-1- mgj IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. Notice of Motion No. 1860 of 2006 in Suit No. 1650 of 2006 Wizard Realtors & Logistics ) Pvt. Ltd., a company ) incorporated under the ) Indian Companies Act, 1956 ) having its registered office) at 2/B-1, India United Mills) Building, Dr.B.A.Road,Parel ) Mumbai 400 012 ) ..Plaintiffs. versus 1. Smt.Perviz Sarosh ) Batliwalla, age not known) Occupation Household. ) 2. Kum.Tricia Sarosh ) Batliwalla, age not known) Occupation Trustees of ) Family Trust, residing at) Supertrish Suyojana ) Society, Koregaon Park, ) Pune 411 001 ) ..Defendants. .... Mr.Sandeep Parikh, a/w. Ms.Vijaya Mishra, i/b. India Law Alliance, for the Plaintiffs. Mr.Shailesh Shah, i/b. Mr.U.L.Shah, for the Defendants. .... Judgment Reserved on :18.12.2008. Judgment Pronounced on:28.01.2009. CORAM: CORAM: CORAM: S.J.KATHAWALLA S.J.KATHAWALLA S.J.KATHAWALLA J. J. J. DATE : 28TH JANUARY,2009. DATE : 28TH JANUARY,2009. DATE : 28TH JANUARY,2009. J U D G M E N T: J U D G M E N T: J U D G M E N T: 1. The plaintiffs are a private limited company which claims to have purchased the property, viz. land admeasuring 473.92 sq. meters and building standing thereon known as "Yasmin Villa", situated -2- at Parel, on the side of Sopari Baug Road, Mumbai, more particularly described in Schedule which is annexed as Exhibit A to the plaint (the said property) from the defendants. 2. By an agreement dated 4th August, 2003 executed between the defendants, referred to as "vendors" and the plaintiffs referred to as "developers", the vendors agreed to sell the said property to the developers granting absolute development rights to the plaintiffs at a price therein mentioned and on terms and conditions recorded in the said agreement dated 4th August, 2003. An irrevocable power of attorney dated 4th August, 2003 was executed by the defendants simultaneously in favour of two of the Directors of the plaintiffs, granting full authority and power to do and execute all acts, deeds and things with regard to demolition of the existing structure, constructing a new building and selling the premises in the new building without reference to the defendants. The present suit is filed by the plaintiffs seeking a declaration that the alleged termination by the defendants of the development agreement and irrevocable power of attorney both dated 4th August, 2003 is illegal, null and void and that the said agreement and the -3- power of attorney are valid, subsisting and binding. The plaintiffs have also sought a decree, order and direction against the defendants for specific performance of the development agreement dated 4th August, 2003 and irrevocable power of attorney dated 4th August, 2003. In the Notice of Motion, the plaintiffs have sought ad-interim relief against the defendants in respect of the said property, viz., appointment of the Receiver of the suit property and injunction in respect thereof. 3. The plaintiffs, after filing of the above suit, had moved an ad-interim application before this Court (Coram: Smt.Nishita Mhatre J.) when this Court by its order dated 28th June, 2006 refused ad-interim relief to the plaintiffs on the ground that the agreement is a development agreement and not for sale. 4. The plaintiffs being aggrieved by the said ad-interim order, preferred an appeal. The Hon’ble Appeal Court passed an ad-interim order dated 9th August, 2006 restraining the defendants from dealing with, disposing of, alienating or encumbering the said property. The appeal was -4- disposed of by an order dated 19th September, 2006. From the said order it is clear that the Counsel for the parties agreed that until disposal of the Notice of Motion the ad-interim order passed by the Hon’ble Appeal Court on 9th August,2006 shall remain operative. The Hon’ble Appeal Court by its order dated 19th September, 2006 requested the Trial Court to hear and decide the Notice of Motion expeditiously and if possible within a period of 3 months from the date of the order i.e. 19th September, 2006. The defendants were also granted liberty to apply to the Trial Court for vacating the ad-interim order. It was further clarified that the Notice of Motion shall be decided by the learned Single Judge on its own merits without being influenced by the ad-interim order dated 9th August, 2006. 5. The defendants have filed their affidavit in reply to the Notice of Motion and their written statement on 3rd October, 2006. The plaintiffs have filed their rejoinder on 29th November, 2006. Despite the pleadings being complete and despite the orders obtained from the Hon’ble Appeal Court for expeditious hearing of the Notice of Motion, admittedly, when the Notice of Motion was taken up -5- for hearing on 20th February, 2007 and 3rd October, 2008, the parties sought time on the ground that the parties are negotiating for settlement. On 25th November, 2008 when the matter reached hearing before this Court the parties once again sought time on the ground that parties have settled the matter and would be filing the consent terms shortly. This Court, therefore, after recording that the parties are seeking time since last one and half years on the ground that they are negotiating settlement, as a last chance adjourned the hearing of the Notice of Motion to 10th December, 2008. On 15th December, 2008 the parties once again sought time on the ground that they are negotiating settlement. In view of my earlier order dated 25th November, 2008 the parties were asked to proceed with the hearing of the Notice of Motion. A day’s time was sought which was granted. The Notice of Motion was, therefore, heard on 16th and 18th December, 2008. 6. Under the said agreement dated 4th August, 2003, the plaintiffs and the defendants have, inter alia, agreed thus: i) in recital (f) of the agreement, it is provided -6- that the plaintiffs (developers) proposed to redevelop the said property by demolishing the existing structures and constructing the new building thereon in accordance with the plan to be sanctioned by the Mumbai Municipal Corporation and for that purpose, the developers are negotiating with the tenants and have agreed to give self contained flats to the tenants on ownership basis in the new building proposed to be constructed; ii) Under clause (1)a of the agreement, the defendants (vendors) granted unto the plaintiffs (developers) exclusive development rights in respect of the said property and clarified that the developers will be entitled to all rights arising out of the said property including by way of additional/extra FSI available, as the structures on the said property are cessed structures, or by way of purchase of T.D.R. or Road set back etc. iii) Under clause 2 of the said agreement, it is agreed that the total consideration payable by the developers to the vendors for acquiring the development rights in respect of the said property is an aggregate lumpsum of Rs.45,00,000/- out of which Rs.5,00,000/- would be paid on execution of -7- the agreement; Rs.39,00,000/- would be paid within 15 days from obtaining the consent letters/agreement for alternative accommodation from all the tenants or 90 days from the date of agreement whichever is earlier. Balance Rs.1,00,000/- was payable at the time of executing the conveyance deed in favour of the society or within 18 months from the date of agreement, whichever is earlier. iv) Clause 3 of the agreement provided that the vendors shall hand over peaceful possession of the said property to the developers only after receiving the balance consideration of Rs.40,00,000/- v) Under clause 4 of the agreement, the vendors declared that the title to the said property is free from all encumbrances save and except the tenancy/occupancy rights of the persons residing therein. The vendors further stated that they have not entered into any agreement under which they have created any rights in respect of the suit property in favour of any third party. The vendors declared that they shall cooperate to obtain all necessary approvals, permissions, sanction from the -8- concerned authorities for selling the land and transferring the development rights and ultimately transferring the said property to the developers. vi) Under clause 5 of the agreement, it was agreed that the vendors shall at all times as may be required and in such manner as may be required execute and cause to be executed in favour of the developers or their nominees such further deeds, documents and writings including the conveyance inrespect of the said property. vii) Under clause 7 of the agreement, it was inter alia agreed that after demolition of the structures on the said property, the remaining debris, steel, wood and other material shall be the property of the developers and the developers shall have the right to sell it and retain the sale proceeds thereof. viii) Under clause 8 of the agreement the vendors undertook to pay all the taxes, cess taxes, cess repair payments and other outgoings and payments to the Mumbai Municipal Corporation , MHADA or any other Government or semi government authorities in respect of the said structure and property till the -9- date of handing over the said property to the developers. ix) Under clause 9 of the agreement it was agreed that the developers alone shall be entitled for additional FSI along with the regular FSI and the vendors do not and shall not claim any share, right and interest of any nature whatsoever in such additional FSI or income or sale proceeds thereof. x) Under clause 11 of the agreement, it was agreed that the developers upon taking possession shall have the right to demolish the structure on the said land and to commence construction as per necessary permissions and to carry out the same in accordance with law at the costs and at the risk and responsibility of the developers and for the exclusive benefit of the developers. xi) Under clause 13 of the agreement, it was agreed that the developers shall subject to the vendors’ right under the agreement have the right to raise loans from the financial institutions by mortgaging the said property and that it would be the sole responsibility of the developers to repay the loans and not to hold the vendors responsible therefor in -10- any manner whatsover. xii) Under clause 16 of the agreement, the vendors agreed and undertook to execute the conveyance/other documents for transferring the said property to the society or other entity of the premises, as and when called upon to do so by the developers provided all the amounts payable under the agreement are paid to the vendors. 7. Under the power of attorney executed simultaneously with the said development agreement, almost all the powers of the owners were given to the developers including the power to enter upon the said property and to carry out the development work in respect thereof. The developers were amongst others also given power to sell, lease, mortgage or transfer the said property or any part thereof to such person/s and on such terms and conditions as the developers would deem fit and proper for the purpose of complying with the provisions of Maharashtra Ownership Flats Act. In short, every power to deal with the said property was given by the defendants (vendors) to the plaintiffs (developers) under the said power of attorney also dated 4th August, 2008. -11- 8. Admittedly after the execution of the said Agreement and Power of Attorney both dated 4th August, 2003, no correspondence is carried out between the plaintiffs and the defendants until the defendants purportedly terminated/cancelled the said agreement and the power of attorney by their letters dated 23rd December, 2005. and 29th January, 2006. 9. The plaintiffs have submitted that the relations between the Directors of the plaintiffs and the defendants were extremely cordial. The Directors of the plaintiffs regularly requested the defendants to deliver the original documents of title for the purpose of inspection of title. The defendants assured them that they would trace the original documents and deliver them to the plaintiffs’ Directors. The defendants failed to do so and the plaintiffs were, therefore, unable to instruct their Advocate to inspect the title of the property for certifying the marketability of the title. The defendants have submitted that prior to the execution of the said agreement, the photostat copies of the documents were provided to the plaintiffs. The plaintiffs have denied having -12- received photostat copies and have submitted that in any event,the Advocates would not certify the marketability of the title without inspecting the originals. It was submitted that the declaration of the vendors in the agreement that they have not created any rights in respect of the said property in favour of any third party can only be verified if the original documents are shown/given to the plaintiffs for inspection/investigation. 10. It is an admitted fact that upon execution of the said agreement, the plaintiffs paid an amount of Rs.5,00,000/- to the defendants towards the agreed consideration of Rs.45,00,000/-. However, the plaintiffs submit that the obligation to make payment of Rs.39,00,000/- as per clause 2 of the agreement was waived and/or not insisted upon by the defendants because the defendants were unable to trace the original title deeds of the said property and also because the defendants were fully aware of the difficulties faced by the plaintiffs in dealing with some of the tenants of the building who were not cooperating with the plaintiffs. It is submitted that the defendants, therefore, did not insist upon the plaintiffs making full payment of Rs.39,00,000/- to the defendants after expiry of -13- 90 days from the date of execution of the agreement. The defendants requested the plaintiffs to make part payment of Rs.3,00,000/- in cash in March, 2004 which was paid on 30th March, 2004, receipt whereof is acknowledged by the defendants. It is submitted that pursuant to the terms of the said agreement read with the irrevocable power of attorney the plaintiffs entered into the possession of the property. 11. The plaintiffs submitted that since the obligation of the plaintiffs to make payment as per clause 2 of the said agreement was waived and/or not insisted upon by the defendants, it was felt necessary to execute another document which would state that the development agreement and irrevocable power of attorney are valid, subsisting and binding. Therefore, the defendants after more than a year from the date of execution of the said agreement dated 4th August, 2003 executed a declaration dated 21st October, 2004 confirming that the said agreement for sale and development agreement is valid, subsisting and binding and further stated that on finalization of the list of tenants and negotiations with the tenants for temporary and permanent alternative accommodation, -14- the defendants shall register the development agreement and irrevocable power of attorney. The said declaration dated 21st October, 2004 is at Exh.E to the plaint. 12. It is submitted by the plaintiffs that after prolonged negotiations the plaintiffs were able to execute the agreement with the tenants and obtained their consent for development of the property and to deliver to the plaintiffs the possession of their respective premises. The plaintiffs have agreed to provide free accommodation to the tenants in the proposed new structure. 13. It is submitted that since the plaintiffs were dealing with the said property they incurred various expenses for the said property. The plaintiffs inter alia paid the property taxes to the Mumbai Municipal Corporation, electricity charges, repairs cess charges to MHADA. The plaintiffs have annexed a chart being Exh.F to the plaint setting out the details of payment made by the plaintiffs for development of the said property aggregating to Rs.14,59,297.05. Except for the alleged cash payment of Rs.3,00,000/- all the expenses incurred by the plaintiffs are by cheque. -15- The defendants as pointed out hereinafter initially denied on oath all the expenses made by the plaintiffs but later on upon being pointed out by this Court that the amounts are paid by the plaintiffs by cheques the particulars of which are given, the defendants, interalia admitted that the bills pertaining to the property taxes and repairs cess were paid by the plaintiffs to the Mumbai Municipal Corporation and MHADA respectively. 14. The plaintiffs further submitted that with their efforts they got the letters addressed to the defendant no.2 being the owner of the said property from the Executive Engineer, Mumbai Building and Repairs and Reconstruction Board, Parel, Mumbai 400 012 dated 29th June, 2004 inviting the attention of the defendants for directions of the Government for grant of additional 2.5 FSI for redevelopment of the property category "A". The said property is classified by the Municipal Corporation of Greater Mumbai as "A" category for the purpose of levying repairs cess. 15. It is submitted by the plaintiffs that they were unable to submit the development plan of the said property to the Municipal Corporation of -16- Greater Mumbai in view of the interim relief granted by this Court in Public Interest Litigation being Writ Petition No.3189 of 2004 challenging the grant of additional FSI to redevelopment of the property under the DCR and further restraining the Planning Authorities to grant additional FSI under the DCR. This Court by its order and judgment dated 17th October, 2005 finally disposed of the said writ petition appointing two committees, one to ascertain the structural condition of the buildings requiring redevelopment and another committee for ascertaining whether the occupants of the respective buildings are the genuine tenants in the property to be developed under the said DCR. Though the plaintiffs are aware that the Special Leave Petition against the said order and judgment dated 17th October, 2005 is pending for admission, the plaintiffs have now commenced and are in the process of submitting all the information, the documents and plans to the Court appointed committees for the purpose of obtaining their sanction for development of the said property. 16. The plaintiffs have submitted that the defendants were regularly kept informed by the plaitniffs about various steps taken by the -17- plaintiffs with regard to the said property and also about the orders issued by this Court in the PIL. However, to the utter shock and surprise of the plaintiffs, the defendants addressed to the plaintiffs a letter dated 23rd December, 2005 and incorrectly stated that the plaintiffs were in alleged serious breach of the said agreement for having failed to pay the sum of Rs.39,00,000/- within a period of 90 days from 4th August, 2003 being the date of the said agreement. The defendants in the said letter made an illegal demand for payment of interest at the rate of 18% p.a. on the said sum of Rs.39,00,000/- from 3rd November, 2002 to 3rd January, 2006 amounting to Rs.22,23,000/- and also demanded additional 50% of Rs.45,00,000/- in view of the increase in the price of the immovable properties. It was recorded that if the plaintiffs failed to pay the entire sum of Rs.83,73,000/- within 15 days from the date of issue of the letter then the defendants will sell the property to other parties who have already approached the defendants for the same. 17. According to the plaintiffs on receipt of the said letter the plaintiffs’ Directors immediately contacted the defendants and held negotiations with -18- a view to arrive at an amicable settlement and avoid unnecessary litigation. The plaitniffs made it clear to the defendants that the plaitniffs were not in breach of the said agreement and the defendants were not entitled to forfeit the money and the said agreement was valid, subsisting and binding on the defendants. The plaintiffs stated that the defendants demand for interest and enhanced consideration was illegal and without any basis. The plaintiffs also offered to make full payment of balance sum of Rs.39,00,000/- to the defendants. The defendants sought time to consider the plaintiffs’ offer. However, the defendants’ by another letter dated 29th January, 2006 addressed to the plaintiffs stated that the defendants have terminated the development agreement by their letter dated 23rd December, 2005 and further sought to revoke the irrevocable power of attorney. 18. The plaintiffs, therefore, by their Advocate’s letter dated 8th February, 2006 addressed to the defendants inter alia brought to the notice of the defendants the failure on their part to perform their obligations under the said agreement. It was pointed out that the defendants had executed the declaration dated 21st October, 2004 confirming -19- that the development agreement and irrevocable power of attorney are valid, subsisting and binding. It was stated that the plaintiffs had dealt with the said property with the knowledge and consent of the defendants and that the plaintiffs had after prolonged negotiations obtained the consent letter from the tenants and that the plaintiffs have also paid the property taxes. It was stated that time was not made the essence of the contract and that the defendants had till date failed to hand over the original title deeds to the plaintiffs for the purpose of verification of the defendants’ title to the said property. 19. The defendants have by their letter dated 17th February, 2006 denied the plaintiffs’ statement and for the first time raised the contention that the plaintiffs had allegedly committed a fraud on the defendants by obtaining unlimited power of attorney from the defendants and that the defendants were under the impression that they had executed a limited power of attorney to only deal with the tenants. The defendants also for the first time contended that the said agreement was signed on a false representation made by Mr.Ameya Naik, namely,that the property is being purchased by the -20- State Bank of India through its Labour Union whereas Mr.Ameya Naik is doing business on behalf of his son and his friend. The defendants also alleged that the declaration dated 21st October, 2004 was obtained on a false promise, namely, that the plaintiffs are bringing the full amount of consideration. In short, the defendants have alleged that all the documents i.e. the development agreement and the power of attorney both dated 4th August, 2003 and the declaration dated 21st October, 2004 are all executed by them because of fraud/misrepresentation on the part of the plaintiffs. The plaintiffs by their letter dated 11th March, 2006 addressed to the defendants denied the allegations made by the defendants and once again offered to pay to the defendants the balance consideration amount subject to the defendants handing over the original documents/title deeds for the plaintiffs’ title verification. The plaintiffs have submitted that the defendants have continued to permit the plaintiffs to deal with the said property after expiry of the period of 90 days from the date of development agreement and have not insisted upon payment being made as per clause 2 of the development agreement. The plaintiffs have paid -21- the property taxes and incurred expenditure to the tune of Rs.14,59,296.05 and has proceeded to obtain the consent letters from the tenants. Due to defendants’ active consent the plaintiffs have dealt with the said property and have altered the position to its detriment. The defendants are, therefore, estopped from alleging that the plaintiffs are in breach of the terms of the development agreement and/or that the plaintiffs have failed to perform with their obligations under the same. 20. The plaintiffs have submitted that they are, therefore, entitled to the relief sought in the suit filed by them on 11th May, 2006 and pending the suit the said property needs to be protected and they are also entitled to the reliefs sought in the Notice of Motion. 21. The first submission made on behalf the defendants is that the agreement dated 4th August, 2003 is a development agreement and no interest can be said to have been created in favour of the developers i.e. the plaintiffs. In support of this contention the defendants have submitted two unreported decisions of this Court. The first -22- decision is in Notice of Motion No.1568 of 2004 in Suit No. 1455 of 2004 dated 7th/8th December, 2006 (Coram: S.J.Vazifdar J.) and the second