTER II of the Specific Relief Act, 1877 (3 of 1877), or as evidence of any collateral transaction not required to be effected by registered instrument.]"
30. As can be seen from the proviso to Section 49, a party can sue for the relief of specific performance of an unregistered document. In the facts of the present case, as mentioned earlier, the Petitioner, in the proposed arbitration, would be seeking the relief of specific Laxmi 30/33
7. CARBP 422-21.doc performance or in the alternative, damages. This being the case, I do not think that non registration of the Agreement dated 16th February, 2013 would in any way, disentitle the Petitioner from either seeking relief before the arbitral tribunal or before this Court under Section 9 of the Arbitration Act.
31. I must mention that apart from the aforesaid three arguments, no other argument was canvassed by Dr. Tulzapurkar, though a detailed affidavit in reply has been filed to the above Section 9 Petition. Having negated all the arguments canvassed by Dr. Tulzapurkar, I still have to examine whether the Petitioner would be entitled to the reliefs sought for in the Petition. As mentioned earlier, Clause 8 of the Agreement stipulates that until possession of the all flats and car parking spaces (as agreed to under the Agreement) are handed over to the Petitioner and Respondent Nos. 2 to 8, Respondent No.1 will not give possession of any of the balance flats to anyone else. This is the solemn agreement reached between the parties. I therefore, have no hesitation in holding that the Petitioner has made out a strong prima facie case to seek any injunction against Respondent No.1 in terms of prayer clause (a) of the Petition. I am of the opinion that even balance of convenience lies in favour of the Petitioner. If the reliefs are not granted, irreversible prejudice will be caused to the Petitioner. Laxmi 31/33
7. CARBP 422-21.doc
32. In view of foregoing discussion, the Section 9 Petition is made absolute in terms of prayer clauses (a) and (c) which read thus:
"(a) that pending the hearing and final disposal of the Arbitral proceedings, pronouncement of Award and execution thereof, this Hon'ble Court be pleased to pass an order of injunction restraining Respondent No.1, its Directors or any other group companies, employees, agents, associates, assignees or any other entity/ person claiming through or under Respondent No.1 from in any manner directly or indirectly dealing with the project and selling, transferring or creating any third party rights of any nature including but not limited to mortgage, charge etc with respect to the project and the flats allotted to the Petitioner as more particularly described in Exhibit "A" to this Petition and proportionate car parking spaces and in the alternative to the flats as more particularly described in Exhibit "A"
an area of admeasuring 94,831.06 sq. ft in the project and the proportionate parking spaces;
(c) that pending the hearing and final disposal of the arbitral proceedings, pronouncement of Award and execution thereof, this Hon'ble Court be pleased to pass on order directing Respondent No.1 to disclose on oath the following particulars:-
(1) all the permissions and sanctions with respect to the project, (2) the names of the persons/entities who have purchased the flats/premises in the project and other material particular such as the Agreements, amount paid by the purchasers and the balance consideration."
33. As mentioned earlier, ad-interim relief was already granted in terms of prayer clause (c) by this Court vide its order dated 22nd July, 2021. It is the case of the Petitioner, that the same has not been Laxmi 32/33
7. CARBP 422-21.doc complied with. The 1st Respondent is directed to strictly comply with prayer clause (c) of the Petition by filing a further affidavit within a period of two weeks from today and serve a copy of the same on the advocates for the Petitioner, failing which they will be held in contempt.
34. The above Section 9 Petition is disposed of in the aforesaid terms. However, there shall be no order as to costs. It is needless to clarify that all observations made herein are only prima facie and shall not influence the Arbitral Tribunal whilst deciding the lis between the parties hereto.
35. All parties to act on an authenticated copy of this order digitally signed by the Personal Assistant /Private Secretary/Associate of this Court.
(B. P. COLABAWALLA, J.) Laxmi 33/33