1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.263 OF 2008 IN SUIT NO.189 OF 2008. M/s Gold Coin Builders ..... Plaintiffs. Versus Dr. D.H. Dave & Ors. ..... Defendants. Mr. Aspi Chinoy, Senior Counsel with Mr. Umesh Shetty i/b Umesh Shetty & Co. for plaintiffs. Mr. Mahendra Ghelani i/b Bhagwati & Co. for defendants. CORAM: V. M. KANADE, J. DATE : 17th August, 2009 P.C. 1. Plaintiffs have filed this suit for a declaration that the purported termination of the agreement between plaintiffs and defendants by their letter dated 15/10/2007 is illegal, null and void. Secondly, for a decree and order directing the defendants to specifically perform their obligations under the said agreement executed in December, 2004 by (i) allowing the plaintiffs to complete the balance finishing work, (ii) executing necessary transfer/conveyances of the 4th and 5th Floor flats in favour of plaintiffs/their nominees and (iii) for permanent injunction, prohibiting defendants from causing 2 any obstruction, let or hindrance in the completion of the balance construction/finishing work. 2. Brief facts are as under:- 3. Plaintiffs are carrying on business of construction / development of the immovable properties. Defendant Nos. 1 to 4 are members of the family known as Dave family and lessees of an immovable property at Vallabhnagar Co- operative Housing Society situated at J.V.P.D. Scheme, Vile- Parle, Mumbai 400 056. By an agreement executed in December, 2004 it was agreed between the parties that plaintiffs would be entitled to flats on the 4th and 5th floor in consideration of the plaintiffs (i) constructing on the said immovable property and in place of the Bungalow Udgith, a seven storied building using TDR of 850 sq. meters and (ii) paying to defendants a sum of Rs 1.65 crores. As per the agreement, defendants were responsible for internal flooring, the toilets, the kitchen platform and flooring, the internal wiring and painting of their flats and the plaintiffs were to bear the cost of these items in flats on 4th and 5th floor which 3 were shown to them. As per the said agreement, plaintiffs demolished the existing bungalow, paid consideration of Rs 1.65 crores to defendants and purchased TDR at the cost of Rs 50 lakhs and virtually completed the construction of the entire 7 storied building at the further costs of Rs 2.58 crores and only finishing work viz. construction of compound gates, construction of watchman’s cabin, compound lighting, fixing of elevation grills and brackets, external painting and entrance lobby finishing was to be completed. Plaintiffs alleged that they had completed internal work of the 4th and 5th flats. According to plaintiffs, bungalow was demolished on/or about last week of October, 2005 and the Plinth C.C was obtained on 11/11/2005 and on 18/11/2005, plaintiffs commenced their work. It is the case of plaintiffs that by letter dated 6/7/2007, defendants made allegations against plaintiffs in respect of the quality of work carried out by them. Further, letter was sent by defendants dated 02/08/2007, stating therein that plaintiffs had not completed balance work and finally on 30/08/2007, agreement was terminated by defendants. 4 4. In the said suit, plaintiffs took out notice of motion, seeking the following reliefs :- (a) that pending the hearing & final disposal of the suit the Court Receiver be appointed as Receiver of the immovable property more particularly described in Exhibit-B to the Plaint and the Plaintiffs be enabled to complete the finishing work of the said building as agents of the Receiver and to apply for and obtain the Occupation certificate for the same; (b) that pending the hearing & final disposal of the suit the Defendants be restrained by an interim order and injunction : i. creating any disturbance or interference in the matter of the construction / finishing work by the Plaintiffs / their contractors & employees; ii. from alienating / selling the said building or any part thereof; iii.from entering into, occupying or using any part of the building until 5 the Occupation certificate is issued in respect thereof; iv.from, using, selling, encumbering, creating any third party rights or parting with possession of the 4th and 5th Floors of the said building;” By an order dated 30/1/2008, the learned Single Judge recorded the statement of the defendants’ counsel that they will not create any third party rights in the property in respect of which the dispute had arisen in the proceedings. Defendants’ statement also to the effect that they would not part with possession of 4th and 5th floor of the building was recorded and the learned Judge was pleased to appoint the Court Commissioner to visit the premises and to submit report to the Court. 5. Defendants in their affidavit in reply submitted that plaintiffs had not completed the work as agreed and it was stated that the plaintiffs were entrusted the work as contractors and, as such, they were not entitled to claim any reliefs as claimed by them in the notice of motion or in the suit. It was further submitted that the work was to be 6 completed within 18 months from commencement certificate and time was always agreed and understood to be of the essence of the contract. It is further stated in the reply that plaintiffs committed material breaches of the agreement and did not correct the said breaches within three months from the letter sent by defendants dated 6/7/2007 and, therefore, termination was validly done by letter dated 15/10/2007. It is further submitted that plaintiffs were not entitled to 4th and 5th floor as they had not fulfilled their obligations as mandated by the said Memorandum of Understanding. It is submitted that by the time notice of motion came up for hearing, defendants had completed the balance work by incurring huge expenditure and, as such, plaintiffs were not entitled to claim reliefs. It is submitted that defendants would obtain Occupation Certificate for the entire building and, as such, prayer clause (a) had become infructuous. It is further submitted that so far as prayer clause (c) is concerned, defendants were already occupying the first floor of the premises since they were the owners of the said building. It is further submitted that plaintiffs were not entitled to any relief in respect of the defendants creating 7 third party rights since neither the land nor the building was owned by plaintiffs. 6. Mr. Chinoy, the learned Senior Counsel appearing on behalf of plaintiffs submitted that since the statement is made by Counsel for defendants that they would be obtaining Occupation Certificate in respect of the entire building, he is not pressing prayer clauses (a) and (c). He also submitted that, similarly, prayer clause (b)iii. also would not survive in view of the statement made by the Counsel for defendants. He submitted that the agreement in question was not the construction contract but was a contract for purchase of two flats on the 4th and 5th floor for consideration of plaintiffs demolishing bungalow of defendants and reconstructing 7 storied building in its place after obtaining necessary permission from the ULC authorities and the Municipal Corporation. He submitted that the entire work practically had been completed and defendants had illegally terminated the said agreement after 90% of the work had been completed by plaintiffs. He submitted that, therefore, defendants could not now terminate the agreement after 8 accepting Rs 1.65 crores and construction of the building at the cost of plaintiffs. 7. Mr. Ghelani, the learned Counsel appearing on behalf of defendants, on the other hand, vehemently urged that plaintiffs had not completed construction within the stipulated time and, as such, since they were merely contractors, they did not have any legal right to claim any relief against defendants. 8. After having heard the learned Counsel appearing on behalf of plaintiffs and defendants at length, I am of the view that prima facie case is made out by plaintiffs for grant of interim relief in terms of prayer clause (b)ii. and (b)iv. Since the statement is made by the learned Counsel appearing on behalf of defendants that they would be obtaining occupancy rights in respect of the entire building, prayer clause (a), prayer clause (c) and prayer clause (b)iii do not survive. Since the learned Counsel for defendants has stated that the balance work has been completed by defendants, prayer clause (b)i. also does not survive. 9 9. The short question which falls for consideration is : whether the agreement dated 29/12/2004 can be specifically enforced. Secondly, whether MOU is for the sale of two flats on the 4th and 5th floor as alleged by plaintiffs or is merely a construction contract given by defendants to plaintiffs as alleged by defendants. For the said purpose, it will be necessary to take into consideration the relevant clauses in the said agreement. The circumstances under which the agreement was entered into are mentioned in the said agreement which read as follows:- “The Bungalow was constructed in the year 1972. It needs immediate major repairs or reconstruction. The design of the bungalow does not conform to the current social needs. The Bungalow cannot accommodate the needs of expanded family. There is risk of maintaining a bungalow without good neighbours. Dave family does not have funds to accomplish the objectives. Also, the senior members of Dave family are desirous of generating regular source of income unto themselves.” 10 “With a view to addressing the above objectives, the Co-owners have reached to an Understanding with the Buyer for grant to the Buyer of specific measure of TDR bedding rights on terms and conditions and mutual covenants agreed to by and between the parties hereto.” It is thus obvious that defendants did not have financial ability to demolish the existing bungalow and to reconstruct the building in place of the said bungalow and, therefore, defendants had reached an understanding with the buyer to grant specific TDR bedding rights. 10. The relevant clauses of the agreement are as follows:- “1) The Plot of land measures 852.5 sq. meters. As per current municipal law read with society bye-laws, the plot has potential for development of about 1,702 sq. meters of residential building if regard be had to FSI married to the Plot and potential for loading TDR. 11 2) The parties hereto require reconstruction of property as per plan and design agreed to by them and forming part of this MOU. The same can be changed with common consent. The parties will co-operate with each other should the change become inoperative or advisable. As per the proposed plan, the reconstructed property would comprise of residential units of 7 floors.” 11. Thereafter, clause 3 of the said agreement stated as under:- “3) As and by way of consideration, the Buyer has agreed to the following :- a) The buyer commits to undertake development and reconstruction of the property in the manner described hereunder. The Buyer, at the cost of buyer, will discharge the obligation cast on him as per Schedule A attached herewith. The Buyer, at the cost of Buyer, will 12 obtain completion certificate as an agent of the Co-owners. b) The Buyer will pay, in the aggregate, a sum of Rs 1.65 Crores (Rs. One Crore and Sixty Five Lacs only) to the Co-owners in the manner instructed hereinafter. A Part of this amount is likely to be spent by the Co-owners in provision of amenities listed in Schedule B in the floors reserved for Co-owners Occupation and Control. c) The Buyer will complete construction of the property and secure building occupation certificate from the Municipal Authority within 18 months from the date of issuance of commencement certificate by Municipal authority or demolition of the existing structure (contemplated in terms of clause 6 herein) whichever is later.” In clause 4 it was further agreed that a sum of Rs 1.65 crores payable by buyer to the co-owners would be paid in accordance with the time schedule as may be mutually 13 agreed upon by both parties from time to time. Clause 6 stated that plaintiffs would cause the existing bungalow to be demolished and clause 9 stated that buyer would not be granted any right other than TDR loading right in respect of floor Nos. 4 and 5. It is an admitted position that plaintiffs obtained ULC permission from the Urban Land Ceiling Authority dated 15/12/2004. On 16/12/2004, plaintiffs submitted necessary building proposal to the Municipal Corporation of Greater Mumbai. On 31/1/2005, plaintiffs entered into an agreement for purchase of TDR at the cost of Rs 50 lacs. An amount of Rs 65 lakhs was paid as per time schedule to defendants and between 01/06/2006 to 16/11/2006, eight slabs of the said seven storied building were completed. According to plaintiffs, following work was completed:- Sr.No. Description Date of Casting of Slab 1. First Slab 01/06/2006 2. Second Slab 27/06/2006 3. Third Slab 26/07/2006 4. Fourth Slab 16/08/2006 5. Fifth Slab 02/09/2006 6. Sixth Slab 29/09/2006 7. Seventh Slab 21/10/2006 8. Eighth Slab 16/11/2006 14 From the aforesaid clauses, it is abundantly clear that the said MOU contained entire terms and conditions and it was not merely an understanding regarding the agreement which had to be executed between the parties. In fact, it contained the entire text of the agreement itself. Secondly, from the clauses in the said agreement, it is clear that the plaintiffs were buyers of two flat numbers on 4th and 5th floor and in consideration for buying these flats had agreed to construct seven storied building without defendants spending any amount on the construction and for further consideration which was to be paid which was quantified at Rs 1.65 crores. Prima facie, therefore, in my view, the said agreement is clearly an enforceable agreement and is not hit by the bar under section 14 clause (1) of the Specific Relief Act. The contention of Mr. Ghelani, the learned Counsel appearing on behalf of defendants that it was merely a construction contract which was entrusted to plaintiffs cannot be accepted in view of the clear clauses in the agreement. 12. The dispute between the parties was in respect of work 15 which was not completed by plaintiffs in time. According to plaintiffs, after the entire building was constructed, defendants sent letter dated 06/07/2007, complaining that certain work was not done and, thereafter, promptly proceeded to terminate the contract by their letter dated 30/08/2007 and as such period of three months which was to be given as stated in the agreement to rectify any breach of the agreement was not given. According to plaintiffs, defendants took possession of the flats on the first floor, though Occupation Certificate was not obtained and dispossessed plaintiffs from flats on 4th and 5th floor which were nearly completed by them. It is, therefore, submitted that the action on the part of defendants in terminating the agreement was unconscionable and, therefore, defendants were not entitled to terminate the said contract after more than 90% of the work had been completed by plaintiffs. It is further submitted on behalf of plaintiffs that remaining work could not be completed on account of non-cooperation on the part of defendants in choosing glass, tiles, grills which were required to enable plaintiffs to complete the residual finishing work. 16 13. There is much substance in the submissions made by the learned Senior Counsel appearing on behalf of plaintiffs. In further affidavit of defendants, in para 4, it is stated by defendants that after order dated 30/1/2008, following work was done by defendants 1. RCC Walls – North side (approx. 125 feet X 10 feet Height West side approx. 36 feet X 11 feet Height) 2. Grill on all windows – approx. 6100 sq.feet. 3. Compound Flooring – 9000 sq. feet Area approx. 4. Marbles fixed on 144 steps (Ground Floor to Terrace) 5. Riser and Treads – Landing all floors. 6. Stainless Steel Staircase Railings. 7. Two big Mild Steel Gates (11 feet Height X 14 Feet Width) and one wicket gate (7.6’ Feet Height X 4 Feet Width) 8. Compound and Terrace Lights 9. Lobby Entrance and Stilt Area 10. External Building Paints & Stair case. In Exhibit-I-1 which is annexed to the plaint, details/ particulars of pending work were mentioned, which read as 17 follows:- 1) Construction of compound gates 2) Construction of Watchman’s Cabin 3) Compound lighting, 4) Fixing of Elevation Grills & Brackets 5) External Painting 6) Entrance Lobby finishing. Prima facie, therefore, plaintiffs have established that they had completed more than 90% of the work and the balance work could not be completed on account of delay on the part of defendants in selecting tiles, grills etc. 14. Under these circumstances, in my view, plaintiffs are entitled to claim interim relief in terms of prayer clause (b)ii. and (b)iv. Firstly, plaintiffs had constructed more than 90% of the work and had paid the entire balance consideration of Rs 1.65 crores and obtained necessary permissions from the Municipal Corporation. The chronology of events also shows that defendants had not raised any objection in respect of execution of the MOU till July, 2007 by which time entire work had been completed and they had forcibly occupied the 18 first floor of the building though Occupation Certificate was not obtained from the Corporation. Though, under the agreement, it was clearly agreed that plaintiffs would be in possession of the entire building till Occupation Certificate was obtained by them the defendants took forcible possession of the flats on the 4th and 5th floor which is evident from the Commissioner’s Report which indicates that keys of 4th and 5th floor flats were with defendants. Defendants did not have money to demolish the existing bungalow, construct the building in place of the said bungalow, they utilize the expertise of plaintiffs, the finances which were available with them and, in a hurried manner, terminated the agreement on 30/8/2007. The action on the part of defendants, therefore, is unconscionable to say the least, apart from it being prima facie illegal and contrary to the MOU and, as such, plaintiffs are entitled to seek an interim order, restraining defendants from creating third party rights in respect of the entire building. 15. Notice of Motion is accordingly made absolute in terms of prayer clauses (b)ii. and (b)iv. 19 16. Notice of Motion is disposed of. (V.M. KANADE, J.)