Samir Narain Bhojwani vs M/S Aurora Properties And Investments

2. The relevant facts are as follows: Respondent No.1/plaintiff was appointed by one Andheri Kamgar Nagar Cooperative Housing Society Ltd. (for short, „the Society’) under a Development Agreement dated 6th October, 1996 as a developer under the Slum Development/ Rehabilitation Scheme to develop the suit property in question, being a plot of land situated at Versova Link Road, Taluka Andheri and bearing Survey No. 139, City Survey No. 1319 (Part) admeasuring 8892 sq. mts. or thereabouts as per Indenture of Lease dated 31st March, 1993 and 9402 sq. mts. as per City Survey Records. One part of the suit property was for constructing tenements free of charge for project-affected persons and the balance property could be used to develop and sell the balance FSI. Respondent No.1 then executed an 3 Agreement for Sub-Development dated 22nd September, 1999 with respondent No.2/defendant No.1, transferring the benefits of development rights in the suit property, with the consent of the aforementioned Society, to respondent No.2 after keeping aside 15,000 sq. ft. for itself i.e. respondent No.1.

3. Subsequently, respondent No.2 executed an Agreement for Development dated 10th March, 2003 with the appellant/defendant No.2, whereunder the appellant would be entitled to 55% of the total area available for free sale buildings and car parking in the suit property and respondent No.2 retained 45% of the total area available for construction of free sale buildings and car parking by utilizing FSI which may be available on the suit property as per the Slum Rehabilitation Scheme. This agreement was entered into without the consent of respondent No.1 and hence, all three parties executed a Tripartite Agreement dated 11th September, 2009, referencing the previous agreements of 6th October, 1996 and 22nd September, 1999 wherein respondent No.1 was entitled to an area of 22,500 sq. ft., an increase from its earlier 4 agreed upon 15,000 sq. ft., which would be allocated out of the 45% share due to respondent No. 2

4. Disputes arose during the construction of the building, which resulted in respondent No.1 filing a Commercial Suit No. 62 of 2013 against respondent No.2 and the appellant inter alia seeking specific performance of the Development Agreement dated 22nd September, 1999, read with the Tripartite Agreement dated 11th September, 2009, including handing over constructed area of 22,500 sq. ft. in the free sale buildings along with proportionate car parking space, in the form of 12 (twelve) flats in Wings „A‟ and „B‟ of the building „Bay – View‟ constructed on the suit property and 24 (twenty four) car parking spaces. Respondent No.1 also took out Notice of Motion No. 147 of 2013 for interim reliefs, seeking to restrain respondent No.2 and the appellant from creating third party rights in the suit property without first handing over possession of the 22,500 sq. ft. constructed area in the form of flats and parking spaces. Respondent No. 1 alleged that this interim relief was necessitated by the fact that its advocate 5 had conducted a search in the sub-registrar‟s office and found a mortgage deed executed by the appellant in favour of a third party with respect to 12 flats and 24 parking spaces in the building „Bay–View‟ and that it apprehended that the appellant would sell or create third party rights in respect of the said flats. The alleged mortgage deed itself was not produced by respondent No.1 on the ground that it had applied for a copy of the same but was yet to receive it. Respondent No.1 also sought to appoint a Court Receiver to take charge of the premises in the suit property comprising its 22,500 sq. ft. constructed area. An ad-interim, consent order was passed on 3rd December, 2012, in the said Notice of Motion No. 147 of 2013, whereby respondent No. 2 and the appellant agreed to not dispose of or create third party rights in respect of 8 flats in the completed Wings „A‟ and „B‟ of the building and 4 flats in the under-construction Wing „C‟ of the building, totaling 12 flats.

5. The parties filed their respective replies and rejoinders in the suit and notice of motion. The appellant‟s stance was that 6 he had completed his contractual obligations and offered respondent No.2 its entitlement of 45% area in the constructed buildings but respondent No.2 had failed to take possession of the same. The subsequent delay in construction of Wing „C‟ of the building was due to the failure of respondent No.2 to obtain a Commencement Certificate for Wing „C‟, resulting in losses to the appellant. Owing to this breach committed by respondent No.2, it was no longer entitled to its 45% share in the constructed area and as a consequence, respondent No.1 was not entitled to its 22,500 sq. ft. area which could only be claimed out of the respondent No.2‟s entitlement.

6. The appellant then took out Notice of Motion No. 540 of 2013, seeking to refer the suit to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 (“the Arbitration Act”) and Arbitration Application No. 86 of 2013, seeking to appoint an arbitrator under Section 11 of the Arbitration Act. Both these proceedings were rejected by the High Court vide its order dated 30th September, 2014 on the ground that while the Development Agreement of 22nd September, 1999 between 7 respondent Nos.1 and 2 contained an arbitration clause and similarly, the Agreement of 10th March, 2003 between the appellant and respondent No.2 also contained an arbitration clause, however, the Tripartite Agreement of 11th September, 2009 itself did not contain an arbitration clause and that a mere reference made in the Tripartite Agreement to the previous agreements would not make the arbitration clauses therein part of the Tripartite Agreement. The appellant challenged that decision right upto this Court in SLP (Civil) No. 2235 of 2015, which stood rejected.

7. The appellant also initiated proceedings under Section 9 of the Arbitration Act against respondent Nos.1 and 2 before the High Court. The High Court refused to grant any relief in the petition filed under Section 9 of the Arbitration Act. The appellant then withdrew the Section 9 proceedings and initiated arbitration solely against respondent No. 2 under the Agreement dated 10th March, 2003. In the said arbitration proceedings, respondent No.2 filed an application for interim reliefs under Section 17 of the Arbitration Act inter alia 8 seeking specific performance of the agreement of 10th March, 2003 including possession of its entire 45% share of flats in the buildings constructed on the suit property. Respondent No.2 contended that the application was necessitated by the fact that the appellant had violated the terms of the 10th March, 2003 Agreement and had created third-party rights in respect of his 55% entitlement in the suit property, without first providing respondent No.2 with the occupation and possession of its 45% entitlement in the suit property as set out in the said Agreement. Respondent No.2 also submitted that the appellant had deposited a refundable amount of Rs.4 crore as part of his obligation under the Agreement but that refund of the said deposit was not, in any way, connected with handing over of the respondent No.2‟s entitlement of flats. In any event, respondent No.2 had offered to refund the said deposit in exchange for possession of the flats due to it, which the appellant had refused.

8. By an interim order dated 12th October, 2016, the sole arbitrator made prima facie observations that construction of 9 Wing „C‟ in the building situated on the suit property had been delayed owing to respondent No.2‟s failure to obtain the Commencement Certificate for the same. Further, respondent No.2 had allowed the appellant to construct only 88 flats so far, which worked out to 72% of the total area to be constructed. On that basis, the arbitrator was of the opinion that respondent No.2 could not receive its entire 45% share in the constructed area of 88 flats, which worked out to 31.6 flats, but instead, would receive 72% of its 45% share which worked out to 28.5 flats. From these 28.5 flats, 12 flats were to be kept aside for respondent No.1 as directed in the High Court‟s ad-interim order dated 3rd December, 2012 and thus, respondent No.2 was entitled to 16.5 flats. Out of 16.5 flats, the appellant was directed to hand over possession of 16 flats to respondent No. 2, after which respondent No.2 would refund the deposit given by the appellant in respect of such flats. The remaining amount of respondent No.2‟s entitlement in one flat would be discharged by both respondent No.2 and the appellant jointly disposing of the said flat at a mutually agreed price.

10. Reverting to Notice of Motion No.147 of 2013 in the suit filed by respondent No.1, it was then finally heard and judgment reserved. Pending the decision, however, respondent Nos. 1 and 2 filed Consent Terms dated 25th September, 2017 according to which respondent No.2 agreed to hand over an additional 8 (eight) flats along with 16 (sixteen) parking spaces to respondent No.1 in full and final settlement of the Development Agreement of 22nd September, 1999 and the Tripartite Agreement of 11th September, 2009. 11

11. The Learned Single Judge vide decision dated 9th October, 2017 in Notice of Motion No.147 of 2013, relied upon the interim order of 12th October, 2016 passed by the sole arbitrator, terming it as an interim award. The Single Judge was of the opinion that the apportionment of flats done by the arbitrator had become res judicata. The arbitrator‟s finding, that respondent No.2 was entitled to 28.5 flats, had attained finality since the appeals to the High Court and this Court had been rejected. Further, from these 28.5 flats, 12 flats along with 24 parking spaces formed part of respondent No.2‟s entitlement, which, in turn, belonged to respondent No.1, and had been kept out of the scope of the arbitration since there was an ad-interim order of the High Court operating in that regard. Possession and keys of the remaining 16 flats out of the 28.5 flats had been handed over by the appellant to respondent No.2, for which the appellant‟s deposit had also been refunded by respondent No.2, as directed by the arbitrator.

12. The Single Judge further opined that even if respondent No.2 was ultimately held liable to compensate the appellant for damages, the same could not be recovered from the said 12 flats as these flats were ultimately and rightfully due to respondent No.1 (original plaintiff) and out of bounds for the appellant. The Single Judge rejected the appellant‟s argument that since respondent No.1 claimed through respondent No.2, any breach by respondent No.2 would automatically affect the entitlement of respondent No.1 as well.

17. The Division Bench by its judgment and order dated 9th July, 2018, upheld the mandatory direction issued by the Single Judge at an interlocutory stage and rejected the appeal, holding that the Single Judge had addressed the various issues in detail and that it was right to mould the reliefs, even at the interim stage, in light of changed circumstances in the case. The Division Bench opined that the appellant was not 17 left remediless in case respondent No.1 failed in the suit, as his remedies were kept open.

(c) ad interim reliefs in terms of prayer (a) & (b).

(d) for costs of the suit;

Application is accordingly disposed of.”

31. In view of the above, we have no hesitation to conclude that the High Court committed manifest error and exceeded its jurisdiction in granting interlocutory mandatory injunction against the appellant.

33. While parting, we make it clear that the observations made in this judgment are only for considering the matter in issue under consideration and shall not influence the substantive proceedings pending between the parties. The same be decided on its own merits.

34. The appeal is allowed in the aforementioned terms. No costs.

.………………………….CJI.

August 21, 2018.