1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.4855 OF 2007 IN SUIT NO.3504 OF 2007 D.B.Enterprise ..Plaintiff Vs. Juhu Chandan Co-op Hsg. Ltd. & ors. ..Defendants Mr. D.D.Madon Sr Advocate with Mr. Rahul Dwarkadas with Mr.N, Mukerji i/b Wadia Gandhy & co. for Plaintiff Mr. S.Jagtiani with Mr. P.K.Samdhani with Ms. Deepali Deshmukh i/b Bilawala & Co. for Defendant No.1 Mr.S.C.Chaturvedi for Defendants No.2 to 18, 20, 22 to 24, 34 to 35 CORAM: Smt. ROSHAN DALVI, J. DATED: 4TH, April, 2009 P.C.: 1. The Plaintiff is a developer. The Plaintiff has entered into an Agreement with the Defendant Society for re-development and re-construction of its two buildings and to rehouse the members of the society in the newly constructed building. The Agreements between the parties are essentially the Development Agreement, Exhibit D to the Plaint and the Supplementary Agreement Exhibit E to the Plaint. The suit is for declaration that these agreements are valid and 2 subsisting, for specific performance of the Agreement and for damages, and recovery of expenses incurred by the Plaintiffs pursuant to the agreement between the parties, if the agreement cannot be specifically enforced. 2. In this Notice of Motion the Plaintiff has prayed for an order of injunction restraining the Defendants No.2 to 24 from interfering or obstructing the Plaintiff's performance of the obligations under the Development Agreement and from restraining them from selling their respective flat, in the suit premises. 3. The Defendant's society has 40 members. They live in two buildings. They are required to be given permanent alternate accommodation by way of independent flats in the newly constructed building. The Plaintiff is to develop two towers after accommodating the Defendant's society members. The Plaintiff is to construct and sell the remaining flats to outsiders. The Plaintiff is to load TDR upon the two towers for that purpose. 4. The Defendant's buildings are dilapidated. They were required to be repaired or reconstructed. The members overwhelmingly decided to reconstruct their building. They called for tenders and obtained 12 tenders. The Plaintiff's 3 tender was accepted. 5. Initially the mode of reconstruction was by demolishing the present structures, accommodating the members in a temporary accommodation, constructing new building and accommodating the members in the new building by way of permanent alternate accommodation. The members desired not to be dislocated. Hence an alternative plan of reconstruction and redevelopment of the two buildings as a new project was conceived. The Plaintiff had to construct a building in the open space between the two buildings of the society. After the building consisting of 20 flats was constructed, the members from the one of the buildings were to be shifted to the new building. The members of the second building had to be accommodated in the first building which was vacated. That building was to be demolished. A new building was to be constructed. Those members would then be shifted to the new building. The plan is as ingenious as it is accommodating. No member would be required to shift outside the society premises. 6. The society initially informed the members of the dire need of repair / reconstruction their premises. The members decided to reconstruct the society. The society invited tenders. The society held several meetings. The society put up the tenders 4 before the members. The members called upon the society to consider the tenders received. The society accepted the offer of the Plaintiffs. The members discussed in the meetings as well as wrote the letters to have several points agitated, clarified and discussed. A draft Agreement came to be prepared. A draft Supplementary Agreement was also prepared. These drafts were circulated to the members. Their responses were called. Further meetings were held. Thereafter the Development Agreement as well as Supplementary Agreement came to be executed. The Development Agreement was registered as it caused a transfer of interest in immovable property. Supplemental Development Agreement was not registered since there was no such transfer of interest. It was notarised. A Compensation Agreement has also been executed. 7. Some of the members raised several disputes. There has been correspondence between the society and such members, as well as complaints by the members to the MMC, Registrar of Co-operative Society, etc. Despite and after the correspondence with the society the members attended further Special General Body Meetings of the society convened and held essentially only for the purpose of reconstruction and redevelopment of the society premises. 5 8. Several other members of the society have not raised any dispute. The prior Chairman and the Secretary of the society have resigned. The new Chairman and Secretary have been co-opted as further members of the Managing Committee. 9. The members who raised several disputes have not allowed the development work as per the Development Agreement executed by the Plaintiff with the society represented by its Chairman, Secretary and Treasurer. Hence this suit for declaration and specific performance. 10. The society desires to honour the Development Agreement as well as Supplementary Development Agreement. The members who have raised disputes are separately represented. Mr. Chaturvedi has filed his Vakalatnama on behalf of several society members who are Defendants Defendants No.2 to 18, 20, 22 to 24, 34 to 35 , though Mr. Chaturvedi represents all these Defendants only Defendant No.13 has filed Affidavit in reply. The Affidavit in reply initially required to have been filed by all the Defendants whom he represents specifically shows that the numbers of the other Defendants have been scored off. The Chairman has filed affidavit on behalf of the society. The other members who have not raised any dispute are also represented by the attorney who represents the society. No 6 separate Affidavit in reply is filed by them since they support the Plaintiffs. 11. The parties have sought to negotiate and settle their disputes. When the notice of Motion reached hearing, it was stated to court on behalf of the Plaintiff as well the society that settlement was in progress. They applied for time to see the settlement through. Some of the members who have disputes objected to such application, they contended that the exercise was only to delay the hearing. Hence time for any further settlement was not granted. The Chairman of the society filed reply in reply to the Affidavit in reply of the disputed members which is essentially the Affidavit in reply of only Defendant No.13. The Plaintiffs have filed Affidavit in rejoinder. Mr. Charturvedi, upon instructions of the Defendants whom he represents, not to delay the hearing of the Application sought to argue this Application without filing any further Affidavit. He has been allowed to proceed on the basis of the denials of both these affidavits. The affidavit of the Chairman essentially shows all the acts and deeds that have transpired since the members of the society agreed that the society building was dilapidated and required repairs or reconstruction. The Notice of Motion has been heard extensively on 1st, 2 nd & 3 rd April, 2009. The Plaintiffs have produced the final plan submitted to the MMC for 7 redevelopment of the suit plot as per the agreement between the parties. 12. It would have to be seen whether the Development Agreement has been validly entered into by the society on behalf of its members such as to bind the members. If that is so it would be specifically performable. Since several members have raised disputes that the agreement has not been validly entered into, it would have to be seen whether these disputes are genuine disputes which could be heeded. The real test in this regard would be to see whether upon such disputes the Agreement could have been validly terminated. Since the contracting party is the society which is divided into two groups; one in favour of enforcement of the Agreement with the Plaintiffs and the other who disputes the validity of the agreement and seeks to avoid it, the court would have to see whether the Plaintiffs could be granted the equitable reliefs sought by it. 13. This would require consideration of the events that have transpired since initial proposal of the Plaintiff which was accepted by the society. a) On 30.06.2005 the Plaintiffs sent a proposal to demolish the existing structures and build a new structure in a phased manner and rehouse the members in the new 8 structure within 24 months upon consideration of Rs.5 lacs payable in 5 installments, corpus of Rs.20 lacs payable to the society and discount to be given to the members for purchase of additional area. b)On 31.08.2005 the society gave notice of a Special General Body Meeting to the members to demolish and reconstruct the society buildings. c) The Special General Body Meeting was held on 15.09.2005. The precarious condition of the building was discussed. Reconstruction was desired. The members desired reconstruction without displacement. The members authorised the Managing committee to explore and evaluate the situation and to demolish and reconstruct the buildings instead of making temporary repairs as a long term solution. Consent was to be obtained from the members. d)On 12.10.2005 option of the members for demolition and reconstruction or for major repairs was called under a notice issued by the Managing Committee. 38 out of 40 members opted for reconstruction. e) On 19.01.2006 a notice of Special General Body Meeting to be held on 26.01.2006 was called. The agenda was to present the status of the project. f) On 26.01.2006 the members present in the meeting decided to call for tenders / offers from builders / 9 developers known to them. g) They were requested to make propaganda instead of issuing advertisement. The offers were to be received until 06.02.2006. It was to be opened on 07.02.2006 at the next Special General Body Meeting. h)On 27.01.2006 circular was issued by the society calling for tenders. The requirement of the tenders were set out in the circular. i) On 04.02.2006 the Plaintiffs made two offers one was without displacement of the members and the other was upon displacement of the members. Since all the members did not desire to be displaced that offer was ultimately acted upon. The plaintiffs have annexed that offer as Exhibit B to the Plaint. That offer of construction gave the members further benefits then what was offered in the initial plaintiff's offer dated 30.06.2005 Exhibit A to the Plaint. In that offer the consideration was Rs.5 lakhs payable to each of the members + Rs.12500/- as rent though the members were not to be displaced. It was mainly for 18 months during the construction period, payable by 18 advance cheques, to settle with earlier Architect and obtain his NOC, enter into agreements with the society and each member, pay stamp duty upon the Agreement, provide additional 150 sq.ft. area to each member, to screen the new members and provide bank 10 guarantee, if necessary. The other agreement was not agreed upon and need not be considered. j) On 07.02.2006 as agreed in the meeting of 26.01.2006, the sealed offers received by the society were opened. The members requested the managing committee to study the offers and make a comparative statement and convene another Special General Body Meeting to consider / select appropriate developer to entrust the society development work. k)On 18.02.2006 the society sent a notice to hold another Special General Body Meeting on 28.02.2006 to consider the proposals of the builders and select the appropriate builders. This has been received by all the members. Since that date was inconvenient a fresh date of the meeting was scheduled for 05.03.2006. l) On 03.03.2006 the society prepared a primer of the needs of the society titled ''Recommendations for development proposal''. It considered the aspects of dislocation, NOC from the earlier Architect, additional carpet area, parking spaces, monetary compensation, rent compensation and amenities. The managing Committee decided to recommend the Plaintiff. The reason for accepting the Plaintiff was that the members were not displaced. The managing committee considered whether the proposal was practical. It takes into account proper ventilation to be 11 maintained. It sets out how the construction of the two towers would be made in phases. The committee further stated that the Plaintiff was the only party who offered to settle with the earlier developers and Architect M/s.Grace Development Corporation and Mr. Tipnis and obtain their NOC. The Committee members checked the financial background of the Plaintiff. The Committee members requested the members to give clear mandate in favour of the Plaintiff to proceed. The Defendants have taken strong exceptions to the recommendation on the ground that the Special General Body Meeting held on 07.02.2006 had called upon the committee members to make a comparative statement and call another Special General Body Meeting to select the developer to entrust the society's development work. The Committee members did not carry out that mandate. The 12 offers which were obtained and opened before the members at the said meeting had not been shown to the members. Only recommendations of the Managing Committee had been circulated. The Managing Committee called upon the members to give it their ''clear mandate'' in favour of the Plaintiffs. No such clear mandate has been given. It appears that this was the first straw which made the members apprehensive and suspicious. m)The recommendations dated 03.03.2006 were put up 12 before the members in the meeting held on 05.03.2006. It was circulated and handed over to all the members. The minutes of 05.03.2006 show that the members present unanimously accepted in principle the proposal of the Plaintiff on the condition the members were not dislocated, given compensation of Rs.12,500 /- per month, the Plaintiff would adhere to the time limit and consider the points raised by one member A.B.Chinderkar (who was earlier serving with the MMC). The dissenting members have disputed the contents of the minutes of that meeting. The Managing Committee members claim that a resolution of the society was passed as reflected in the minutes. n)On 06.03.2006 the Managing Committee members accepted the Plaintiff's offer stated to have been unanimously accepted in principle by the members on the conditions that they were not dislocated during the construction period and as per the other terms and conditions of the Plaintiff's offer. They informed the Plaintiff to go ahead with the project and complete it on war footing in a shortest possible time frame. o) On 08.03.2006 the member Anil Chinderkar gave additional suggestions relating to the TDR to be incorporated in the Agreement with the builders. 13 p)On 22.03.2006 another member one Gaikwad made several queries since he had not attended ''the last couple of meetings''. He sent a reminder on 06.04.2006 to which the society replied on 13.04.2006, addressing his main concerns and allaying his fears about dislocation, NOC of the earlier builder etc. He was informed, that the society had maintained full transperancy and the offers of the tenderers were opened in the presence of the members. q) On 17.05.2006 the society submitted its progress report on the redevelopment of the buildings. It dealt with the meetings held on 26.01.2006, 07.02.2006 and 05.03.2006. The society informed how the members present at the meeting held on 05.03.2006 accepted the proposal of the Plaintiffs as recorded in the minutes of the meeting of that date. The progress report has been sent to all and signed by all the members, along with the three enclosures thereto. On the same day a note for Special General Body Meeting to be held on 28.05.2006 was also sent enclosing the Compensation Agreement and the Development and Supplementary Development Agreement, entered into with the Plaintiffs. The option exercised by some members to have flats facing the north- west direction, the matter relating to income tax implications and the rent compensation to be received by the members were addressed. The copies of the three draft agreements were 14 sent to and received by all the members along with the notice of the Special General Body Meeting to be held on 28.05.2006. The members were put to notice of the agreements to be executed with the Plaintiff. r) The meeting was inter alia attended on 28.05.2006 by the aforesaid two members Chinderkar and Gaikwad, who had entered into some correspondence and given suggestions or made queries. The erstwhile Chairman also attended that meeting. Gaikwad contended that plans which were forwarded were not clear. The members agreed to take advise from Chinderkar who was an ex MMC employer. The minutes show inter alia discussion with regard to the purchase of TDR precisely as Chinderkar's letter dated 08.03.2006 had mentioned about that fact. The members considered about stilt parking and the construction of the podium. They decided to impose penalty clause. s) On the same date several members addressed another letter to the society mentioning about the same issues. These related to the NOC of the earlier builder, non dislocation of the members, the contribution of Chinderkar, giving of bank guarantee, layout plan, amenities etc. The members essentially contended that they did not know the precise minutes of the meetings held on 07.02.2006 and 05.03.2006. They contended that they 15 have not unanimously resolved to appoint the Plaintiffs and hence the draft agreements could not have been prepared. t) On 28.05.2006 a Special General Body Meeting was held. It was attended by 5 of the signatories of the letter dated 23.05.2006. The minutes show that Gaikwad contended that the plans were not clear. Chinderkar was to discuss with the developer. The question of TDR was discussed. The Plaintiff was to purchase the full TDR on behalf of the society and load it on the suit buildings. The FSI was discussed to be shared with the society. The members discussed about the stilt portion and podium as also the penalty clause . It may be mentioned that the minutes show that the question raised by Gaikwad discussed in the meeting were from the ones raised in his letter dated 23.02.2006. The contents of the discussion were in terms of the letter of Chinderkar dated 08.03.2006. Hence the matters which were raised by some of the members prior to the meeting were discussed and addressed at the meeting. u)On 04.06.2006 another Special General Body Meeting was held. The minutes show that 4 alternative plans were received from the Plaintiff. Chinderkar was to study the plans and make recommendations to the Managing 16 Committee. Several suggestions of the members were to be incorporated in the Development Agreement, obviously subject to the Plaintiff agreeing with them. These related to shifting by the members, Compensation Agreement of some members, bank guarantee for the construction costs, guarantee against leakage etc. One intriguing aspect in the minutes of this meeting is that '' all members should not suffer for the nuisance value of one or two members''. The last clause shows that the draft documents were approved and the office bearers were authorised to execute Development Agreement and supplementary agreement (DA & SA) as early as possible. It may be mentioned that draft of these agreements had already been circulated to and received by all the members along with notice and the note of the society dated 23.05.2006. Of course the draft agreement may have required changes as suggested by the members and as would be suggested by Chinderkar in his meeting with the Plaintiff. The real test would be to see whether ultimate agreement did address these issues. 4 of the other members who had sent their letter regarding several aspects to the society on 23.05.2006 had attended this meeting on 04.06.2006. 17 v) Chinderkar considered the four alternate plans. He chose the 4 th alternate plan. He sent his handwritten note to the society accepting the 4th plan together with its advantages and suggestions. w)On 05.06.2006 the society issued a circular mentioning about the 4 alternatives of the plans shown at the meeting dated 04.06.2006 and the resolution of the members requesting Chinderkar to study and recommend the best plan. The circular encloses therein the handwritten note of Chinderkar received by the society which was to be discussed with the Plaintiffs for the final decision x) Defendant No.13 has himself shown in his Affidavit the letter / circular of the society dated 06.06.2006 showing draft minutes of the meeting held on 04.06.2006. Similarly the resolution passed on 04.06.2006 with regard to 10 aspects of construction is shown to have been circulated as it is relied upon by Defendant No.13 himself. The contents of the circular are identical to the minutes of the meeting. Each of the aspects mentioned in the letter / circular showing the resolution are aspects to be considered for the safety of the members for the reconstruction work. y) On 16.06.2006 the society sent a development proposal to the Plaintiff's authorising the Plaintiff to procure the entire TDR necessary for the development project and load 18 the same on the suit buildings. This was in accordance with the recommendations / advise of Chinderkar. z) On 29.07.2006 notice to hold the next AGM on 13.08.2006 was issued. The AGM was accordingly held. Most of the similar members attended. aa)The much- discussed, much- opposed, Development and Supplemental Agreements were executed in July, 2006, Development Agreement was registered in August, 2006. There is a discrepancy in dates of execution. The registration has been effected on 04.08.2006. The Development Agreement shows that it is executed on 05.08.2006. Supplementary Agreement is shown to be executed on 06.07.2006. ab)An Indemnity- cum- Guarantee was to be executed by the society. It was prepared in September 2006, consequent upon the then redevelopment plan, it mentions about the redevelopment in two phases and about the construction of only stilt + 7 upper floors, for 14 members of the society. The society is to undertake responsibility to accommodate 26 other members in two phases upon utilisation of balance FSI & TDR. The society is shown to have indemnified the MMC in respect of the accommodation of the 26 members in the newly constructed building. ac)Similar undertaking cum guarantee has been executed by 19 the Plaintiff on 14.09.2006. Such undertaking cum guarantee appears not be in line with the decision of the members of the society arrived at in various Special General Body Meeting as queried by Gaikwad, recommended by Chinderkar and agitated by other 9 members. ad)On 25.09.2006 the Plaintiff got the plan approved and was issued the IOD which was informed by the Plaintiff to the society by his letter dated 29.09.2006. ae)On 30.09.2006 a circular was issued by the society calling upon the members to sign the compensation Agreement. That has also been received by all the members . af)On 28.10.2006 a circular was issued to the members fixing a meeting with the Plaintiff to discuss the issues relating to redevelopment. The draft compensation Agreement was kept with Defendants No.1, 19 & 36 who are stated to be the members of the erstwhile committee. ag)On 18.10.2006 a complaint letter was addressed by several society members to the MMC. ah)On 21.10.2006 one Anil Gupte, a member of the society, sought to throw up his hands stating that he was not a party to the acts mentioned in the complaint. ai)Another circular was issued on 14.11.2006 fixing a meeting with the Plaintiff for clarifications about the redevelopment of the society. Each of the members has 20 signed the circular. aj)On 16.11.2006 several members addressed a legal notice to the society alleging ''no such specific decision'' taken by the society, amongst other allegations including non transperancy. ak)On 18.11.2006 the builder briefly addressed each of the issued raised by the members in their letter. al)On 24.11.2006 the notice was replied by the society. am)Yet another letter was addressed by several members to the society on 01.12.2006, raising the same issues. On 15.12.2006 plans of phase- wise development of the building so as not to displace any members was submitted by the Plaintiff. an)On 07.01.2007, 12.01.2007, 13.03.2007 & 03.06.2007, several members addressed letters to the society, Deputy Registrar