1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTTION NO.3335 OF 2009 IN SUIT NO.2392 OF 2009 Sharma Realty Pvt.Ltd. ... Plaintiff Versus National Industrial Corporation & Ors. .. Defendants WITH NOTICE OF MOTION NO.2809 OF 2009 IN SUIT NO.1985 OF 2009 Ackruti City Ltd. (Formerly known as Akruti City Ltd.) .. Plaintiff Versus Sharma Realty Pvt.Ltd. And Ors. .. Defendants Mr.Virag Tulzapurkar, Senior Advocate with Dr.Birendra Saraf and Shane Sapeco i/b. Hariani & Co. for plaintiff in Suit N.1985 of 2009 and for defendant No.4 in Suit No.2392 of 2009 2 Mr.Shrihari Aney, Senior Advocate with Ms.Meenaz Merchant i/b. Haresh Ganatra for plaintiff in Suit No.2392 of 2009 and defendant Nos. 1 to 4 and 6 in Suit No.1985 of 2009 Mr.Geetanjali Prabhu i/b. Vigil Juris for defendant Nos. 2 in Suit No.1985 of 2009 and for defendant Nos. 1 to 3 in Suit No.2392 of 2009. CORAM : S.C.DHARMADHIKARI, J. DATE : November 7, 2009. P.C.: 1] These two notices of motions can be conveniently disposed of by a common order, more particularly as the facts and parties are common in the two suits. 2] Since, Mr.Aney, learned Senior Counsel is heard in Suit No.2392 of 2009 in support of Notice of Motion No.3335 of 2009, it would be necessary to refer to the facts in that suit. The plaintiff in this suit is defendant No.4 in the other suit and the defendant No.4 in Suit No.2392 of 2009 is plaintiff in Suit No.1985 of 2009. 3] National Industrial Corporation (hereinafter referred for short as “National”) is the owner of an immovable property which is common to 3 both suits. It is the case of the plaintiff in Suit No.2392 of 2009 (hereinafter referred to as Sharma Realtors) that National executed a development agreement in its favour and that development agreement not only permits development of the immovable property by construction of building but authorises sale of flats and tenaments therein. This development agreement is dated 24th March 2003. Mr.Aney, learned Senior Counsel invites my attention to this development agreement and submits that this development agreement stipulates that National has agreed and undertaken to directly convey the immovable property with the new building to be constructed to such cooperative housing society or association or other bodies or body corporates that will be formed by the purchasers of flats/ shops/ units. He submits that Sharma in consideration of this agreement and National permitting irrevocably the development of the property agreed, to pay a sum of Rs.12.25 Crores. Mr.Aney submits that in terms of clause 3 of this development agreement, save and except the amounts in sub-clauses V and VI thereof, the other sums have been paid. He submits that the agreement is to fully exploit the available FSI within a period of four years from the date of the agreement. The agreement also confers the exploitation of TDR Rights. Mr.Aney then submits that clause 6 of the Agreement sets out that the title to the 4 immovable property is free, clear and marketable and there are no encumbrances and charges. Clause 7 gives irrevocable permission to the developers/ Sharma to enter upon the property. He submits that although the agreement recites that the title is clear and marketable and that there are no claims, in fact, there were claims of banks, third parties and workers/ labourers. This was a property where Industrial units/ galas were existing and since there were claims of the workers, even, the Labour Commissioner had to be approached, apart from banks, for settlement thereof. Admittedly, National did not settle the claims of these parties nor did it comply with the requisitions of the competent authority under the Urban Land (Ceiling and Regulation) Act, 1976. However, it is apparent from a reading of the letter at page 83 that vacant possession was given by the National to Sharma. He has referred to the letter at page 86 of the owner/ National confirming handing over of possession in March 2003. Further, the letter itself recites that there are some machineries which are lying in the premises and National sought time till November 2003 to clear the site. He submits that physical possession is with Sharma. 4] Inviting my attention to a letter dated 11th March 2005, addressed 5 by the Advocates of National, Mr.Aney submits that despite this letter alleging that the development agreement has not been complied with and there are several breaches and the same stands terminated, yet, it goes without saying and is rather an admitted position that between the National and Sharma, there was supplemental agreement dated 2nd April 2005. That supplementary agreement, copy of which is annexed at Annexure I page 89 of the paperbook in Suit No.2392 of 2009 recites that some of the clauses of the earlier development agreement stand altered. That the alleged delay in not abiding by the time schedule is of no longer significance inasmuch as in addition to the sum of Rs.12.25 Crores a further sum of Rs.30 lakhs is agreed to be paid by National as compensation for delay. In terms of the Schedule prescribed in this agreement, amounts have been paid and it is the case of the plaintiff that, although it is agreed that they will give possession of 30,000 sft., built up area (constructed) to National by Diwali of 2006, National did not settle the claims pending against them. It is subject to that claims being settled that the plaintiff Sharma could take steps to develop the property. It is in that context and for this reason that the deadline of 2006 Diwali could not be met. Both agreements are terminated but that is under challenge. My attention is invited by Mr.Aney to the letter dated 4th October 2005 6 addressed by one Allan Sabestian D’Souza and Edward Sabestian D’Souza, to National and Sharma on 4th October 2005 putting up a claim in regard to the suit property. It alleges that encroachments have been made by Sharma. Thus, this claim had to be settled as is evident by para 42 of the affidavit in rejoinder filed by Sharma, that this claim had been settled by them. Further, the Labour Commissioner’s NOC dated 22nd August 2008 speaks volumes of the fact that the claims of even the workers were not settled by National. With regard to the clearance of Urban Land Ceiling Authorities, the details are pointed out at para 25 of the affidavit in rejoinder. 5] In these circumstances, the submission of Mr.Aney is that the letter dated 25th March 2006 terminating the supplementary agreement and the prior agreement is bad in law. The so called breaches alleged do not correctly reflect the claims that were already pending and which could not have been settled purely because of the fault of National. In these circumstances, although Sharma applied for necessary permissions to construct and develop the property, the same could not be granted by the B.M.C. Inviting my attention to the letters at page 109 and 110 of the plaint paperbook, Mr.Aney submits that the plaintiffs were surprised to 7 have a public notice being issued by Akruti (Defendant No.4) stating that it has agreed to purchase the suit property from National and that it is an intending purchaser. The objection was raised to this public notice on 8th March 2007. Despite pendency of this objection, National and Akruti proceeded to execute a deed of conveyance dated 18th January 2008. However, despite execution of this conveyance, no steps have been taken by Akruti mainly because the Corporation issued commencement certificate in favour of Sharma on 31st December 2008 and physical possession being with Sharma, there is no question of any construction or development activity commenced by Akruti. In such circumstances, when now permissions have been granted, construction work has commenced and about 124 flats have been booked by third parties, this is a fit case where interim relief as prayed in the present suit be granted and the ad-interim order passed in favour of Akruti on 12th August 2009 in the companion suit be vacated. Mr.Aney submits that the Commencement Certificate (CC) postulates construction of building of ground plus 17 upper floors. The CC permits construction of ground plus 7 upper floors in the first phase and digging has been done with regard to this phase. Even monies have been paid by third parties who are really innocent in this entire battle. In these circumstances, the prayer for interim relief in a 8 suit to declare that all agreements in favour of Sharma are valid, subsisting and binding so also the termination is bad in law, be considered favourably. Although, Mr.Aney concedes that Suit by Sharma is subsequent in point of time, he urges that the circumstances clearly show that there is in present, a right to commence and complete construction at site. Because of a status quo and injunction and/or restraint order that the construction activity could not proceed or else everything that is necessary for completing the construction has been done, permissions have been obtained and funds have been invested. At this stage, the issue of prejudice and loss to the flat purchasers be seriously considered. Mr.Aney has invited my attention to para 32 of the plaint. He has highlighted the fact that when the CC is still holding the field and this is a case of two registered documents being projected by Sharma and Akruti, then, merely because Akruti claims under a conveyance is of no significance and at this interlocutory stage construction be allowed to be completed. 6] He submits that there is no illegality in the construction. The construction is authorised and, therefore, the decision of the Supreme Court in the case of Amey Cooperative Housing Society Vs. Public 9 Concern for Governance Trust and ors. (2007 C.T.J. Page 93) would squarely apply. 7] Ms.Prabhu appearing for National states that she confirms the stand of National as recorded in ad-interim order dated 12th August 2009 viz., that it has terminated the agreement in favour of Sharma and that it has executed a conveyance in favour of M/s.Akruti. It states that time was the essence of the contract and, therefore, the agreement was terminated validly. It also stands by the letters alleging breaches on the part of Sharma. 8] Mr.Tulzapurkar, appearing for M/s.Akruti firstly submits that the suit of Sharma is barred by limitation. Inviting my attention to Article 54 of the Limitation Act 1963, he submits that the termination is effected on 21st March 2006. The suit challenging this termination is instituted in this Court on 11th August 2009. It is clearly beyond the period specified in law. This is a case where the plaintiff cannot allege that it was not aware of the termination. Mr.Tulzapurkar has invited my attention to the letter dated dated 18th February 2006 addressed by the Advocates representing National alleging delay in fulfilling the obligations under the 10 supplementary MOU. He submits that a reply was given to this letter by Sharma on 27th February 2006. All this precedes the termination letter dated 21st March 2006. Time is of the essence in the entire contract. A reply is given to this termination letter and the correspondence subsequent thereto is wholly irrelevant as this would not save the bar of limitation. He submits that Civil Procedure Code and more particularly Order VI thereof requires the plaintiff to plead as to how the bar of limitation is saved. However, para 48 of the plaint is hopelessly vague and does not set out as to how and in what manner the claim is within limitation, beyond stating that the same is within limitation. In these circumstances, looked at from any angle, the suit claim is hopelessly time barred. Once it is so barred, then, no interim reliefs be granted. 9] Alternatively and without prejudice to the aforesaid submission, he submits that this is a fit case where the conduct of Sharma who is plaintiff in this suit, disentitles it from claiming any equitable and discretionary relief. This is an agreement for development. The clauses thereof are very clear. When the breaches were alleged and the agreement was terminated in 2005, Sharma accepting that termination approached National and pursuant to negotiations the supplemental MOU was 11 executed. Now both prior and subsequent document/ agreements have been terminated. Once they are terminated and that is a fact known to Sharma in the year 2006 itself, it did not take any steps to assert its rights in this property. Far from filing a suit it did not even question the agreement which was stated to have been executed by National in favour of Akruti as is evident by the Public Notice dated 22nd February 2007. After the public notice was replied of 8th March 2007 also, Sharma took no steps. It is not that only this claim was asserted with regard to this property. At page 146 of the plaint paperbook, Sharma have referred to a letter by Advocates of M/s.Nupur Leasing asserting right in this property and very clearly alleging in the said letter that the subject immovable property was handed over to M/s.Nupur Leasing and M/s.Nupur Leasing claiming to be in possession thereof. This letter also refers to the conveyance in favour of M/s.Akruti. In such circumstances Mr.Tulzapurkar submits that Mr.Aney’s argument that Sharma’s suit being subsequent in point of time is a wholly irrelevant matter, cannot be accepted. The conduct must be seen as a whole and more particularly institution of the suit subsequent in point of time. This would show that the conduct of Sharma is not free from any blemish or fault. Once, such a party has an ample opportunity to come to Court and yet does not 12 approach the Court, allows third party to acquire rights, then, no equities can be claimed by Sharma in their favour. Mr.Tulzapurkar submits that the CC is subsequent to the letter of termination and once the agreement has been terminated on 21st March 2006, then, this Court cannot proceed on the basis that it is not validly terminated at this stage. Once it was so terminated, then, the act of moving the Corporation and obtaining permissions cannot be given any importance at this prima facie stage. On the strength of CC granted subsequent to the termination of the development agreement, plaintiffs cannot claim any equities in their favour. 10] Mr.Tulzapurkar submits that at the ad-interim stage an argument was canvassed that there is a power of attorney executed by National in favour of Sharma and that power of attorney creates agency coupled with interest. However, according to Mr.Tulzapurkar, such an interest must be antecedent to the execution of the documents and must be confirmed in that document. It cannot be an interest arising in future. In this case, from the power of attorney and more particularly clauses 7, 8, 10 and 12 of the Development agreement itself, it is apparent that all acts done by Sharma are on behalf of the National, the owner. Once they are acts done 13 and on behalf of the owner and the owner has terminated the development agreement, then, the argument that there is an agency coupled with interest should not be countenanced and must be rejected. 11] Mr.Tulzapurkar places strong reliance upon the decision of the learned Single Judge (Lordship D.G.Karnik) reported in 2003 (6) Bom.C.R. 846 (Barses J.A.D’Souza Vs. Municipal Corporation of Greater Brihan Mumbai and Ors). Mr.Tulzapurkar submits that merely because Sharma claims to be in physical possession of the property that aspect should not be given any weightage once Akruti is claiming on the basis of a conveyance. Akruti’s suit is not for specific performance but is a suit claiming possession from Sharma by Akruti as owner. It is the owner who is now seeking to evict the trespasser and, therefore, not only the motion taken by Akruti in its suit deserves to be made absolute but additionally that it is just and convenient that Court Receiver be appointed as Receiver of the suit property with all powers under Order 40 Rule 1 of C.P.C. 12] With the able assistance of learned Senior Counsel appearing for parties, I have perused the plaints in both suits, the affidavits placed on 14 record and Annexures thereto. I have also perused the decisions brought to my notice. 13] In my ad-interim order I have already adverted to some of the basic and uncontroverted facts. That the owner – National Industries has terminated the development agreement of March 2003 the supplemental agreement in favour of Sharma as early as on 21st March 2006. It confirms and stands by these acts and the termination. Further, it has executed conveyance in favour of Akruti on 18th January 2008. The conveyance has been duly registered. Preceding the conveyance is the public notice by Akruti inviting claims and objections from interested parties. An objection was lodged by Sharma stating that it has two agreements in its favour pursuant to which it is put in physical possession and can deal with the immovable property in question.. It is also an admitted position that despite the agreement in favour of Sharma having been terminated on March 21, 2006, Sharma did not move this Court until the suit filed by Akruti. In the suit filed by Akruti, interim relief that was sought was to restrain Sharma from commencing and carrying on any construction activities on the suit property. At the same time, it sought to restrain National from creating any third party rights or transferring the 15 suit property so as to defeat the conveyance in its favour. It is at the hearing of the application for ad-interim relief that it was stated that M/s.Sharma have filed a suit in this Court claiming specific performance of the agreements in their favour and challenging conveyance in favour of Akruti. 14] In the ad-interim order, I have already observed that at this stage, when M/s.National confirms the conveyance, then, prima facie case to that extent is made out by M/s.Akruti. That is apparent from the fact that even Sharma Realtors do not dispute that after the agreement was terminated till the date of the conveyance, they did not take any steps to impugn or challenge the cancellation and question the conveyance. In such circumstances, now permitting them to commence and carry on any construction would amount to granting final reliefs in their favour. Thus, in the light of their conduct highlighted by M/s.Akruti and which prima facie has some bearing on the controversy, then, until M/s.Sharma Realtors succeed in their suit they cannot carry out any construction activities at site. Merely because a statement is handed over stating to be particulars of the rights created in favour of some 124 persons, without anything more being produced, it would not be proper to hold that the 16 flats are already sold and disposed of. If the plaintiffs desire to claim any equities, firstly, they ought to have approached the Court expeditiously and secondly they ought to have made complete disclosure of the transactions with third parties/ flat purchasers. When it is seriously disputed by Mr.Tulzapurkar appearing for Akruti that during the course of inspection no documents were shown with regard to this transaction, then, prima facie, I cannot proceed on the basis that these parties would be adversely affected and for that reason construction activity be permitted at site. Such a course would mean putting a premium on the inaction and would, at this stage itself, amount to accepting the arguments challenging the termination and questioning the conveyance. All such aspects have to be fully substantiated and proved and that is possible only at the trial. Until then, the construction activities being permitted would mean not only affect the rights allegedly created but that may be created in future. There is a litigation and there are serious issues involved. During the course of such disputes, any construction activity or dealing with the property would invite claims from third parties as well. That would complicate the entire adjudication. In such circumstances, the request of Mr.Aney that the construction activity be permitted to be carried out cannot be accepted. 17 15] Mr.Aney’s reliance upon the decision of the Supreme Court is clearly misplaced in these facts. Before the Supreme Court, the controversy was that a public interest litigation had been filed in this Court questioning the manner in which certain residential plots in Navi Mumbai Municipal area had been allotted by City and Industrial Development Corporation (CIDCO for short). The CIDCO is an authority constituted by the State Government. The allotment made by it was challenged on various grounds. The main ground of challenge there was that disposal of Plot Nos. 24 to 29 (Nerul) was in violation of existing regulations regulating such allotment. CIDCO did not follow the procedure of open bidding and made direct allotments, which allotments were questioned and ultimately an investigation was made. Based upon the outcome/ report of that investigation, this Court issued further orders and directions and that is how the matter reached the Supreme Court. Supreme Court found on the basis of the peculiar facts that the construction had reached an irreversible stage. The construction activities after enormous expenses being incurred ought not be halted. More so, when the matter was a public interest litigation and the parties approached the Court questioning the allotment after the construction had 18 already commenced. It is in those peculiar facts and bearing in mind the larger public interest that the Supreme Court made the observations relied upon by Mr.Aney while allowing the appeals before it. 16] The fact situation before the Supreme Court and before me is not identical. Before me, beyond some digging activities stated to have commenced in pursuance of IOD and CC, no construction is carried out. Furthermore, these are cross suits wherein at this stage, there is a conveyance in favour of one of the parties whereas the construction is sought to be commenced and completed in furtherance of an agreement which stands already terminated and which termination is questioned. In these peculiar facts, allowing construction activity at site by taking any equitable view would be contrary to the interest of not only innocent third parties but would complicate the entire process. In these circumstances, I cannot accede to the submissions of Mr.Aney that the observations of the Supreme Court in this decision would apply. 17] In this view of the matter, it is not necessary to decide any larger controversy, much less, the one raised by Mr.Tulzapurkar that the issue of limitation is also an issue which could be said to be jurisdictional one and 19 covered by Section 9A of CPC and, therefore, a preliminary issue be framed of jurisdiction of this Court. Secondly, it is not necessary to decide as to whether in the peculiar facts of this case the decision of the learned Single Judge (supra) would apply or not. Prima facie, the power of attorney in this case is relied upon but that appears to be in furtherance of the obligations under the development and supplemental agreement. Once, both agreements have been terminated on 24th March 2006 and there is a serious issue as to whether the power of attorneys themselves survive or not, then, it would not be proper at this stage to render any conclusive finding as to whether the agency is coupled with any interest or not. That is a matter which can be left open for consideration at a subsequent stage. In these circumstances, I leave open the contentions of both sides in that behalf. 18] In the view that I have taken, it is clear that M/s.Akruti have made out a prima facie case and even the balance of convenience is in their favour. Grave loss and irreparable harm so also injury will be caused not only to them, since they have conveyance in their favour but to third parties as well, if the construction activities