Chandka 1 APP-891-10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 891 OF 2010 IN NOTICE OF MOTION NO. 4087 OF 2008 IN SUIT NO. 3236 OF 2008 WITH NOTICE OF MOTION NO. 2242 of 2010 Samir N. Bhojwani ..Appellant versus Sunshine Projects Pvt. Ltd. & Anr. ..Respondents Mr. Pravin Samdhani, Sr. Advocate with Mr. Parimal Shroff, Mr. D. V. Deokar, Mr. Vismay Shroff, Ms. Amruta Ghone and Mr. Himanshu Mahajan i/b. P. K. Shroff & Co. for Appellant. Mr. S. U. Kamdar, Sr. Advocate with Mr. Snehal Shah and Ms. Aakansha Thakkar i/b. Purnanand & Co. for Respondent No. 1. Mr. Shailesh Shah with Mr. Prakash Gunwani and Ms. Sonal Jain i/b. M/s. Khona & Kayser for Respondent No. 2. CORAM : DR. D. Y. CHANDRACHUD & ANOOP V. MOHTA, JJ. 21 February 2011. ORAL ORDER : Admit. With the consent of all the learned counsel and at their request the Appeal has been taken up for hearing and final disposal. Chandka 2 APP-891-10 2. This Appeal arises out of an order of a learned Single Judge dated 10 August 2010 in a Motion for interim relief. The learned Single Judge has come to the conclusion that no relief of injunction could be granted in the suit instituted by the Appellant for specific performance. 3. The Appellant and the Second Respondent entered into an agreement in respect of certain lands situated at Khar on 10 November 2003. The land is occupied by hutment dwellers and has been declared as a slum. The land is privately owned, the Second Respondent being the owner. Under the agreement dated 10 November 2003 the Appellant became entitled to develop the property under a slum rehabilitation scheme pursuant to the provisions of DCR 33(10) of the Development Control Regulations. Annexure II certifying the names of the eligible slum dwellers was issued to the Second Respondent as owner and 136 structures were found to be eligible for the purposes of rehabilitation. On 17 January 2005 the agreement came to be modified. On 18 April 2004 and 3 August 2004 the Second Respondent obtained a Letter of Intent and building plans came to be sanctioned. Under the agreement between the Second Respondent and the Appellant, the Appellant was obliged to construct a rehabilitation building for eligible tenants / occupants, each rehabilitation tenement being Chandka 3 APP-891-10 of an area of 260 sq. ft. Under Clause 13 of the agreement the Appellant alone was to procure permissions from the Slum Rehabilitation Authority for approval and sanction of plans, issuance of an IOD and in respect of the Commencement Certificate and Completion Certificates. However, Clause 29 of the agreement stipulated that all permissions interalia under the SRA Scheme and the Maharashtra Regional Town Planning Act, if any, were to be obtained by the Second Respondent at the costs, charges and expenses of the Appellant. Under Clause 25 the Respondent as owner agreed with the Appellant as developer to cause the slum dwellers and occupants of the property to vacate their tenements and shift to transit accommodation at the cost of the Appellant and make available the property to the Appellant to enable him to carry out construction on the property. Under Clause 31 of the agreement, the Second Respondent was to execute a Power of Attorney in favour of the Appellant authorising the Appellant to represent him before the Slum Rehabilitation Authority (SRA) and to engage Architects, Surveyors, Town Planners and to submit plans, proposals and applications for development. The Power of Attorney that was executed by the Second Respondent in favour of the Appellant conferred upon the Appellant the authority to deal with the SRA for the purpose of obtaining all permissions; and to appoint Architects. The Appellant was under the agreement granted a licence to enter upon the property. Pursuant thereto the Appellant Chandka 4 APP-891-10 constructed transit accommodation for housing eligible slum dwellers and a structure consisting of 40 such tenements was constructed. 4. The Second Respondent had entered into an agreement with the slum dwellers in 1995. The slum dwellers terminated the agreement with the Second Respondent on 26 February 2005. On 25 July 2007 the Second Respondent terminated the agreement with the Appellant. It is common ground that the Appellant initially instituted proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 against the Second Respondent and certain ad interim orders were passed in those proceedings in favour of the Appellant. In proceedings which were instituted under Section 11 of the Arbitration and Conciliation Act, 1996, an Arbitrator was appointed. During the course of the proceedings however it transpired that the Second Respondent had created third party rights in the form of a lease in favour of the First Respondent. Since the First Respondent was not a party to the arbitration agreement a full, final and effective adjudication could not have been rendered in the arbitral proceedings. That led to the institution of a suit for specific performance in this Court in December 2008. On 15 December 2008 a learned Single Judge of this Court recorded the statement of the First Respondent that until permission is granted to the First Respondent by the appropriate authority for carrying out development on the property, the Chandka 5 APP-891-10 status quo shall be maintained and that as and when permission was granted for development the Appellant would be informed with at least three weeks prior notice before the status quo was altered. The ad interim order continued to hold the field. Eventually the Motion has been dismissed by the impugned order of the learned Single Judge. 5. On behalf of the Appellant it has been urged that the basis on which the learned Single Judge rejected the application for interim relief was that whereas the Appellant had in pursuance of the agreement with the Second Respondent agreed to provide alternate accommodation admeasuring 260 sq. ft. to the hutment dwellers, the initial plan which was submitted by the Appellant, after the execution of the agreement was for 225 sq. ft. On this basis, the learned Single Judge concluded that there was a major breach of the agreement by the Appellant. The learned Single Judge observed that this breach was sought to be remedied by the Appellant in December 2004. But the plans for rehabilitation tenements admeasuring 260 sq. ft. were not submitted by the Appellant until May 2005. In the meantime the slum dwellers sought to resile from their agreement with the Second Respondent and the Second Respondent could not allow the Appellant to continue development. It was urged on behalf of the Appellant that the entire basis of the reasoning is flawed. As a matter of fact, plans for rehabilitation Chandka 6 APP-891-10 tenements admeasuring 225 sq. ft. were submitted not by the Appellant but by the Second Respondent and a statement on affidavit was made to that effect by the Second Respondent before the learned Single Judge. While placing reliance on the affidavit filed on behalf of the Second Respondent, learned counsel submitted that an application that was submitted by the Architect on 24 May 2004 was signed by the Second Respondent. Learned counsel submitted that the Second Respondent entered into a lease agreement with the First Respondent which was submitted for adjudication before the Stamp Authority on 21 April 2007 and upon which stamp duty was adjudicated on 11 July 2007. Hence, the agreement between the First and the Second Respondents, though it was executed on 27 July 2007 was with the knowledge of the fact that the Appellant had a pre existing agreement with the Second Respondent of 10 November 2003 as modified on 17 January 2005. The agreement with the Appellant was registered and in pursuance of which the Appellant paid an amount of Rs.86 lacs out of the total agreed consideration of Rs.2.25 crores. Moreover, as Exhibit ‘CC’ to the Plaint would indicate, in addition to the amount of Rs.86 lacs the Appellant expended an amount of Rs.51.69 lacs towards payments made for diverse permissions to the Slum Rehabilitation Authority. An expenditure of Rs.90.13 lacs was undertaken towards the construction of transit accommodation. Thus according to the Appellant, he has incurred an Chandka 7 APP-891-10 outlay of Rs.2.27 crores in pursuance of the agreement which was entered into with the Second Respondent. In these circumstances, it was submitted that the Appellant was at all material times ready and willing to perform his part of the contract, and which is evidenced by the conduct of the Appellant in constructing transit accommodation, incurring payments towards the slum rehabilitation authority besides paying an amount of consideration of Rs.86 lacs to the Second Respondent. 6. On the other hand it has been urged on behalf of the Second Respondent that under the agreement of 10 November 2003 it was the obligation of the Appellant to get the plans sanctioned. Though it is true that the original plans for construction of tenements admeasuring 225 sq. ft. were signed by the Second Respondent, the Second Respondent was required to do so as an owner under the DCR 5(4). It was urged that even after the slum dwellers terminated the agreement with the Second Respondent on 26 February 2005, the Second Respondent waited for over two years before terminating the agreement with the Appellant on 25 July 2007. Ample opportunities, it was urged, were furnished to the Appellant between 2005 and 2007 and it was the Second Respondent who pursued the matter with the Slum Rehabilitation Authority for the sanctioning of plans involving rehabilitation tenements of 260 sq. ft. The Second Respondent Chandka 8 APP-891-10 had been pursuing the SRA since 2005. Learned counsel submitted that under the agreement the project had to be completed within eighteen months of the Commencement Certificate and since the Commencement Certificate was issued on 23 July 2004 the project should have been completed in February 2006. There was a delay on the part of the Appellant in doing so which would justify the termination of the agreement. 7. On behalf of the First Respondents, the submissions which have been urged on behalf of the Second Respondent have been reiterated. These submissions now fall for determination. 8. The primary, if not the sole basis on which the learned Single Judge rejected the Motion for interim relief was that under the agreement dated 10 November 2003, it was the obligation of the Appellant to provide for rehabilitation tenements admeasuring 260 sq. ft. to each slum dweller. The learned Single Judge was of the view that the initial plans submitted after the execution of the agreement and which were approved were for an area less than what was stipulated in the agreement and that the tenements to be constructed were to be of 225 sq. ft. as opposed to 260 sq. ft. This in the view of the learned Single Judge was a major breach of the agreement on the part of the Appellant. During the course of the hearing, we have with Chandka 9 APP-891-10 the assistance of the learned counsel perused the relevant documentary material on the record. The material on the record reveals that on 24 May 2004 an application was submitted to the Planning Authority for sanctioning of the building plans. The application was signed by the Second Respondent. The first application for the provision of rehabilitation tenements of 225 sq. ft. was not only with the knowledge of but with the concurrence of the Second Respondent. In this background it would be necessary to advert to what has been stated on affidavit by the Second Respondent before the learned Single Judge. In paragraph 4 of the affidavit of the Second Respondent dated 17 March 2009 which was filed during the course of the proceedings in the Motion, the Second Respondent specifically stated that it was he who had obtained the Letter of Intent dated 8 April 2004, an Intimation of Approval under Appendix IV of DCR 33(10) on 5 July 2004, a Commencement Certificate on 23 July 2004 and other consequential approvals including for the construction of transit accommodation. Once the Second Respondent has in uncertain terms, disclosed on affidavit that the requisite permissions were obtained by the Second Respondent, the learned Single Judge was manifestly in error in coming to the conclusion that there was a major breach of the agreement on the part of the Appellant in submitting plans for rehabilitation tenements admeasuring 225 sq. ft. as opposed to 260 sq. ft. Moreover, apart what has Chandka 10 APP-891-10 been stated on behalf of the Second Respondent on affidavit, the record before the Court contains the application that was submitted on 24 May 2004 which has been signed by the Second Respondent. 9. From the material which has been placed on record before the Court, it has emerged that the Appellant, in pursuance of the registered agreement which was entered into with the Second Respondent took several steps which would reflect on the question as to whether the Appellant was ready and willing to perform the contract. These steps included (i) the payment of amount of Rs.86 lacs to the Second Respondent; (ii) the construction of transit accommodation to house 40 slum dwellers during the course of the slum redevelopment; and (iii) expenditure which has been adverted to in Exhibit ‘CC’ to the Plaint. Of course, at this stage, it would be necessary to note that the question as to whether the Appellant has as a matter of fact expended an amount of Rs.51.69 lacs towards payments made to the SRA and the Municipal Corporation and made an investment of Rs.90.13 lacs towards the construction of transit accommodation, are matters which would have to be evaluated and proved at trial. Prima facie, the material on the record would indicate that the Appellant had taken steps in fulfilling of the obligations under the contract that was entered into with the Second Respondent. The original agreement dated 10 November 2003 was Chandka 11 APP-891-10 modified by the parties on 17 January 2005. The agreement was not terminated on account of any breach by the Appellant of the payment terms. The learned Single Judge has, with respect, failed to appreciate these factual aspects. 10. Now in so far as agreement between the First and the Second Respondents is concerned, the course of events suggests that though the agreement with the Appellant was terminated on 25 July 2007, even prior thereto the Second Respondent had submitted the lease which he was seeking to enter into with the First Respondent for adjudication to the Stamp Authorities. An adjudication was made on 1 July 2007. The lease agreement that was executed between the First and Second Respondents of 27 July 2007 contains an endorsement to the effect that a certificate was issued by the Collector of Stamps on 11 July 2007. Therefore, when the First Respondent proceeded to enter into an Agreement with the Second Respondent, this was clearly with the knowledge of the fact that the Appellant who had a registered agreement with the Second Respondent had pre existing rights which have been created under and in pursuance of the said agreement. The First Respondent is therefore a party which had notice of the transaction between the Second Respondent and the Appellant. Chandka 12 APP-891-10 11. As we have noted earlier, the land in this case is purely of private ownership. Considerations which arise in relation to other slum rehabilitation projects where a public body such as the Municipal Corporation or the State Government is the owner of the land, are absent in the facts of this case. For the reasons which we have indicated earlier we are of the view that a prima facie case was made out by the Appellant for the grant of protective orders in the Motion. The Appellant has acted upon the agreement with the Second Respondent. The Appellant submitted plans to the Slum Rehabilitation Authority in December 2004 for permission to build rehabilitation tenements admeasuring an area each of 260 sq. ft. On 10 December 2004 the Architect had addressed a letter to the Chief Executive Officer of the SRA that the original agreement with the slum dwellers was signed in 1995. The slum dwellers had sought an enhancement of their area of entitlement from 225 to 260 sq. ft. The Appellant stated that the additional area of 35 sq. ft. would be adjusted against the entitlement of the Appellant from the sale component. This was approved by the Chief Executive Officer of the Slum Rehabilitation Authority on or about 29 December 2004. 12. After duly considering the material on the record and having heard the submissions of the learned counsel, we are of the view that a prima facie Chandka 13 APP-891-10 case was made for the grant of interim relief. The balance of convenience in a case such as the present must lie in favour of the Appellant who has incurred a substantial investment towards fulfilling the agreement which was entered into with the Second Respondent. The Appeal is accordingly allowed by setting aside the order of the learned Single Judge dismissing the Motion. There would be an order of injunction in terms of prayer clause (a) of the Notice of Motion restraining the Respondents from alienating or encumbering the property or creating any third party rights in respect of the property. The parties shall maintain the status quo in respect of possession. The Appeal is accordingly disposed of. 13. In view of the disposal of the Appeal, the Notice of Motion does not survive and is disposed of accordingly. (Dr. D. Y. Chandrachud, J.) (Anoop V. Mohta, J.)