: 1 : IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.528 OF 2008 Della Developers Private Limited, a company incorporated under the provisions of the Companies Act, 1956, having its registered office at Della House, Opposite Grant Road Post Office, Sleater Road, Mumbai-400 007. ....Petitioners Versus 1.Noble Organics Private Limited, a company incorporated under the provisions of the Companies Act, 1956, having its registered office at Noble Tower, Off.Ganapatrao Kadam Marg, Lower Parel, Mumbai – 400 013. 2.Noble Paints Private Limited, a company incorporated under the provisions of the Companies Act, 1956, having its registered office at Off.Ganapatrao Kadam Marg, Lower Parel, Mumbai – 400 013. ...Respondents ...... Ms.Rajani Iyer with Mr.M.S.Doctor with Ms.Kirtida Chandarana i/b M.Humranwala for Petitioners. Mr.R.M.Kadam, Advocate General with Mr.S.U.Kamdar & Mr.A.S.Kamat i/b Kartikeya & Associates for Respondents. ...... CORAM : A.M.KHANWILKAR, J. DATE : 4TH JANUARY , 2010. : 2 : JUDGMENT : 1. This Petition under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as `the Act’) takes exception to the order passed by the sole Arbitrator dated 1st August 2008 on Application dated 14th April 2008 filed under Section 17 of the Act in the Arbitration Dispute between the parties herein. 2. Briefly stated, an Agreement styled as Development Agreement was executed between the Petitioners and Respondents on 17th March 2006. According to the Petitioners, it was an arrangement to form a joint venture to jointly develop the property in question and the Petitioners would become entitled to a 50% share with all the rights and benefits arising thereunder. The Petitioners were to contribute aggregate amount of Rs.7.50 Crores. Whereas, the Respondents were to contribute by way of land which was to be developed as a joint venture. However, on account of certain differences and disputes between the parties in view of the arbitration clause in the said Agreement, the dispute was referred to the sole Arbitrator. In the said Arbitration proceedings, the Petitioners took out application under Section 17 of the Act for interim protection during the pendency of the : 3 : proceedings. That Application came to be rejected by the sole Arbitrator by the impugned decision. 3. The prima facie opinion recorded by the sole Arbitrator in rejecting the Application preferred by the Petitioners is broadly on two considerations. Firstly, it is noted that the Agreement between the parties was a pure and simple Development Agreement to develop the property and share the profits. Relief of specific performance cannot be invoked in respect of such an Agreement. He has further opined that prima facie, the Petitioners/Claimants had failed to carry out all its obligations and that the balance of convenience also tilted in favour of the Respondents and against the Claimants. 4. In the present Petition, the findings reached by the sole Arbitrator have been assailed on the argument that the same is manifestly wrong and incorrect. According to the Petitioners, on construing the Agreement in question as a whole, it is a joint venture arrangement agreed upon between the parties to jointly develop the suit property and not a pure and simple Development Agreement with no rights in the property to be developed. Even with regard to the finding recorded by the sole Arbitrator on the issue : 4 : as to whether the Petitioners were ready and willing to comply with their obligation specified in the suit Agreement have been criticized with reference to the terms of the Agreement as also the subsequent correspondence exchanged between the parties and the Minutes of the joint meeting held to discuss the relevant aspects arising from the Development Agreement. According to the Petitioners, in any case, the non-compliance of the obligations under the Development Agreement by the Petitioners have been waived by the Respondents and therefore, the same cannot be made the basis to deny interim protection. It is lastly submitted that in any case, since status-quo arrangement in respect of the suit property is continuing on account of the statement made in the present proceedings before this Court on 19th December 2007, the same arrangement can continue and the sole Arbitrator can be directed to finally dispose of the Arbitration proceedings expeditiously till which time, the same interim arrangement should prevail. 5. The Respondents on the other hand, have supported the view taken by the sole Arbitrator on both the counts and submit that the material on record clearly establishes that the Petitioners were not ready and willing to fulfill its obligations under the suit Agreement. Besides, it is a case of repudiation of contract, for which reason, relief of specific performance as : 5 : prayed, cannot be granted to the Petitioners. It is further submitted that the claim of the Petitioners, if accepted, would require continuous supervision of the performance of the contract, which cannot be permitted and relief in such matter cannot be granted as it is hit by provisions of Section 14(1)(d) of the Specific Relief Act. Moreover, since the contract has been legitimately terminated by the Respondents, the Petitioners were not entitled to interim relief whatsoever. It is submitted that therefore, the Petition be dismissed being devoid of merits. 6. The sole Arbitrator in the impugned decision has broadly considered these issues. In the first place, he prima facie found that the Agreement is an arrangement for development without creating any right in the property. Secondly, the Claimant does not appear to have carried out all its obligation. Thirdly, the balance of convenience was against grant of any interim relief. 7. Insofar as the first issue is concerned as to whether it was a case of Agreement for Development without creating any right in the property, the sole Arbitrator has essentially adverted to the recital, Clause 8, Clause 11, Clause 16 and Clause 28 of the suit Agreement to prima facie opine that the Agreement was a pure and simple Development Agreement. Indeed, the : 6 : sole Arbitrator has in addition, referred to the correspondence exchanged between the parties including the letters dated 10th July 2007, 17th July 2007 and 24th July 2007. It is found that no right or interest of any kind is created in respect of the property in favour of the Claimant under the Agreement and it was purely a Development Agreement. 8. To consider the correctness of this finding, I would readily agree with the submission of the Petitioners that the Court will have to interpret the Agreement as a whole, even though the Agreement is styled as Development Agreement. Indeed, the title of the document, by itself, cannot be the basis to straightaway jump at the conclusion that it is purely a Development Agreement without creating any right or interest in respect of the suit property in favour of the Petitioners/Claimant. The recital of the Agreement at page 24 of the paper-book clearly mentions that the Petitioners had approached the Respondents for joint development of the two plots referred to in the Agreement and the Respondents have agreed to do so in the manner and on the terms and conditions recorded in the Agreement. On the same page, the next recital reiterates that the Respondents have agreed to jointly enter into the Development Agreement with the Petitioners. Clause 4 of the Agreement at page 29 envisages that : 7 : the Respondents shall jointly with the Petitioners develop their respective plots being Plot No.D-43/3 admeasuring 7104 square meters and D-43/4 admeasuring 4467 square meters (in aggregate 11,571 square meters) for the purpose of constructing an Industrial Complex and an Information Technology Park (`IT Park’) as per the prevailing norms of MIDC. Clause 5 provides that the Respondents shall contribute the land and the Developers shall contribute by way of cost of construction up to a sum of Rs.7.50 Crores. Clause 6 refers to the manner in which the development should proceed. It provides that the parties shall develop the land in phases. It articulates four different phases in which the development would take place. For considering the point in issue, it may be useful to refer to sub- clause (d) of Clause 6B of the Agreement which envisages that the entire proceeds derived out of the sale of the Industrial Complex comprising of area not less than 25000 square feet shall be shared by the parties referred to therein in the ratio of 30:20:50. The Petitioners being Developers, would get 50% share therein. The balance saleable area shall be sold and/or disposed of by the parties to the Agreement and the entire sale proceeds of the balance saleable area shall be utilised for the construction of an IT Park and shall be treated as the contribution of the parties to the Agreement in the said proportion. It will be useful to refer to clause 6D sub-clause (a)(i) : 8 : thereof, which provides that upon completion of development and construction of the IT Park, the Petitioners/Developer shall allot and handover on ownership basis 30% of the saleable built up area of the said IT Park to NOPL and 20% of the saleable built up area thereof to NPPL and the Developer shall be entitled to retain and appropriate unto itself the balance 50% of the saleable built up area of the said IT Park. Besides, Sub- clause (a)(iii) of Clause 6D further provides that the Developers shall in their absolute discretion be at liberty to dispose of their 50% saleable built up area and common areas of the IT Park retained by them in terms of the Agreement. Clause 11(e) provides that the Developer shall enter upon the land for the purpose of construction/development. Once again, in Clause 15, it has been reiterated that notwithstanding anything herein contained at the stage of the second and third phase of the project, each of the parties to the Agreement shall be free to sell/alienate/create charge in any manner whatsoever out of their respective share of the project at such price or upon such terms and conditions as they may deem fit, subject to the norms laid down by MIDC. Clause 18 of the Agreement further provides that should there be any additional FSI and/or TDR or any other advantage, benefit, profit or privilege arising out of the land becomes available in future on account of any change, amendment or relaxation in the Development : 9 : Control Rules, Greater Mumbai 1991 or any other Building Rules Regulations or Bye-Laws or by reason of any reinterpretation thereof, the same shall vest in the ratio of 50:30:20 between the Developer, NOPL and NPPL respectively. 9. On conjoint reading of the above Clauses, prima facie, it appears to me that the tenor of the arrangement arrived at between the parties under the suit Agreement is one of a joint venture wherein the Petitioners would contribute amount up to Rs.7.5 Crores by way of cost of construction and the Respondents would contribute by way of land for development. The ratio in which the developed area is to be apportioned between the parties is also well defined. The Agreement clearly enables the Petitioners to deal with the developed property to the extent of its share specified under the Agreement on the stated terms. Such provision is clearly in the nature of creating right or interest in the immovable property. If there was any doubt, the same has been put at rest by the parties themselves by incorporating provision such as Clause 28 in the Agreement. It postulates that in the event of any breach of the terms, conditions, covenants contained in this Development Agreement by any party, the other party shall be entitled to specific performance of this Development Agreement by the defaulting : 10 : party and to obtain suitable injunctive reliefs from a Court and/or Arbitrator and/or to claim damages, costs, charges and expenses, if any. 10. On reading the above said Clauses of the Agreement as a whole, prima facie, in my view, although the document is titled as Development Agreement, it is in the nature of joint venture Agreement to develop the suit land and it creates right or interest in the part of the immovable property in favour of the Petitioners to the extent defined by the Agreement itself. It is, therefore, not possible to sustain the opinion noted by the sole Arbitrator on this count. It is unnecessary to burden this Judgment with the analysis of the decisions pressed into service in the case of Chheda Housing Development Corporation vs. Bibijan Shaikh Farid & Ors. reported in 2007(3) Mh.L.J. 402 and Vipin Bhimani & Anr. vs. Smt.Sunanda Das & Anr. reported in AIR 2006 Cal. 209. In my opinion, the Petitioners would succeed on this count. 11. Even so, the crucial question is: whether the prima facie opinion recorded by the sole Arbitrator on the issue that the Claimant has not carried out its obligations under the Agreement and shown readiness and willingness to discharge the same, is appropriate? In other words, even if : 11 : the Petitioners have succeeded on the first count discussed earlier, but if were to fail on the issue under consideration, in that case, the order under Appeal would not require any interference at the hands of this Court. 12. We shall straightaway analyse the basis on which the sole Arbitrator has answered the issue under consideration. That discussion can be found from Paragraphs 12 onwards. It is noted that although the Petitioners had promptly appointed an Architect but no further steps seem to have been taken for obtaining the requisite approvals of the concerned Authorities. As per Clause 7 of the Agreement, the Respondents were entitled to draw collectively a sum up to and not exceeding Rs.Two Crores at the expiry of six months from the date of execution of the Agreement. That could not be done as the Petitioners failed to make further contribution which they were liable to do under the Agreement. It is noted that the correspondence exchanged between the parties does not suggest that failure to get the plans sent for approval was due to any default on the part of the Respondents. It is further noted that the original plan attached with the Agreement was for construction of two towers whereas, the plan prepared for being sent for approval of the Petitioners/Claimant was only for one tower. Moreover, there was no explanation as to what the Claimant has done after December : 12 : 2005. The Claimant also did not appear to have taken steps for submission of plan and/or requisite application for sub-division of Plot No.D-43/3 in Phase-I. The Claimant, however, has taken a stand that it was not its obligation which stand is incorrect, as Clause 6(a) read with 11(a), (b), (c) and (d) makes it clear that all approvals were to be obtained by the Petitioners/Claimant as Developer. On this basis, prima facie finding has been recorded that the Petitioners/Claimant were in remiss in this regard. 13. In Paragraph 13 of the impugned decision, the sole Arbitrator has then noted that prima facie, the stand of the Petitioners that the delay had occasioned on account of indecision on the part of the Respondents was incorrect. Whereas, by letter dated 20th July 2006, the Respondents had sent to Mr.S.N.Iyer of Positron Architects, appointed by the Petitioners/ Claimant, the relevant documents with a request to process the application for approval from MIDC for the first phase of the project. This was not done. It is further noted that the letter of 25th July 2006 written by the Claimant clearly mentioned that the Claimant was to bear the stamp duty and registration charges for the Development Agreement. The amount of Rs.Two Lakhs paid as advance towards registration fees was returned along with letter dated 4th August 2006 sent by Solicitors of the Respondents as : 13 : the Petitioners/Claimant made allegations against the said Solicitors. No default could be attributed to the Respondents. It is also noted that unilateral change was made by the Petitioners while submitting proposal only of one tower - even though such proposal would not exploit the full potential of the land and FSI would be wasted - inspite of the original Agreement envisaging construction of two towers. It is because of this change, delay had occasioned. It was erroneous assumption of the Petitioners and not due to any default committed by the Respondents. Moreover, the idea of the Hotel project instead of IT Park project was mooted by the Claimant as can be seen, for which reason, the Respondents were not responsible at all and the Claimant was wrongly attributing default to the Respondents. The sole Arbitrator has also considered the efficacy of the circular issued by the Government of Maharashtra dated 12th July 2003 which was pressed into service by the Petitioners to reject the stand of the Petitioners. It is on this basis, the sole Arbitrator recorded prima facie finding that the Claimant does not appear to have carried out all its obligations. The question is: whether this view taken by the sole Arbitrator needs any interference? 14. According to the Petitioners, the Petitioners had admittedly paid sum : 14 : of Rs.1.75 Crores on execution of the Agreement as per the terms of the Agreement. Thereafter, the Respondents utilised the said amount to remove the charge in relation to the suit property held by Rupee Cooperative Bank with respect to portion thereof. According to the Petitioners, the delay was essentially because of the rethinking done by both the parties to exploit the suit property to its full potential since they were both entitled to 50% of the area that was to be developed. Both the parties were keen on maximising their profit from the property. The parties therefore met to discuss aspects in relation to these and incidental matters. Reliance is placed on the correspondence exchanged between the parties which according to the Petitioners would show that as late as till May 2007, the Respondents expressed their readiness and willingness to proceed with the Agreement namely documents at Exhibit M to Exhibit Q. Reliance is placed on these documents also to contend that the Respondents withdrew the objection that they may have had with regard to the alleged delay on the part of the Petitioners. For that reason, it was not open to the Respondents to unilaterally assume that time was essence of the Agreement which stand is taken for the first time in letter dated 10th July 2007 and based on that stand, proceeded to terminate the Agreement vide letter dated 24th August 2007 as also to forfeit the amount of Rs.1.75 Crores already received. According to : 15 : the Petitioners, time was never the essence of the Agreement, as the parties were fully aware that the project may take some time and for that reason, provision was made that in case of any delay in completion of the project on account of his acts of commission and omission, the Developer shall bear excess interest burden on the borrowing of other cost resulting from such delay. 15. Insofar as the prima facie opinion recorded that the Petitioners failed to contribute further amount as was required and more particularly which deprived the Respondents from drawing amount of Rs. Two Crores in terms of Clause 7 of the Agreement, it is submitted that such finding is on account of complete misunderstanding and misreading of the terms of the Agreement inasmuch as the amount to be contributed by the Petitioners was for cost of construction and since the work of construction had not commenced the question of bringing in further amount did not arise. Moreover, the Respondents as per Clause 7 of the Agreement were entitled to collectively draw an amount not exceeding Rs.Two Crores “after the expiry of the period of six months” from the execution of the Agreement from the project. Since the construction itself had not commenced, there was no reason for the Petitioners to contribute any further amount and more : 16 : so, the Respondents could not have invoked their right to draw the amount from the project merely because period of six months from the execution of the Agreement was over. 16. To examine the question as to whether the Petitioners were always ready and willing to perform their obligation under the Agreement, we may refer to the relevant Clauses as per which the Petitioners were expected to perform their part of the Agreement. Clause 5 of the Agreement provides that the Respondents would contribute land and the Petitioners shall contribute by way of cost of construction up to Rs.7.5 crores. Clause 6 provides for development of the land in phases. The Agreement envisages a joint venture to develop the property as IT Park. As per Clause 6(a), the parties were expected to obtain requisite approvals for division of Plot No.D-43/3 and then first develop Plot No.D-43/3-A which was the second phase of the development work. This is not done. Clause 8 of the Agreement refers to the terms agreed by the Developer and his undertaking in relation to commencement and completion of the development on the terms specified therein. Amongst others, it provides that the construction of 25000 square feet of the Industrial Complex (Phase-II) to be commenced and completed within a period of six months from the date of receipt of all : 17 : approvals. This obligation could be discharged only after the plans were duly approved. Before that the division of Plot No.D-43/3 was to be done. However, as found by the Arbitrator, even that step was not taken forward. Clause 11 of the Agreement records the undertaking given by the Petitioners/Developer about the activities to be taken by it and to keep the Respondents informed about the same. Amongst others, the Developer was expected to appoint Architects, Contractors, enter into various contracts, arrangements, understanding as may be required for the development of the land, prepare plans and apply for and obtain approvals of all the requisite authorities including MIDC. Clause 12 further provides that the Developer shall apply for various approvals, permissions and sanctions including passing of plans. However, as has been observed by the sole Arbitrator that besides the step taken for appointing Architect, the Petitioners have not taken any other step to effectuate the Development Agreement. More over, nothing was done for division of the plot which was the first step to be taken as per Clause 6A. That prima facie finding of the sole Arbitrator, to me, seems to be correct. There is no reason to depart from the said opinion recorded by the sole Arbitrator. The explanation offered by the Petitioners for the delay has also been taken into account by the sole Arbitrator. I am in agreement with the prima facie conclusion so reached by the sole Arbitrator. : 18 : It has been rightly found that the Developer except appointing Architect, did not discharge any other obligation, much less, of division of plots or submission of plans to the Competent Authority. As a matter of fact, the plans prepared at the instance of the Petitioners were not consistent with the terms agreed upon between the parties. Significantly, the case of the Petitioners is that the parties were in the process of discussion to incorporate several changes from the original Development Agreement, which position can be discerned from the Minutes of Meeting held on 31st August 2006. The Minutes also record that there was possibility of entering into supplemental Agreement. In the Minutes held on 20th June 2006, it has been noticed that it was necessary to review the whole project keeping in mind the new developments and Government Policies. From this stand, it would, in fact, follow that the Petitioners were keen to change the terms of the Development Agreement in question. According to the Petitioners, the same cannot be taken forward unless changes were to be effected therein. More over, the plans as prepared by the Petitioners through its appointed Architect