1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.1568 OF 2004 IN SUIT NO.1455 OF 2004 Mahendra J. Vora ....Plaintiff V/s. Aditya Enterprises & Ors. ....Defendants Mr.S.D. Parekh, Senior Advocate with Mr.Pooniwala, Mr.N. C.Parekh, Ms.M. M. Paladia and Ms.Dadwali/b Mansukhlal Hiralal & Co. for the Plaintiff. Mr.D. D. Madon, Senior Advocate with Mr.Gaurav Kothari i/b Kanga & Co. for Defendant Nos.1 to 3. Mr.R. S. Tripathi i/b J.R. Vakil & Associates for Defendant Nos.4, 5, 10 and 11. Mr.L. M. Acharya for Defendant Nos.6 and 7. Mr.M. M. Vashi with Ms.Varsha Sawant i/b Ms.Gauri Godse for Defendant No.8. Mr.S. Nagvodaria i/b Mehta & Co. for the Applicants in Chamber Summons. CORAM : S.J. VAZIFDAR, J. DATE : 7TH/8TH DECEMBER, 2006. ORAL JUDGMENT :- 1. The suit is filed inter-alia for a declaration that an 2 agreement dated 26.8.2002 has been legally and validly terminated with effect from 10.3.2004 and that the Defendants have no right and/or interest under the said agreement and in respect of the construction already put up by Defendant Nos.1, 2 and 3 thereon and for a mandatory injunction ordering the Defendants to remove themselves and their material from the suit property. The Plaintiffs have also claimed damages. 2. The Plaintiffs claim to be entitled to various rights in respect of the suit property. Development and other rights were granted by the Plaintiffs in favour of Defendant No.1 by an agreement dated 26.8.2002. Defendant Nos.2 and 3 are the partners of Defendant No.1. Defendant Nos.1 to 3 in turn entered into agreements to sell in respect of nine flats in the proposed construction. As their interests are likely to be affected, by an amendment pursuant to an order dated 1.4.2005, Defendant Nos.4 to 15 were impleaded. By the said amendment the Plaintiffs sought a declaration that the agreements entered into by Defendant Nos.1 to 3 with them are void ab-initio and in any event not binding on the Plaintiffs. 3 3. By this Notice of Motion, the Plaintiffs have sought a mandatory order and injunction directing the Defendants to forthwith remove themselves and their materials and machinery from the suit premises and an injunction restraining the Defendants from entering and remaining upon the suit property and putting up any construction thereon and interfering with and obstructing completion of construction work and development by the Plaintiffs. Further, the Plaintiffs have sought an injunction restraining the Defendants from selling, encumbering, alienating or creating any third party rights in respect of the said project or any part thereof. Lastly, by the amendment the Plaintiffs have sought an order restraining Defendant Nos.4 to 15 from in any manner dealing with or disposing of the flats allegedly purchased by them. Mr.Parekh, stated that the Plaintiffs are not pressing prayer (b) by which the Plaintiffs have sought the appointment of a Court Receiver with a direction to appoint the Plaintiffs as their agents without security or royalty in order to develop and construct on the site. 4. It is to be noted that the prayers if granted would virtually amount to decreeing the suit and dismissing the counter-claim filed by 4 Defendant Nos.1 to 3 for specific performance. Mr.Parekh did not deny the same. He however submitted that the facts and circumstances of the case, warranted such orders even at the interlocutory stage. 5. It would require the Plaintiffs to make out not merely a prima-facie case but a virtually unanswerable case at the interlocutory stage to entitle them to an order substantially decreeing the suit. This would be even more so in a case where, if the Defendants were to succeed at the final hearing of the suit, it would not be possible for the Court to restore status-quo ante to undo the prejudice that the Defendants would suffer by reason of such an interim order. 6. In Assistant Collector of Central Excise, Chandan Nagar,West Bengal vs. Dunlop India Ltd. and ors. (1985) 1 SCC 260 = equivalent SCC, the Supreme Court held as under :- “5. We repeat and deprecate the practice of granting interim order which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other relevant considerations. ........... Incalculable harm has been done by 5 such interim orders. All this is not to say that interim orders may never be made against public authorities. There are, of course, cases which demand that interim orders should be made in the interests of justice. Where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens faith in the impartiality of public administration, a court may well be justified in granting interim relief against public authority. But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a court must be circumspect in granting interim orders of far-reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the court alleging prejudice, inconvenience or harm and that a prima facie case has been shown. There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the question of balance of convenience. There is the question of irreparable injury. There is the question of the public interest. There are many such factors worthy of consideration. We often wonder why in the case indirect taxation where the burden has already been passed on to the consumer, any interim relief should at all be given to the 6 manufacturer, dealer and the like.” 7. It is true that this judgment was in a Writ Petition. Further the observations in paragraph 5 refer to the effect of the orders having caused loss to the public exchequer. However, the principle would normally apply to other cases as well. Interlocutory orders are meant to preserve the subject matter of the suit and thereby protect the rights of the party that ultimately succeeds. Unless an extremely strong case is made out, normally it would not be proper to pass an interlocutory order which virtually concludes the party at the final hearing without there being any possibility of restoring the status-quo ante if the other party finally succeeds. I do not rule out the possibility however of such an order being passed if a proper case is made out indicating a considerably high degree of certainty that the party seeking the order is bound to succeed at the final hearing of the suit. 8. As I shall demonstrate, in the facts and circumstances of this case, it is impossible to hold that the Defendants would certainly fail at the final hearing of the suit as contended by Mr.Parekh. Defendant Nos.1 to 3 have filed a counter-claim in which they have sought inter-alia specific performance of the said agreement. I cannot 7 rule out the possibility of the counter-claim being decreed either. 9. Mr.Parekh submitted that the Plaintiffs are bound to succeed in the suit on two grounds. Firstly, he submitted that the Defendants were guilty of various breaches the nature of which are such as to positively deny the Defendants any relief much less the relief of specific performance. Secondly, he submitted that the agreement being a mere development agreement specific performance thereof cannot and ought not to be granted. 10. By the said agreement, Defendant No.1 was, under the supervision of the Plaintiff's architect, engineers, etc., to complete the work of construction of a building consisting initially of four wings on the suit property. Subsequently another wing was added. I will refer to the relevant clauses while dealing with the submissions. Re : The alleged breaches of the agreement by Defendant Nos.1 to 3 : 11. Mr.Parekh submitted that the breaches were of such a nature that the Court would undoubtedly come to the conclusion at this interlocutory stage itself that the suit is bound to be decreed and the counter-claim is bound to be dismissed. Basing himself on this 8 premise, he submitted that the reliefs claimed in the Notice of Motion ought to be granted despite the fact that the order would render the Defendants defence to the suit and the prayers in the counter-claim for specific performance infructuous at the final hearing of the suit. 12. The breaches alleged by the Plaintiffs against Defendant Nos.1 to 3 fall broadly under three categories. The first pertains to a breach of clauses 10 and 12 of the agreement, the second to clauses 3 and 5 of the agreement and the third to clause 18 of the agreement. Sale of nine flats by Defendant Nos.1 to 3 to Defendant Nos.4 to 15 contrary to and in violation of clauses 10 and 12 of the agreement : 13. Mr.Parekh submitted that the Plaintiff sold nine flats to Defendant Nos.4 to 15 contrary to and in violation of the agreement and in particular clauses 10 and 12 thereof which read as under :- “10. In consideration of the aforesaid, it is agreed that Aditya enterprises may, subject to the terms hereof, become entitled to constructed residential flats/premises on Built- up area basis in the said one building to be constructed on the said remaining portions of Sector A being the project, in lieu of the cost 9 as above, upon completion of each stage of work as per the table below and in the manner hereafter appearing. Item No. (1) Stage of work completed in the one building (i.e. all four wings in the one building) (2) Approximate area of the premises which Aditya Enterprises will become entitled to in lieu of costs as above. (3) A. On completion of work of Plinth and on commencement of further R.C.C. work Residential premises admeasuring approx.5,000 sq.ft. Saleable area B. On completion of work of R.C.C. of fourth floor and on commencement of further R.C.C. work Residential premises admeasuring approx.7,750 sq.ft. Saleable area C. On completion of work of R.C.C. of Top Floor (i.e. 7th or 8th) and on commencement of masonry work Residential premises admeasuring approx.7,750 sq.ft. Saleable area D. On completion of work of mansory work of Fourth Floor and on commencement of masonry work Residential premises admeasuring approx.3,500 sq.ft. Saleable area E. On completion of work of masonry work of Top Floor (i.e. 7th or 8th) and on commencement of Internal Plastering and Flooring masonry work. Residential premises admeasuring approx.3,500 sq.ft. Saleable area 10 F. On completion of work of Internal Plastering (including finishing plaster) and Flooring on commencement of External Plastering and Tiling. Residential premises admeasuring approx.5,500 sq.ft. Saleable area G. On completion of work of External Plastering (including finishing plaster) and Tiling on commencement of work of Doors and Windows. Residential premises admeasuring approx.5,500 sq.ft. Saleable area H. On completion of work of Doors and Windows and on commencement of Electrical and Plumbing work.. Residential premises admeasuring approx.2,000 sq.ft. Saleable area I. On Completion of work of Electrical and Plumbing work and on commencement of work of Fixing Lifts, Painting and Fixtures and Fittings. Residential premises admeasuring approx. 3,000 sq.ft. Saleable Area J. On Completion of Fixing Lifts, Painting and Fixtures and Fittings and on commencement of all balance work including work of gardens, compound, gates, staircase lobbies, etc., and finishing work including installing Fire- fighting equipment, if required. Residential premises admeasuring approx. 2,200 sq.ft. Saleable Area K. On completion of work of all balance work including work of gardens compound, gates, staircase lobbies, etc., and finishing work including installing fire-fighting equipment, if required, and making the premises ready for Possession with electricity and water. Residential premises admeasuring approx. 2,200 sq.ft. Saleable Area 11 L. On obtaining of Occupation Certificate for the one building Residential premises admeasuring approx. 2,200 sq.ft. Saleable Area M. On expiry of three years from the date of obtaining Occupation Certificate as above, subject to what is stated in clause 14 herein below. Residential premises admeasuring approx.780 sq.ft. Saleable Area Total 50,880 sq.ft. built-up area of Residential premises The final figures of areas shall vary proportionally with the exact/actual area approved as per the final approved plans. The more particularly description of the premises which the Aditya Enterprises may become entitled to, subject to the terms hereof, is more particularly set out in the schedule annexed hereto and marked as Annexure ‘2”. The Voras shall ensure that the flats, which the Aditya Enterprises will become entitled to, shall be free from all encumbrances including mortgage and charge. 12. It is agreed that only on completion of particular stage of work as mentioned in column (2) of the table in clause 10 hereinabove, the Aditya Enterprises shall obtain a certificate from the Voras’ architects M/s. H.A.Mehta, Architects and Engineers, to the effect that the work up to that stage is completed in all respects in accordance with this agreements and as per the approved 12 plans and specifications and as per the rules, and thereupon the Aditya Enterprises shall become entitled to the said premises as provided in column (3) of the table in clause 10 hereinabove. Upon becoming so entitled to such premises, the Aditya Enterprises shall have the right to sell such premises in their own name in such manner as they deem fit, and they shall be responsible and liable to carry out the terms and conditions of such transactions/ agreements for sale executed by them on principal to principal basis, and the Voras shall not be in any way liable or responsible for performance of any of the obligations including the obligation as mentioned in Maharashtra Ownership Flat Act qua the said premises purchasers or any other persons and the Aditya Enterprises shall be solely liable and responsible and shall observe, perform and comply with the obligations including the obligation as mentioned in Maharashtra Ownership Flats Act. Upon Aditya Enterprises becoming so entitled to sell their premises, they shall be entitled to independently sell the said constructed premises in their own names, and on such sale, Aditya Enterprise shall be entitled to appropriate the entire consideration arising therefrom for their absolute use and benefit, without accounting for the same to the Voras.” 14. Mr.Parekh submitted that Defendant No.1 had sold nine flats to Defendant Nos.4 to 15 though they were not entitled to do so in view of clauses 10 and 12 of the agreement. According to him 13 Defendant Nos.1 to 3 were not entitled to the premises to the extent mentioned in column 3 of item-A viz. “approx 5000 sq. ft.” or any portion thereof for four reasons. Accordingly, therefore, he submitted, Defendant Nos.1 to 3 were not entitled to enter into agreements for sale of the said flats to Defendant Nos.4 to 15 in view of clause 12 of the agreement. 15. I have found none of the four grounds to be well founded. It would however be convenient to preface a consideration of Mr.Parekh's contentions by dealing with two of Mr.Madon's submissions, which I find well founded and constitute a defence to each of Mr.Parekh's contentions even assuming that the same are factually established. 16. Firstly, clauses 10 and 12 do not contain a bar against Defendant No.1 entering into agreements to sell the flats to be constructed on the suit property. The first sentence of clause 12 specifies when Defendant No.1 becomes “entitled” to the said premises. The next sentence provides that upon Defendant No.1 becoming “entitled” to the premises they shall be entitled to sell the same. The expression “sell” therefore refers to an agreement of sale 14 and not an agreement to sell. The clause does not even impliedly restrain agreements to sell. I do not read clause 12 as implying the negative either viz. as a restraint against Defendant No.1 even from entering into agreements to sell prior to Defendant No.1 becoming entitled to the premises. 17. The least that must be said in favour of Defendant No.1 is that clause 12 is not so clear as to unequivocally provide that Defendant No.1 was not entitled even to enter into agreements to sell the flats. The scope and ambit of the expression “shall have right to sell such premises” requires to be interpreted. It is a moot point, to say the least, as to whether the expression refers to agreements for sale or whether it refers to agreements of sale. 18. Further, Mr.Madon with considerable force relied upon clause 38 of the said agreement which reads as under :- 38. It is agreed that in case the Aditya Enterprises fails or is other wise unable to observe, perform or comply any of the terms, conditions, covenants or obligations as mentioned herein, for any reason whatsoever or in case the Aditya Enterprises fails or is otherwise unable to undertake or complete the 15 construction work in accordance with the terms of this Agreement for any reason whatsoever, then the Voras shall be entitled to terminate the appointment of the Aditya Enterprises and also terminate this Agreement and appoint a new contractor to complete the said project. On such termination, the Aditya Enterprises shall, save and except as mentioned in clause 39, not be entitled to claim or receive any money or premises either towards the cost of construction or towards any expenses, costs, charges incurred by them in connection with the Project. The Aditya Enterprises shall also not be entitled to claim any loss or damages on account of such termination from the Voras. Provided however that the Voras shall before terminating this Agreement, give a notice to the Aditya Enterprises requiring the Aditya Enterprises to make good the default or breach within a period of 30 (thirty) days from the date of receipt of such notice and Aditya Enterprises has failed, neglected or otherwise unable to make good the said default or breach. It is agreed that the right of the Voras to terminate this Agreement is without prejudice to 16 Voras' other rights and remedies that the Voras may have against the Aditya Enterprises either in law or as provided in this Agreement or otherwise.” (emphasis supplied) 19. It is not disputed that a notice in accordance with clause 38 was not served by the Plaintiffs on Defendant No.1. Mr.Parekh however submitted that the clause does not make it mandatory upon the Plaintiffs serving such a notice and that the mere absence of such notice would make no difference. I am unable to agree. 20. Such clauses are common in agreements including construction contracts. The purpose of such clauses is to ensure that agreements are not terminated merely on account of breaches having been committed. Such clauses are meant to afford a party committing a breach, an opportunity of remedying the same. It is an important right in favour of a party committing a breach. Such clauses are an essential term of a contract. There is nothing to suggest that the clause was not to be acted upon for any reason. 21. The least that must be said in favour of Mr.Madon's submission founded upon clause 38 is that it is a point which certainly 17 warrants consideration at the trial of the suit and counter-claim and it cannot by any stretch of imagination be rejected at the interlocutory stage. 22. This brings me to a consideration of the four grounds based on which Mr.Parekh contended that Defendant Nos.1 to 3 had not become entitled to the premises mentioned in column 3 of item A to clause 10 of the agreement. 23. Firstly, he submitted that on a true and proper interpretation of column 2 qua item “A” of the table in clause 10, RCC work ought to have commenced in respect of all five wings. That not having been done, Defendant Nos.1 to 3 had not become entitled to “approx. 5000 sq.ft.” under column 3 of the table. 24. The plain language of column 2 does not support this contention. It does not provide that the RCC work ought to have commenced in respect of all the wings. It merely states that the work of RCC ought to have commenced. That the RCC work had commenced is not in dispute. 18 25. The least that must be stated in favour of Defendant No.1 at this stage is that the matter is not free from doubt as contended by Mr.Parekh. 26. It is not clear from the record as to when RCC work actually commenced. This mater assumes significance in view of the rival contentions between the parties regarding the date of the agreements between Defendant Nos.1 to 3 on the one hand and the remaining Defendants on the other. Relying upon the affidavits filed by/on behalf of Defendant Nos.4 to 15, Mr.Parekh submitted that the agreements were not entered into on the date of the formal agreements executed between the parties but prior thereto, on the date on which the deposits were accepted. There is some force in the argument. For instance in some cases even before the formal agreements were executed the amounts were paid from time to time. This would indicate that such amounts were paid pursuant to an agreement and not merely as a token amount only for booking the flats. However even assuming this to be as it would be of no assistance to the Plaintiffs considering the views that I have taken. 27. Secondly, Mr.Parekh submitted that for the work completed 19 upto the stage mentioned in item “A” of column 1 of clause 10, Defendant No.1 was entitled to sell the “premises admeasuring approx. 5000 sq.ft saleable area” (emphasis supplied). According to Mr.Parekh, Defendant No.1 sold 5015 sq.ft. built up area thereby committing a breach of clause 10. The submission is not tenable. 28. Nowhere in the pleadings has the Plaintiff alleged that an area in excess of 5000 sq.ft. was sold. In fact in paragraph 29(viii)(a) of the plaint the Plaintiffs have alleged that Defendant No.1 sold 4908 sq.ft. saleable area. There is no amendment to the plaint in this regard. In the correspondence, Defendant No.1 expressly stated that by a letter 2.3.2004, nine flats aggregating to 4828 sq.ft built up area had been disposed of. It would be unfair to the Defendants to permit the Plaintiffs to contend contrary to their own case on such questions of fact. This is more so considering the fact that even in the notice of termination dated 10.3.2004, the Plaintiffs alleged that Defendant No.1 had purported to sell 4825 sq.ft built up area. 29. Moreover even assuming, as alleged by Mr.Parekh, that 5015 sq.ft built up area had been sold, it would make no difference for the right of Defendant No.1 is to sell “approx. 5000 sq.ft.” (emphasis 20 supplied.) I am unable to agree that 15 sq.ft in excess of 5000 sq.ft would not fall within the ambit of the term “approx.” (approximate). 30. Further, as Mr.Madon pointed out, even as per the agreements with Defendant Nos.4 to 15, the built up area is only 4712 sq.ft. 31. Faced with this, Mr.Parekh submitted that as per the agreements tendered in Court, the area agreed to be sold by Defendant No.1 to Defendant Nos.4 to 15 was 5620 sq.ft saleable area. He was however unable to clarify the basis for the computation of the saleable area or to define the term clearly. In any event this allegation was taken only across the bar and had not either been made in the correspondence or dealt with in the pleadings. In the facts and circumstances of this case,it would not be fair to