Bombay High Court
Swastik Developers vs Acme Metal Industries Pvt Ltd on 8 September, 2025
2025:BHC-OS:14666
11.CARBPL.33608.2024.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION (L) NO.33608 OF 2024
M/s Swastik Developers ....Petitioner
Versus
Acme Metal Industries Pvt. Ltd. ...Respondent
Mr. Gaurav Joshi, Senior Advocate a/w. Mr. Chirag Kamdar,
Ms. Shachi Udeshi & Ms. Juhi Shah i/b. Wadia Ghandy & Co.,
Advocates for Petitioner.
Mr. Pankaj Savant a/w. Aliabhas Delhiwala, Anirudh Bhalwal &
Sabir Merchant i/b. Vyas & Bhalwal, Advocates for Respondent.
CORAM: SOMASEKHAR SUNDARESAN, J.
DATE : SEPTEMBER 8, 2025
ORAL JUDGMENT :
Context and Factual Background:
1. This is a Petition filed under Section 37 of the Arbitration and Conciliation Act, 1996 ("the Act") challenging an order dated September 5, 2024 ("Impugned Order") passed by a Learned Arbitral Tribunal under Section 17 of the Act denying interim reliefs sought by the Petitioner, M/s Swastik Developers ("Swastik") against the Respondent, Acme Metal Industries Pvt. Ltd. ("Acme").
2. The parties had executed a Memorandum of Understanding ("MoU") dated June 5, 2003 ("2003 MoU") by which the parties had Page 1 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc engaged in a joint venture to develop property located in Goregaon, more particularly described in the Impugned Order (" Subject Property") on which Acme had been conducting manufacturing activity earlier. In terms of the 2003 MoU, the risk and reward was to be shared by the parties in the ratio of 70:30 between Acme and Swastik.
3. Acme had already obtained the requisite 'intimation of disapproval' and even a commencement certificate (" CC") between 2002 and 2003. According to Acme, roping in Swastik was meant to bring to bear Swastik's expertise as a developer with Acme being the owner. The value of the land, agreed at Rs. ~2.86 crores was to be Acme's initial contribution. Monies were to be deposited in a separate account in the name of Acme to be jointly operated by the parties.
4. An agreement dated February 15, 2005 ("2005 Agreement") is on record, which earmarks and demarcates five units to which Swastik would be entitled - Units No. 101 to 104 on the first floor and Unit 203 on the second floor. No other terms in the 2003 MoU were changed by this instrument. There is some controversy about when this instrument was executed. The Learned Arbitral Tribunal has returned a prima facie finding that the 2005 Agreement was executed in 2011 after a show cause notice issued by the Income-tax Authorities on December 1, 2010 in relation to payment of tax by the joint venture. The prima facie Page 2 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc character of the 2005 Agreement being a back-dated instrument has weighed with the Learned Arbitral Tribunal, but for all purposes of analysis, this instrument is not being wished away - in fact, this is one of the core instruments relied upon by both parties.
5. A third instrument between the parties is an "understanding"
dated July 31, 2017 ("2017 Understanding"), which is claimed by Swastik as a reiteration of the 2003 MoU. The execution of the 2017 Understanding is also controversial with Swastik initially having made no disclosure of this instrument. This is essentially a joint affidavit filed by the parties before the Maharashtra Real Estate Regulatory Authority ("RERA").
6. The development project entailed two wings - Wing A and Wing B. It appears that on April 27, 2006, a part occupation certificate ("OC") was obtained for occupation of the basement and ground floor of Wing A, which is now completed. Work on Wing B, now a residential project, is underway in full swing and Acme has asserted that it is on course to completing it on schedule this year.
7. It is Acme's case that Swastik did not perform its obligations after the project hit rough weather with the discovery that the Subject Property fell in the Coastal Regulatory Zone (" CRZ"). The parties had desired to part ways after 2017 and one Mr. Bharat Shah, a chartered Page 3 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc accountant was engaged to examine the accounts, reconcile the contributions and entitlements, and figure out an amicable manner of parting of ways.
8. Acme issued a notice of termination dated March 15, 2021 ("Termination Notice"). Swastik replied to this on March 20, 2021 and April 16, 2021 with Acme writing back to Swastik on April 29, 2021.
9. Eventually, on September 9, 2021 and December 29, 2021, RERA registered the Wing B project as a residential project. Acme has invested in acquiring further transferable developments rights ("TDR") to load them on to the project. Wing A has been completed and Wing is actively underway.
10. The application under Section 17 Application of the Act was filed by Swastik on February 26, 2022 (" Section 17 Application") nearly one year after the Termination Notice was issued. The Section 17 Application made no disclosure of either the 2017 Understanding or the Termination Notice and the attendant correspondence. The Section 17 Application sought interventions into both Wing A and Wing B - an injunction against any development of the Subject Property other than deduction of development potential towards setback for a road. Appointment of a receiver over the entire Subject Property was sought Page 4 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc and indeed as a sub-set, protection of the units referred to as falling in Swastik's entitlement was also sought.
Impugned Order:
11. The Impugned Order extensively records the primary pleadings by the parties, the flurry of affidavits supplementing and amending the initial pleadings and their verbal submissions made by the respective advocates for the parties before the Learned Arbitral Tribunal. The Impugned Order reasons as to why it is not appropriate to grant any interim relief, whether as claimed or otherwise. The Learned Arbitral Tribunal has taken pains to explain that its findings on facts are entirely prima facie in nature and it is always open to the Learned Arbitral Tribunal to grant damages to Swastik after examining the requisite evidence and adjudicating the multiple claims and counter-
claims of the parties.
12. The Impugned Order has essentially found that Swastik has prima facie not been ready and willing to perform its obligations throughout the life of the relationship. The Learned Arbitral Tribunal has found that Swastik had not come with clean hands inasmuch as neither the Termination Notice nor the 2017 Understanding was disclosed in the Section 17 Application and indeed, Swastik has made completely untenable contentions about Acme having violated the Page 5 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc plans by changing plans to construct office premises into construction of a banquet hall.
13. The Learned Arbitral Tribunal has considered the reply given by Swastik to the Income-tax Authorities indicating that it had contributed only about Rs. 9 lakhs, and has found that the transactions with third parties indicated by Swastik as being investments towards acquisition of TDR are transactions with related parties for their deployment in other projects of Swastik. The Impugned Order has also found that Swastik has launched its attack under Section 17 with delay that makes it inappropriate and inconvenient to grant the interim reliefs sought.
14. An interim restraint on creating any third party rights on an area of ~1,523.19 square feet on the second floor and on the multi-purpose hall on the first floor of Wing A was vacated in the Impugned Order. Analysis and Findings:
15. There are observations of the Learned Arbitral Tribunal made in the process that Swastik makes a target of attack in its challenge. For purposes of adjudicating this Petition, this being an appeal, bearing in mind the same framework as was available to the Learned Arbitral Tribunal, I have examined the matter from the perspective of whether the conclusion by the Learned Arbitral Tribunal is a plausible one. Page 6 of 17
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11.CARBPL.33608.2024.doc Assuming that the attack on the Impugned Order on a few facets are tenable, I have considered if that would alter the outcome pursuant to the Impugned Order.
16. The position in law is succinctly stated by a Learned Division Bench of this Court in the case of Union of India v. PLR-HC-RBR (JV)1 as follows:
17. 7. An appeal is a continuation of an original proceeding. It is equally well settled in law that in absence of any statutory provision to the contrary, the power of appellate Court is co-terminus with the power of a subordinate court. [See : JUTE CORPN. OF INDIA LTD. VS. CIT2]. Thus, an appellate Court exercising the power under Section 37 of the 1996 Act would interfere only if a ground under Section 34 of the Act is made out. [See : STATE OF CHHATISGARH AND ANOTHER VS. SAL UDYOG PRIVATE LIMITED23] [Emphasis Supplied]
18. The conduct of the commercial transactions by the parties brings into question the nature and character of the instruments executed by them. Some of the facets on record tend to have a propensity to conflict with the manner of presentation of the import of these facets to the Learned Arbitral Tribunal. It is against this backdrop that one has to appreciate what the Learned Arbitral Tribunal has had to deal with, recording as it has done copiously, the respective written and verbal 1 Judgement dated July 22, 2025 in Commercial Arbitration Appeal (L) No. 21577 of 2025 2 1991 Supp 2 SCC 744 3 (2020) 21 SCC OnLine 1027 Page 7 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc contentions of the parties, to return a set of prima facie findings in a rather prolix 186-page interim order.
19. First, a party claiming specific performance of an agreement to implement a project and thereby seeking an injunction against the entire project must be seen ready and willing to perform the agreement. It is quite clear that the parties had worked on disengaging rather than proceeding further together. They are said to have had nearly 50 meetings and Mr. Bharat Shah had also drawn up data for reconciling accounts and working out entitlements when parting ways. In this light, when the parties have been actively engaged in working out what their respective investments were and how they were to reconcile their entitlements, they could well present data for adjudication of the subject matter of the arbitration, but in order to preserve the subject matter of arbitration (which is the prime consideration of measures under Section 17 of the Act), it would be out of question to injunct the project or any entitlements from it.
20. Facts have to be proven to establish the claims of each party - each has claimed damages against the other. This can be done in the course of the arbitration but that would not necessitate injuncting the development as sought by Swastik. The view of the Learned Arbitral Tribunal that Swastik can well be compensated in damages without the Page 8 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc need for an injunction at this stage is a plausible view that does not warrant interference.
21. It is also evident from the record that the project ran into rough weather upon finding that its location would lead to serious restrictions on development on account of environmental law governing development in CRZ areas. This led to the project having been stalled after the partial OC received for the basement and ground floor on April 27, 2006. The impasse resolved upon formulation of the New Coastal Zone Management Plan, 2011 ("CZMP"), effectively bringing the Subject Property out of the zone of CRZ. It is Acme's contention that Swastik did nothing to deal with getting the project going after the CZMP removed the cloud over the project. Swastik denies this, but in my opinion, at this interim stage, what is clear is that the parties worked on disengagement and to settle accounts, which is a sharp and clear pointer that rather than continue to perform their intent to develop the project jointly (which could necessitate injunction in aid of specific performance), Swastik has for long been on its way out of the project. Moreover, the Termination Notice was issued on March 15, 2021, and Swastik sought interim relief by filing the Section 17 Application nearly a year later. This is also a plausible pointer to its intent and approach towards the project. Far from engaging in the Page 9 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc project, Swastik has been desirous of disengaging from it on terms acceptable to it.
22. As stated earlier, the 2017 Understanding is controversial. Swastik initially denied having executed it. This was a filing with RERA, but it is plausible that in an environment that the parties sought to disengage peacefully, they could have agreed to file the 2017 Understanding with RERA. This too is to be tried and adjudicated in the arbitration eventually, but no case is made out for intervention at this stage, when right after the 2017 Understanding, the parties worked on the terms of their disengagement. Swastik may have a case for damages but not for specific relief in the form of an injunction on the project or Acme's enjoyment of the fruits of development of the project.
23. That Acme had obtained an IOD and CC even before the 2003 MoU has weighed with the Learned Arbitral Tribunal. Swastik was brought into the project as a developer unlike Acme which was a manufacturing company. Against that backdrop, when the parties had decided in principle to disengage and were negotiating terms on parting of ways, what has weighed with the Learned Arbitral Tribunal is that the IOD of June 17, 2021 and CC of August 19, 2021 were obtained by the efforts of Acme. The RERA registration and recognition granted on September 9, 2021 and December 29, 2021 were also by the efforts Page 10 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc of Acme alone. As a matter of equity, the Learned Arbitral Tribunal has taken a view that there was no scope for granting any protection of interest to Swastik on developments in the project that had been achieved by Acme on its own merit and steam without effort from Swastik. There is nothing implausible in this view to warrant any interference.
24. Second, the Learned Arbitral Tribunal has also taken a prima facie view that Swastik did not come clean with the factual matrix involved. Swastik made no mention of the 2017 Understanding or of the Termination Notice, or indeed of the active negotiations to disengage from the project after 2017. Swastik would contend in these proceedings that not much should be made of it since these developments became available to the Learned Arbitral Tribunal in the course of the arbitration proceedings. This is not an acceptable response. When it was Swastik that was seeking an injunction on the premise of pursuing specific performance, it was for Swastik to come clean upfront about these vital facets that are material to the pursuit of an injunction. It was Acme that brought these developments on record. The Learned Arbitral Tribunal cannot at all be faulted for taking this accurate view of what is expected of the party seeking specific performance to disclose upfront. The issue is not whether such developments were available to the Learned Arbitral Tribunal but Page 11 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc whether Swastik made them available upfront to the Learned Arbitral Tribunal. To try and given an impression that the 2003 MoU and the 2005 Agreement were continuing without any cloud over their continued validity is a material non-disclosure, which the Learned Arbitral Tribunal is entitled to consider when adjudicating on what is an appropriate decision on the Section 17 Application.
25. On an analysis of the contentions and documents presented by Swastik to the Learned Arbitral Tribunal, it was found that the purported purchases of the TDR by Swastik were not intended for deployment in the joint venture project with Acme. The Learned Arbitral Tribunal has also considered Swastik's own stance with the Income-tax Authorities in its reply dated March 4, 2011 that it had invested Rs. ~9 lakhs in the project. Essentially, income-tax payments had been made by Acme and not by Swastik. It is contended on behalf of Swastik that the 2005 Agreement was only to reduce to writing and present to the Income-tax Authorities a notional picture of the arrangement between the parties to mark up the entitlements that would conform to how tax treatment had been effected by the parties.
26. This has led to some controversy about how much one can rely on the 2005 Agreement. The Learned Arbitral Tribunal has taken a position that there is a cloud over this instrument and its terms are not Page 12 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc indicative of the true bargain between the parties. Be that as it may, both the parties have executed the 2005 Agreement and any inappropriateness in its execution is to be shared by both parties. Therefore, even assuming the Learned Arbitral Tribunal were to take into account the contents of the 2005 Agreement and not reject it as a contrivance and device aimed at taking a stance with the tax department, the contents are at variance with the factual reality on the ground. The Learned Arbitral Tribunal has meticulously pointed out that while the table of entitlements set out in that instrument (extracted at Paragraph 258 of the Impugned Order) presents a picture based on which Swastik claims the five units in Wing A, in reality there were no units on the first floor and the plans always intended to have a multi-purpose hall.
27. Swastik has attempted to paint Acme into a corner by stating that Acme violated the 2005 Agreement by constructing a banquet hall instead of the office units. This is in itself problematic. If Swastik was the developer that was engaged in the project, Acme could not have deviated from the agreed plan to build units. If Acme had done so and was able to do it on its own, it would mean that Swastik was actually disengaged and it was possible for Acme to go ahead and do whatever it pleased on the ground with Swastik being none the wiser. Such a proposition would support Acme's contention that Swastik was not at Page 13 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc all playing its intended role on being roped in as the developer. More importantly, the Learned Arbitral Tribunal has explained that Swastik's contention of deviation is itself untenable - the plans finalised on May 12, 2005 entailed a banquet hall on the first floor and not office units. This is contemporaneous with the 2005 Agreement, which therefore lends credence to the Learned Arbitral Tribunal's view that the 2005 Agreement was not reliable. Even the CC obtained on June 20, 2003 showed no demarcation of units. Even in 2008 documentary evidence points to no trace of offices. Likewise, in 2008-09, the parties envisaged constructing a star hotel, which would then be consistent with the plan to have a banquet hall. The plan of November 16, 2021 also envisaged a banquet hall. Taking a holistic view of the matter, it would follow that the Learned Arbitral Tribunal cannot be faulted for disbelieving the 2005 Agreement at least on a prima facie basis at the interim stage as not holding material significance. Therefore, even if one were to ignore allusions to judgements of tax law made by the Learned Arbitral Tribunal, the fact remains that the contention by Swastik that it was purportedly taken by surprise about the change of plans from constructing office premises to constructing a banquet or multi-purpose hall is not tenable. On the contrary, it does lend credence to the scepticism with which the Learned Arbitral Tribunal has considered the 2005 Agreement.
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28. Swastik also initially denied the 2017 Understanding but then, later took the stance that it merely is reiterative of the 2003 MoU. Swastik would contend before me that not much should be read into it since nothing purportedly turns on the 2017 Understanding, which was indeed uploaded on the RERA website. The fact remains that when a party blows hot and cold about multiple positions of fact that the Learned Arbitral Tribunal has to consider when adjudicating an appropriate measure under Section 17, the credibility of the party equivocating on issues does undermine its case. The Learned Arbitral Tribunal's approach to such equivocation is a reasonable and plausible response and that cannot be faulted. The inconsistencies in the stance of a party cannot be brushed away as being of no consequence. All in all, the allegation of Acme having deviated from the plan; the claims based on the 2005 Agreement; the equivocation on the 2017 Understanding; the non-disclosure of the Termination Notice of 2021; the non-disclosure of the disengagement negotiations, altogether lead to an inexorable conclusion that the Section 17 Application was not worthy of intervention and that the Learned Arbitral Tribunal has taken a reasonable, plausible and eminently defensible prima facie view of the matters presented to it.
29. I am not inclined to dwell upon the Learned Arbitral Tribunal's prima facie view that the decision to construct a star hotel meant giving Page 15 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc the 2003 MoU and the 2005 Agreement a go-by - simply because nothing turns on it for determining if Swastik has made out a case for a protective measure under Section 17 of the Act. The aforesaid analysis is adequate to support the outcome in the Impugned Order. Even if the Learned Arbitral Tribunal were to change the prima facie view during final adjudication, Swastik's case would be one of damages, which the Learned Arbitral Tribunal had itself articulated. Same is the case with whether Swastik initially took some efforts to deal with the CRZ issue - it would fall within the realm of apportioning blame and assessing damages and the outcome in terms of specific protection would not be altered at this stage.
30. There are also facets of what precisely has been invested by Swastik and whether its payments to its related parties towards TDR was meant for loading the TDR on the development of the Subject Property or elsewhere in its other projects. This can be dealt with as a matter of damages and keeping of accounts. What is also clear is that Acme has indeed invested in TDR and loaded it on the project and has developed it to a significant extent after the Termination Notice. If Swastik makes out a case for being compensated for any of its purported interests in the project, it can well be a matter of final adjudication, for which a protective measure at this stage need not take Page 16 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::
11.CARBPL.33608.2024.doc the form of an injunction as sought by Swastik or with any moulding. The Impugned Order cannot be faulted.
31. For all the aforesaid reasons, I am not convinced that any interference with the Impugned Order is justifiable or necessary. The Petition is dismissed without any interference.
32. 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.
[ SOMASEKHAR SUNDARESAN, J.] Page 17 of 17 SEPTEMBER 8, 2025 Aarti Palkar ::: Uploaded on - 09/09/2025 ::: Downloaded on - 09/09/2025 21:19:17 :::