1 arbp407-11 vai IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.407 OF 2011 Sharan Co-operative Housing Society Ltd. ....Petitioner V/s. Simal Mahesh Gaglani ....Respondent Mr.Pravin Samdani, Senior Counsel with Mr.Annurudh Joshi and Mr.Nikhil Karnawat i/b Viraj Maniar & Associates for the Petitioner. Mr.D.D. Madon, Senior Counsel with Mr.Vora i/b Pramodkumar & Co. for the Respondent. CORAM : S.J. VAZIFDAR, J. DATE : 5TH JULY, 2011. P.C. :- 1. This is a petition under section 9 of the Arbitration and Conciliation Act, 1996. 2. The petitioner seeks an order restraining the respondent from parting with possession of the building or any part thereof and from inducting any person in any flat therein and for other consequential reliefs. The petitioner has also sought an order directing the respondent to deposit the amounts towards the payment of monthly compensation towards the alternate accommodation with an enhancement of 25%. 3. The parties had entered into a development agreement dated 2.5.2008. Under the agreement, the respondent was entitled to develop the property belonging to the petitioner by utilizing the maximum permissible FSI and loading TDR. The building was to comprise of one or more wings 2 arbp407-11 with a stilt and maximum six upper floors. The respondents was to provide flats admeasuring 840 sq. ft. to each of the twelve members. Clause 6.1 provides that in the event of there being any short fall in the area provided to the members, the respondent is liable to pay an amount of Rs.25,000/- per sq. ft. of the said deficit area to the concerned member. The decision of the architect appointed by the petitioner for this purpose is to be binding on the developer. Under the agreement, the respondent is entitled to retain certain flats. 4. The building is now complete. A “full occupation certificate” was issued by the B.M.C. on 27.4.2011. The certificate states that the development work of the building is completed and that the same may be occupied on the following conditions :- “1) That the certificate under section 270-A of M.M.C. Act shall be obtained from I.L.E. and a certified true copy of the same shall be submitted to this office within three months from the date of issue of occupation certificate. A set of certified completion plan is attached herewith”. 5. The respondent offered possession of the premises to the petitioner even before the occupation certificate was issued. The building therefore, can now be occupied. The condition stipulated in the occupation certificate does not require to be complied with before the occupation of the building. It merely requires the certificate to be produced within three months from the date of the occupation certificate. The occupation certificate does not state that the building may be occupied only after the certificate under section 270-A of the M.M.C. Act is obtained. The 3 arbp407-11 members and the respondent are therefore, entitled to occupy their respective flats. 6. The question then is whether the respondent is not entitled to deal with the flats coming to its share under the development agreement and whether it ought to furnish any security as provided for under the agreement. Clauses 6.1, 6,3, 11 and 13.5 of the agreement read as under :- “6. Consideration payable by the Developers : 6.1 It is agreed between the parties hereto that the Developers as consideration towards the present Agreement shall construct and provide flats admeasuring 840 sq. ft. (carpet area) to each existing member of the Society (for the purpose of this clause single membership shall be considered irrespective of whether the flat is singly or jointly owned). The present area currently been occupied by each member is to be considered as 700 sq. ft. (carpet area) for the purpose of arriving at the additional 20% to be provided by the Developers irrespective of the actual carpet area as it exists currently. The Developers shall not be entitled to raise any dispute about the existing area and it is accepted by the Developers that they shall be liable to provide 20% additional area (carpet area) to the existing area of 700 sq. ft. (carpet area) being presently occupied by the members. The additional area of 20% shall be measured by the Architect to be appointed by the Society at its own cost for that purpose and the Developers shall ensure that there is no short-fall or deficiency in the area to be provided to each member of the Society. In the event of there being a short-fall in the area to be provided to the members as agreed in these presents and the actual area being handed over to the members, the Developers shall be liable to pay an amount of Rs.25,000/- for each sq. ft. of such deficit area to the concerned member. The decision of the Architect appointed by the Society for this purpose shall be final and binding on the Developers. 6.3 It is understood that in order to facilitate the smooth development of the said project the members of the Society are required to vacate their respective flats and handover possession thereof to the Developers. The 4 arbp407-11 Developers shall pay directly to each individual members of the Society an amount of Rs.62/- per month per sq. ft. of the existing area of 700 sq. ft. (carpet area) in the possession of each member currently for obtaining alternate accommodation during the tenure of the project. The amounts payable to each of the members towards the aforesaid rent shall be paid by the Developer to each of the members as per the particulars furnished in the Schedule at Annexure “C” hereto. It is expected that the entire development project shall be completed within a period of 18 months from the date on which the members of the Society vacate their respective flats and handover possession thereof to the Developers. The Developers shall pay the aforesaid amount of Rs.62/- per sq. ft. to each individual member in advance for the entire period of 18 months as setout hereinabove. The said amount shall become payable upon the members handing over physical possession of their respective flats to the Developers or upon issuance of the IOD for the development project, whichever is earlier. It shall be however, incumbent upon each member of the Society to vacate their respective premises and handover possession thereof to the Developers within 60 days of the Developers intimating to the Society and the members about the issuance of the IOD or within 90 days from the effective date whichever is later. It is agreed that a member who does not vacate and handover physical possession of the premises as contemplated herein shall be liable to pay to the Developers an amount of Rs. 5,000/- per day for each day of delay in vacating and handing over the possession of the premises within occupation of such member. 11. Guarantees and Security: 11.1 As per the tentative building plans as provided by the Developers, it is expected that the Developers is likely to construct 6 flats in addition to the 12 flats to be provided to the members and the Developers shall be entitled to sell the said 6 flats and appropriate to himself the sale proceeds thereof. However, the Developers shall not sell, transfer, deal with, dispose off, encumber or create third party rights in any manner in respect of 1 out of the said 6 flats that may be available to him for sale in the open market, till such time as the 12 members of the Society are not put in possession of the flats to which they would become entitled as provided herein. 11.2 The Developers shall deposit in an escrow 5 arbp407-11 account an amount of Rs.30 Lacs ( Rupees Thirty Lacs Only) to secure the liability that may arise out of the defects liability clause stipulated in Clause No.9.8 hereinabove and also any other liabilities arising in the future due to any reasons whatsoever directly or indirectly due to the execution of these presents. Such amount shall be kept in escrow by the Developers for a period of 1 year from the date on which the existing members of the Society are put in physical possession of their respective flats as provided herein. 11.3 The Developers shall also deposit a further amount of Rs.35/- Lacs (Rupees Thirty Five Lacs Only) in an escrow account, which amount shall be held in such escrow account for a period of 6 months from the date on which the members are put in possession of their respective flats. The Developers shall within such period of 6 months obtained the Occupation Certificate in respect of the entire building (inclusive of the 6 flats that may be available to the Developers for sale in the open market). It is agreed and understood that the Developers shall be entitled to withdraw the said amount of Rs.35/- Lacs (Rupees Thirty Five Lacs Only) deposited in pursuance of this Clause immediately upon furnishing to the Society the Occupation Certificate in respect of the building. In the event, of failure of the Developers to obtain such Occupation Certificate within 6 months, the said amount of Rs.35/- Lacs (Rupees Thirty Five Lacs Only) shall stand forfeited and the Society shall be entitled to obtained the Occupation Certificate for the said Building by making necessary Application to MCGM or the concerned statutory body. However, it is clarified that if the occupation certificate is delayed in being M. C. G. M. or the application for the same is rejected due to any unauthorized work or change carried out by any individual member in his / her premises, the clause shall not be strictly enforceable against the developer. Further clarified that if such unauthorized work or change is carried out by a flat purchaser of the developer i.e. a person not mentioned in the Annexure “A” the developer shall liable under the present clause. 13. Right to Developers to sell the premises to third parties : 13.5 The Developers shall not handover the possession of the flats to the new members, unless and until possession of the premises agreed to be constructed by the Developers for the existing members is completed 6 arbp407-11 by the Developers and handed over to them as per the schedule herein agreed.” 7. The petitioner submitted that under clause 11.1, the members, who are bound to take possession of the flat only upon the same being handed over to them in terms of the agreement. It was submitted that there are a lot of defects in the interior work and especially as regards the finishing of the flats and therefore, the members were not bound to take possession of the flats unless all these defects are rectified and the occupation certificate is obtained. 8. The submission is contrary to clause 11.3 which entitled the members to take possession of the flats and the respondent was to obtained the occupation certificate within six months thereof. The possession was offered even earlier. Despite the same, the respondent has in fact pursuant to an order dated 3.5.2011, paid the rent till the end of May, 2011. The refusal to take possession, even after the occupation certificate, prima-facie at least was not justified. In any event, at this stage, it would not be proper to direct the respondent to secure the aggregate amount of Rs.60.00 lacs towards the rent for the month of June, 2011. 9. The amount of about Rs.12.00 lacs is claimed on account of the amenities not having been furnished as per the agreement. I am not inclined to restrain the respondent from exercising rights in respect of an entire flat on this ground. It is difficult to assess the short fall in the amenities in a petition under section 9 of the said Act. 10. A demand for security for the short fall in the area is also made. 7 arbp407-11 According to the petitioner, there is a deficit in area of 10 sq. ft. per flat. Under clause 6.1, the members are entitled to compensation for any deficit in area at the rate of Rs.25,000/- per sq. ft. i.e. Rs.2,50,000/- per flat. 11. These disputes must be worked out in the arbitration proceedings. There is no warrant for restraining the respondent from dealing with the entire flat due to a short fall of 10 sq. ft. per flat. 12. Mr.Madon stated that the respondent would be depositing in escrow an amount of Rs.30.00 lacs towards the defects liability period as per the agreement. The statement is accepted. 13. The matter is not free from doubt or disputes. For instance the respondent also has a claim of about Rs.1.00 crore. According to the respondent, the petitioner was to hand over possession within two months of the I.O.D. being obtained. The I.O.D. was obtained on 2.8.2008, but the possession was given only on 31.3.2009. The petitioner contends that this was because of the respondent did not have money ready towards the payment of rent for temporary alternate accommodation. The respondent on the other hand contends that the members did not vacate the premises for their own reasons within the stipulated period of two months. It is impossible to foist liability, without evidence, in this regard. Further according to the respondent, the petitioner wanted certain alterations to be made on account of which there was a delay. 14. In the circumstances, the petition is dismissed. However, as stated above, the respondent shall put the members in possession of their respective flats forthwith. The same shall be done without prejudice to the rights and contentions of all the parties in the arbitration petition. The 8 arbp407-11 parties have agreed to refer to all their disputes and differences to the sole arbitration of Mr.Snehal Shah, an advocate of this Court. It is accordingly so ordered. No order as to costs.