Bombay High Court
Kings Empire Heights Pvt Ltd vs Anand Dham Cooperative Housing Society ... on 1 December, 2025
2025:BHC-OS:23026
CARBPL-29840-2025 - F.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION (L) NO. 29840 OF 2025
Digitally
signed by
SHRADDHA
SHRADDHA KAMLESH
KAMLESH TALEKAR Kings Empire Heights Private Limited ...Petitioner
TALEKAR Date:
2025.12.02
15:03:48
+0530 Versus
1. Anand Dham Cooperative Housing
Society Ltd.
2. Mr. Nilesh Laxmikant Kudalkar
(Proprietor of Kings Builders and De-
velopers) & Ors. ...Respondents
Mr. Mayur Khandeparkar a/w Mr. Abhishek Nikharge and Mr.
Mahesh Dube i/b Mehul Shah, for Petitioner.
Mr. Aseem Naphade a/w Mr. Amit Karle, Mr. Sameer Tiwari and
Ms. Deepanjali Mishra, for Respondent No.1
CORAM: SOMASEKHAR SUNDARESAN, J.
DATE: December 1, 2025
ORDER:
Context and Factual Background:
1. This is a Petition filed under Section 37 of the Arbitration and Conciliation Act, 1996 ("the Act") impugning an order dated August 5, 2025 ("Impugned Order") passed by the Learned Arbitral Tribunal disposing of an Application filed by the Petitioner under Section 17 of Page 1 of 29 December 1, 2025 ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx Act. The Impugned Order has partially allowed the Section 17 Application by restraining the Respondent from acting contrary to the redevelopment documentation between the parties, but refusing to interfere with the physical possession held by the Respondents over ten flats as sought by the Petitioner.
2. The Petitioner, Kings Empire Heights Private Limited ("Developer") had inherited a Development Agreement dated November 29, 2007 ("Development Agreement") originally executed between the Respondent No.1, Anand Dham Cooperative Housing Society Ltd.
("Society") with the Respondent No.2, Nilesh Laxmikant Kudalkar, Proprietor of Kings Builders and Developers ( "Original Developer"). The Development Agreement entailed redevelopment of the Society's property admeasuring 5,371 square metres of land located in Bhandup, more particularly described in the pleadings of the parties. The redevelopment did not take place within the timelines originally envisaged by the parties. Eventually, the Developer, a company in which the Original Developer retained a 25% equity stake, took over the project.
3. On September 22, 2008, the parties agreed that there would be a joint development whereby the Developer and the Original Page 2 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx Developer would be responsible for discharging the obligations contained in the Development Agreement. Towards this end, the Developer and the Original Developer executed a Joint Development Agreement dated October 3, 2008 ("Joint DA") without any changes to the original terms of the Development Agreement.
4. For purposes of these proceedings, the core elements of the Development Agreement are that the Developer would be obliged to pay a sum of Rs.1,30,90,000/- to the Society towards corpus fund distributable across the 119 members of the Society; and make certain payments to the Original Developer. In terms of Clause 33, the Developer would be entitled to enter upon the property and carry out the work required to be implemented under the Development Agreement. Under Clause 41 of the Development Agreement, in the event of any increase in floor space index (" FSI") attributable to the property, the Developer would pay double the corpus fund to the Society. The FSI indeed increased, and for all practical purposes, it is common ground that the corpus fund needs to be doubled aggregating to approximately ~Rs.2.61 Crores. However, the parties have disputes about whether the additional FSI has already been absorbed by the Developer.
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5. The deadline for completion of the redevelopment was 24 months from the possession of the building being handed over. Eventually, possession of the vacated building was handed over only by February 2008 and therefore the redevelopment was expected to be completed by February 2010.
6. On March 25, 2011, the parties executed a Supplementary Development Agreement ("Supplementary DA") whereby the assignment of the project to the Developer was confirmed and recorded. The terms of the Joint DA confirming the Society's consent for the Joint DA and identifying the Developer's right to sell flats relating to the free sell component were recorded. The Supplementary DA also contains an arbitration clause which is the arbitration agreement underlying the arbitration proceedings that led to the Impugned Order.
7. The redevelopment entails construction of a "Building No.1"
comprising two wings (A Wing and B Wing) with 175 flats, of which 119 flats were rehabilitation flats meant for the members of the Society, while 56 flats were meant for the free sale component of the redevelopment. Building No.1 also entailed construction of twelve shops. A third "Wing D" i.e. another building comprising 59 free sale flats is also envisaged in the redevelopment. Page 4 of 29
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8. On January 10, 2016, an agreement was executed between the Society and the Original Developer, which was also countersigned by the Developer, whereby "fit out possession" was given to members of the Society for purposes of deploying their furniture and fixtures. On May 5, 2016, a letter ("Security Letter") is said to have been issued by Mr. Nilesh Laxmikant Kudalkar, Proprietor of the Original Developer, who was also a 25% shareholder and a director of the Developer, specifically stating that owing to the buildings not having an Occupation Certificate as yet, and the amount equal to double the corpus fund not having been paid as contracted, as a "Security Measure" ten flats were earmarked out of the free sale component of the Developer to secure the performance of the aforesaid obligations.
9. The Security Letter records that further to the Society, the Original Developer and the Developer having reached agreement on how to handle the delayed status of obtaining the Occupation Certificate and provision of the corpus fund due to " unavoidable situations", Mr. Kudalkar in his capacity as a Director of the Developer and Proprietor of the Original Developer had decided in good faith and respect for the Society, to hand over the ten identified flats. It was stated that the Security Measure would continue until the Occupation Certificate is obtained and the corpus fund is paid. Nine of the flats so provided, Page 5 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx spread across both the wings were of the structure of One Bed Room Hall Kitchen while one flat has the structure of a Two Bed Room Hall Kitchen.
10. The veracity and legality of the Security Letter lies at the heart of the challenge mounted in the proceedings before this Court.
11. It is common ground that some time in April 2018 (but two years after the Security Letter), the Society placed locks on the aforesaid ten flats, based on the Security Letter. It is the Developer's case that the Security Letter is back-dated inasmuch as only in, 2017, the Original Developer had been denuded of powers to operate bank accounts and sign cheques and other documents in relation to sale of flats, with all powers concentrated in the hands of Mr. Pankaj K. Shah, another shareholder and Director of the Developer. According to the Developer, the Original Developer appears to have back-dated the Security Letter to disrupt the interests of the Developer upon such powers being removed from him and having been granted to Mr. Pankaj K Shah.
12. Thereafter, the Original Developer is alleged to have started executing and registering agreements for Permanent Alternate Accommodation with members of the Society; addressing letters to bankers of the Developer requesting freezing of the bank accounts; Page 6 of 29
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13. According to the Developer, the Security Letter came to the knowledge of the Developer only pursuant to an affidavit dated January 7, 2020, in reply to a Petition filed by the Developer under Section 9 of the Act in the form of Arbitration Petition No. 268 of 2019 in this Court. According to the Developer this would indicate that the Security Letter was purely a got-up instrument fabricated to resist the Section 9 Petition filed by the Developer and to create a bargaining chip for receipt of the corpus amount.
14. On September 28, 2020, the Developer and the Original Developer filed Consent Terms to settle the disputes between them that had also been the subject matter of separate arbitration proceedings. In the said Consent Terms, the Original Developer has confirmed that, according to him, the Security Letter does not create any security and Page 7 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx that the Development Agreement, Joint DA and Supplementary DA are valid and binding and that he would resign as a Director of the Developer. These Consent Terms do not record any admission by the Original Developer that he had fabricated or back-dated the Security Letter.
15. Eventually, on November 9, 2020 the Municipal Corporation of Greater Mumbai ("MCGM") issued a part Occupation Certificate in respect of Building No.1 comprising A Wing and B Wing. It is common ground that such Occupation Certificate is a part Occupation Certificate and not a final Occupation Certificate. The part Occupation Certificate in respect of the 119 rehabilitation flats was issued on November 9, 2020 while the part Occupation Certificate in respect of all the other flats, including the free sale component has been issued on June 29, 2021. A full Occupation Certificate is pending as of date. According to the Developer, the hurdle in achieving a full Occupation Certificate is posed by expectations from the owners of the free sale flats that they would have a separate gymnasium and not have to use the four flats earmarked in each of the A Wing and B Wing for a gymnasium. The treatment of the aforesaid area earmarked towards the gymnasium is what is pending resolution for issuance of a final Occupation Certificate, and according to the Developer, nothing else remains to be done. Page 8 of 29
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16. Eventually, the Section 9 Petition filed in this Court came to be disposed of by a Learned Single Judge by appointing the Learned Arbitral Tribunal, disposing of the Petition by empowering the Developer to apply for a full Occupation Certificate, and also granting liberty to the Developer to seek interim reliefs from the Learned Arbitral Tribunal.
Impugned Order :
17. The Learned Arbitral Tribunal has essentially allowed prayer clause (a) made by the Developer by rejecting contentions of the Society about not recognizing the Developer and directing the Society not to interfere with making any claims or acting against the provisions of the Development Agreement, the Joint DA and the Supplementary DA.
18. The Learned Arbitral Tribunal has squarely found in favour of the Developer that the Society and its members had explicitly approved of the Development Agreement and has also agreed to the assignment of all the rights and liabilities under the Development Agreement by the Original Developer to the Developer. There having been no pleadings directly disputing the letter dated September 22, 2008, and verbal submissions alone being made about such letter not having been approved by the General Body of the Society, the Learned Arbitral Page 9 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx Tribunal invoked the doctrine of indoor management and protected the Developer by returning prima facie findings that there is no case to be made for denying the existence of the redevelopment documentation as validly contracted agreements.
19. The Learned Arbitral Tribunal has also noticed the Society's letter dated February 3, 2010 addressed to the Original Developer and the Developer, recording that the Original Developer did not have financial resources to carry out redevelopment. The Learned Arbitral Tribunal held that implicit in the aforesaid letter is an approval of including the Developer into the redevelopment documentation. This instrument too has not been disputed in the pleadings and therefore the Learned Arbitral Tribunal was pleased to hold in favour of the Developer that the redevelopment documentation had been validly executed.
20. Likewise, the Learned Arbitral Tribunal took note of specific letters addressed by the Society solely to the Developer, which would not have been possible unless the Society had accepted the Developer as the new Developer. So also, the Supplementary DA is executed between the Society and the Developer. The office bearers have also alluded to a resolution passed at a General Body Meeting of the Society on May 12, Page 10 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx 2010, following up on an increase in transit rent and the execution and registration of the Supplementary DA
21. The Learned Arbitral Tribunal noted a letter dated October 23, 2018, issued by the Advocates of the Society to the Developer as well as the Original Developer, calling upon them to comply with the various obligations under the redevelopment documentation and stating that this would lead to a revocation of such documentation. The Learned Arbitral Tribunal noticed that a new Managing Committee cannot purport to resile from the actions of the earlier Management Committee and towards that end, held in favour of the Developer.
22. However, the Learned Arbitral Tribunal also noted that the Society has relied heavily on the Security Letter and went on to analyse the provisions of the Security Letter in the context of the redevelopment documentation. The Arbitral Tribunal found prima facie that all the parties have acted upon the Development Agreement, the Joint DA and the Supplementary DA and have derived some benefit or the other under the same. Therefore, while granting prayer clause (a) to the Developer the Learned Arbitral Tribunal went on to deal with prayer clause (b) whereby the Developer had sought release of the ten flats covered by the Security Letter.
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23. The Learned Arbitral Tribunal noted the contentions of the Developer that the Security Letter had been issued surreptitiously behind the back of the Developer without any authority to issue such a letter. The Learned Arbitral Tribunal noticed the contentions of the Developer that the Security Letter had not been stamped and registered. The contention that the Security Letter did not have the sanction of the Board of Directors of the Developer and therefore, could never have created any charge over the said ten flats, was also noticed when considering the prayer for release of the ten flats. The Learned Arbitral Tribunal also examined a suggestion from the Developer that the Developer be permitted to sell seven out of the ten flats which would be adequate to secure double the corpus amount and after such amount is deposited, the remaining three flats could also be released, subject to the amount of Rs.2.62 Crores being deposited, pending conduct of the arbitration. The Learned Arbitral Tribunal also took on record the confirmation on behalf of the Society that no third party rights or interest shall be created in respect of any of the ten flats.
24. The Learned Arbitral Tribunal noted the contentions of the Society that the Society was not party to the Consent Terms by which disputes and differences between the Original Developer and the Developer stood resolved. However, since the very order dated January Page 12 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx 21, 2021, constituting the Learned Arbitral Tribunal directed the Developer to apply for a full Occupation Certificate, which is till date not issued, the Learned Arbitral Tribunal went on to analyse the submissions made by the parties. Similar to dismissing the contentions of the Society about the redevelopment documentation not having been authorised by the General Body of the Society, the Learned Arbitral Tribunal also found that the submissions about the absence of authorisation by the Board of Directors of the Developer for issuance of the Security Letter is something that would be dealt with at a subsequent stage in the course of the final hearing.
25. According to the Learned Arbitral Tribunal, non-payment of stamp duty and non-registration of any documents is a rectifiable defect and that whether the Security Letter would withstand scrutiny would be seen during the trial. It was found that if the Security Letter were to eventually withstand scrutiny, but the Developer were permitted to deal with the ten flats in the interregnum, the Society would be left with nothing but a paper security. On the other hand, the Learned Arbitral Tribunal found that if the Developer succeeded in proving that the Security Letter was in fact back-dated then the flats could always be released to the Developer at that stage.
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26. Taking note of the fact that the flats in question would be kept intact by the Society without creation of any third party rights or interest in the same, the Learned Arbitral Tribunal deferred the decision on release of the said flats until after the trial that would ensue in the arbitral proceedings and thereby rejected prayer clause (b) in respect of release of the said flats.
Contentions of the Parties:
27. Mr. Mayur Khandeparkar, Learned Advocate on behalf of the Developer would essentially submit that the Impugned Order is disproportionate and therefore arbitrary. He would make a with- prejudice offer to submit that double the corpus amount namely Rs.2.62 Crores would be deposited by the Developer with the Prothonotary and Senior Master of this Court, based on which the Developer must be allowed to have access to a free and marketable title to the ten flats which are squarely within the Developer's free sale component. He would submit that the flats of the Society's members have actually been developed and handed over to the Society and there is no default on the part of the Developer. In fact, the Developer took over the project from the Original Developer and has actually delivered the project by Page 14 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx reconstructing and actually delivering free and vacant possession of the flats due and owing to the 119 members of the Society.
28. Mr. Khandeparkar would point to the disputes and differences that had existed between the Developer and the Original Developer on the premise that the Original Developer had allegedly created third party rights on the free sale component of the project by colluding with other third parties and even acted against the interests of the Developer, unsuccessfully, in an attempt to freeze the bank accounts and suspend the RERA Registration. This led to the disputes between the Developer and the Original Developer and at that stage the Original Developer had colluded with the Society to disrupt the interests of the Developer.
29. Mr. Khandeparkar would submit that the purported Security Letter is entirely untenable inasmuch as it is in conflict with Section 77 of the Companies Act, 2013 ("Companies Act") which requires a specific registration of a charge without which, no charge on a company's assets can be recognised. He would also submit that Section 78 of the Companies Act provides a statutory right to a beneficiary of a charge to register the charge which too has not been effected by the Society. In these circumstances, he would submit that in the absence of a registered instrument, the Security Letter is of no consequence whatsoever Page 15 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx considering that it seeks to create a charge over immovable property and is in direct conflict with Section 59 read with Section 100 of the Transfer of Property Act, 1882 as indeed Section 17 read with Section 49 of the Indian Registration Act, 1908.
30. Mr. Khandeparkar would also point to the Security Letter not being stamped and would submit that these are all questions of law which can be raised at any stage of the proceedings. Mr.Khandeparkar would contend that even at the Section 37 stage, if it is found that the order passed under Section 17 of the Act were to be in conflict with the requirements of law, the Section 37 Court would interfere and set aside or substitute the Impugned Order.
31. Mr. Aseem Naphade, Learned Advocate for the Society would resist this Petition on multiple grounds. He would submit that the scope of interference with an Order passed under Section 17 of the Act would be limited to situations where the Impugned Order is ex-facie perverse and interference becomes necessary. He would submit that the Impugned Order is a balanced and well-reasoned order and represents more than a plausible view that could be taken by any reasonable mind and therefore this Petition must not be allowed. Mr. Naphade would also contend that not having challenged the Impugned Order, the earlier Page 16 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx contention of the Society about the redevelopment documentation not entitling the Developer in any manner is no longer being pursued on behalf of the Society.
32. On the other hand, he would point out that the Security Letter was essentially meant to secure the payment of the corpus fund amount which was payable at the time of handing over of possession and remains unpaid. In these circumstances, he would also point out that without a full Occupation Certificate being given and admittedly the FSI having increased, double the corpus fund is payable but is not paid. Therefore, the Society would be left without any security whatsoever if the ten flats are released to the Developer. He would also submit that the redevelopment was in any case meant to be completed by February 2010 whereas possession has been handed over only in 2016.
33. Mr. Naphade would submit that the Security Letter merely secures the interest of the Society pending payment of the corpus fund and the full Occupation Certificate over the rehabilitation component of the project being received. It does not use the term "charge" for the provisions of company law pressed into service by Mr. Khandeparkar to become relevant. The Learned Arbitral Tribunal has rightly examined that the Society was entitled to rely on the doctrine of indoor Page 17 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx management, and since a letter issued by the Original Developer's proprietor, who was also a director of the Developer and a 25% shareholder of the Developer, the Society had no reason to suspect that the Security Letter was not backed by authorisation.
34. To counter Mr. Khandeparker's submissions that the doctrine of indoor management is subject to exceptional circumstances and not applicable when suspicion in the mind of the counterparty could arise, Mr. Naphde would contend that such a proposition would not be applicable to the facts of this case. He would submit that the Society had no reason to discern existence of disputes and differences between the Developer and the Original Developer until their disputes became known in the course of Section 9 proceedings before this Court.
35. Mr. Naphade would also point out that the attack on the validity of the Security Letter is in bad faith in as much as the Security Letter had been pressed into service in a Notice of Motion filed by the Society in the Section 9 Petition filed by the Developer. He would submit that the affidavit in support of this Notice of Motion had been categorically referred to in those proceedings and therefore the Developer was feigning surprise about having realised about the claimed existence of the Security Letter only when an affidavit in reply was filed Page 18 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx on January 7, 2020. In reply to the Notice of Motion, Mr. Naphade would submit that there has been no denial or objection to the existence or validity of the Security Letter.
36. As regards the Consent Terms between the Developer and the Original Developer, Mr. Naphade would submit that even in those Consent Terms, the Original Developer does not admit to having back- dated the Security Letter. Clause 23 of the said Consent Terms merely states that the Original Developer was now taking the position that the Security Letter had not been backed by due authorisation and that it would not create a security interest. In this regard, he would submit that the settlement between the two Developers could not prejudice or bind the Society and these terms were self-serving. Clause 23 of the Consent Terms in fact admits to the Security Letter having been issued on behalf of the Developer, the only contention being that the Security Letter was not authorised. It is in Section 37 proceedings that the plea of back-dating has been taken for the first time without any pleadings being found in the Section 17 Application dealt with by the Arbitral Tribunal.
37. Mr. Naphade would also submit that each and every Security Measure need not be a "charge", although every charge would be a Page 19 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx security interest. He would submit that the Security Letter does not even purport to create a charge but merely states that the control over the ten flats was being kept aside to secure the interests of the Society and the Society is indeed entitled to double the corpus amount since the FSI had increased from the position originally envisaged under the Development Agreement.
Analysis and Findings:
38. Having heard Learned Counsel for the parties and having considered the material on record, I find that the contentions about the Security Letter have not been foreclosed by the Learned Arbitral Tribunal. The Learned Arbitral Tribunal has considered the suggestions from the parties, and in fact, the Impugned Order firmly rejects the contentions of the Society that sought to undermine the very role of the Developer.
39. However, considering that the Developer has not paid over the corpus amount in the scale and amount claimed by the Society, the Learned Arbitral Tribunal has returned a position that, in the Learned Arbitral Tribunal's discretion, is tenable and reasonable for purposes of securing the subject matter of the arbitration agreement. Page 20 of 29
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40. Mr. Khandeparkar submits that if the Developer is allowed to sell some flats, he would use the proceeds to deposit the corpus amount which may be released subject to the outcome of the proceedings. Using such deposit, the remaining flats ought to be released. In my opinion, the Learned Arbitral Tribunal has to be given its rightful play in the joints on how it perceives the best balancing of competing interests may be made. It is always open to the Developer to deposit the amount and have the flats released based on the deposit. The Security Letter is issued by none other than a 25% shareholder and director of the Developer. Facially it purports to record the understanding reached by the parties.
41. The locking of the flats took place only in 2018 while the Security Letter was issued in 2016. That the building was completed in 2016 is not in doubt. Once completed, the flats were available to be locked up. That the flats were locked up only in 2018 is also not in doubt. Therefore, Mr. Khandeparkar attempts to arouse strong suspicion about the Security Letter being backdated. However, at this stage, it would not be possible to conclude that the Security Letter was backdated. Even while the Developer and the Original Developer have signed a truce and have set out their respective mutually-supporting statements, the Consent Terms between them do not record any Page 21 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx admission or claim by the Original Developer about the backdating. Practically, it is not reasonable to expect a confirmation of that sort in writing, but equally, whether it was backdated remains a matter of trial. At this stage, considering that there are obligations of the Developer that are owed and pending performance, and that there is an obligation owed for which the Security Letter purports to be the Security Measure, this presents a framework for the Learned Arbitral Tribunal to have taken a judgement call. That call, if taken without any perversity of a nature that shocks the conscience of the Court, the Section 37 Court must not lightly interfere.
42. The Learned Arbitral Tribunal has examined the balance of convenience and this is assailed by Mr. Khandeparkar as placing convenience at a premium over a prima facie case. Having reviewed the record, I am of the view that the Developer's contentions are made but do not lead to an unequivocal prima facie case that the Security Letter is a complete sham. It is truly a matter of trial and the Learned Arbitral Tribunal must have the flexibility to judge how to handle the situation without undue interference from the Court.
43. The sheet anchor of the strength of the prima facie case claimed by the Developer is the interpretation of company law and to Page 22 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx point to the need for a charge over a company's assets to be registered for it to be perfect. In my opinion, it is the Developer who is mooring the Security Measure into the realm of a "charge". In my opinion, the Security Letter and the Security Measure need not be a "charge". It may be an encumbrance that is contracted. Every encumbrance is not a mortgage or a charge, while every charge and mortgage is an encumbrance. The nature of the Security Measure is for the parties to contract. For example, the provision of an escrow arrangement by a company would not constitute a charge warranting registration under company law. I do not think it appropriate to comment further on this count, since the Learned Arbitral Tribunal has reserved this issue for appropriate consideration in the course of the trial. I do not wish any comments made in the course of articulating the reasons for this judgment to be seen as a ruling on the merits by the High Court. Suffice it to say, the Learned Arbitral Tribunal will consider all these issues in the manner and sequence that the Learned Arbitral Tribunal deems appropriate, being the master of the proceedings and the best judge of the quality and quantity of evidence.
44. While Mr. Khandeparkar has taken remarkable efforts to arouse suspicion about the Security Letter, Mr. Naphde too has made out a reasonable case for not dismissing the Learned Arbitral Tribunal's Page 23 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx approach as perverse. The Learned Arbitral Tribunal is the best judge of how to make interlocutory arrangements pending trial and unless there is anything perverse and patently illegal in the approach of the Learned Arbitral Tribunal, the Section 37 Court should not freely and liberally substitute the Learned Arbitral Tribunal's wisdom with its own perceived wisdom.
45. It is indeed true that the corpus amount involved needs to be secured. It is true that the rehabilitation flats are said to have been completed in 2016 and the part occupation certificate was issued on November 9, 2020 and June 29, 2021. It is settled law that without delivery of an occupation certificate, possession cannot be said to have handed over. Even if possession was handed over on November 9, 2020, the corpus amount that is claimed has not been paid and how to secure this is a matter that was open to the Learned Arbitral Tribunal to conclude. The Learned Arbitral Tribunal has found the Security Measure already in place, however disputed it may have been. For the Learned Arbitral Tribunal to let the Security Letter continue in vogue until there is a satisfactory displacement of the same during trial, is not some unreasonable and unthinkably perverse arrangement. Page 24 of 29
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46. Mr. Khandeparkar has proposed to deposit double the corpus amount as security and has sought that the ten flats be released. The sequence that he has instructions to commend is that at least three flats be released to the Developer upfront since the value of the ten flats is said to be far in excess of the amount involved. Considering his own earnest suggestion subject to a variation that would be necessary in order to balance the competing interests of the parties, in my opinion, it would be appropriate to permit the Developer to approach the Learned Arbitral Tribunal afresh with a payment or deposit (whichever the Learned Arbitral Tribunal considers fit and appropriate) of 30% of the amount involved upfront, against which, the Learned Arbitral Tribunal may consider releasing three flats. The proceeds of sale of such released flats may be permitted to be brought into the arbitration proceedings to further secure the amounts towards the corpus fund. Such a sequencing of release of flats with proceeds of the sale being ploughed back into the security arrangement is something that may balance the competing interests of the parties, but taking care to ensure that in the first instance, a material deposit or payment (as the Learned Arbitral Tribunal may choose) should be the first step in this exercise to demonstrate the bona fides and seriousness on the Developer's front. Page 25 of 29
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47. It is not possible for the Section 37 Court to get into valuation of the flats and consider whether there is an excessive security margin as contended, on the basis of the volume of the flats frozen. Instead, adopting the Security Letter at face value, treating each of the ten flats as having an average value of 10%, this liberty is being given. Meanwhile, if the full Occupation Certificate is indeed delivered, the Learned Arbitral Tribunal may factor in such leeway as the Learned Arbitral Tribunal considers appropriate by such development.
48. I have to state that I am not inclined to grant such an arrangement myself and I am instead granting liberty to approach the Learned Arbitral Tribunal afresh subject to the conditions I am imposing above, only because it is not open to the Section 37 Court to simply second-guess the Learned Arbitral Tribunal and substitute one reasonable arrangement adopted by the Learned Arbitral Tribunal with another arrangement considered plausible by the Section 37 Court. I am not satisfied that the Impugned Order is perverse necessitating it being set aside. Therefore, I am not convinced that a case has been made out for displacing the Impugned Order.
49. However, since the Developer's proposal of a staggered release of the ten flats and that too based on the contention that the value of the Page 26 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx ten flats is far in excess of the amount involved for the corpus, being purported to be based on equity principles, it is important for the Developer to demonstrate his bona fides and place the money on the table before a deviation from the current arrangement can be considered. Not being satisfied by the claimed strength of the Developer's prima facie case, but purely to enable him to adjust for the height of the inconvenience claimed, I am of the view that the Developer may make another attempt for such a staggered arrangement to be considered by the Learned Arbitral Tribunal in its wisdom, subject indeed to the Developer placing upfront, 30% of the money computed towards double the corpus amount, before seeking release of 30% of the flats that are the subject matter of the Security Measure.
50. This is purely a practical and commercially reasonable variation that the Learned Arbitral Tribunal is requested to consider provided the Developer meets the condition imposed above. The Learned Arbitral Tribunal may also factor in the time value of money. If the corpus fund was payable against delivery of possession, and it has not been paid till date (five years later), the Learned Arbitral Tribunal may consider for what amount the deposit may be made for a part release of the flats. The Learned Arbitral Tribunal may even adjust the Page 27 of 29 December 1, 2025 Purti Parab/Shraddha ::: Uploaded on - 02/12/2025 ::: Downloaded on - 05/12/2025 23:25:29 ::: CARBPL-29840-2025 - F.docx number of flats released to make it proportionate with the adjusted value of the deposit being made.
51. Since it was the Developer's suggestion that three flats may be released for sale, and from the proceeds of the sale, further flats could be released, I have adopted the measure of depositing 30% upfront as a precondition for approaching the Learned Arbitral Tribunal with a revised proposal. I am granting this liberty by inversing the sequence suggested, by indicating that the Developer must first make a deposit or payment (as directed by the Learned Arbitral Tribunal), starting with 30% of the amount involved against which, 30% of the ten flats may be released. The proceeds of the sale of such released flats may then be deposited with the Learned Arbitral Tribunal to release further flats corresponding in percentage terms in number to the percentage of the value of funds deposited.
52. If such an application is made, the Learned Arbitral Tribunal shall consider the same to adjust equities and grant such liberty and impose such terms and conditions as the Learned Arbitral Tribunal may deem fit and necessary in accordance with law and in line with the suggestion made to the Learned Arbitral Tribunal in this order. Page 28 of 29
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53. With the aforesaid directions, this Petition is finally disposed of leaving the Impugned Award without interference with liberty being granted as above.
54. All actions required to be taken pursuant to this order shall be taken upon receipt of a downloaded copy as available on this Court's website.
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