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2021 SCC OnLine Bom 9572 : (2021) 6 AIR Bom R 311

In the High Court of Bombay

(BEFORE G.S. PATEL, J.)

Comm Arbitration Petition (L) No. 74 of 2020

Rajawadi Arunodaya Co-op Hsg Soc Ltd. …
Petitioner;
Versus
Value Projects Pvt. Ltd., through its directors Mimit
Ajit Bhuta, Jayashree Ajit Bhuta and Sonal Mimit
Bhuta … Respondent.
And
Comm Arbitration Petition (L) No. 3930 of 2020
Value Projects Pvt. Ltd., through its directors Mimit
Ajit Bhuta, Jayashree Ajit Bhuta and Sonal Mimit
Bhuta … Petitioner;
Versus
Rajawadi Arunodaya Co-op Hsg Soc Ltd. and
Another … Respondents.
Comm Arbitration Petition (L) No. 74 of 2020 and Comm
Arbitration Petition (L) No. 3930 of 2020
Decided on March 15, 2021
Advocates who appeared in this case:
For Rajawadi Arunodaya CHSL : Mr. Mayur Khandeparkar, with
Tushar Gujjar, I/B Solicis Lex.
For Value Projects : Mr. Rohaan Shah, with Paresh Shah, & Srisabari
Rajan, I/B M/s. Shah & Sanghavi.
For MCGM : Mr. Sagar Patil.
Court Receiver : Mr. D.N. Kher.
The Judgment of the Court was delivered by
G.S. PATEL, J.:— This order will dispose of two competing Petitions
under Section 9 of the Arbitration and Conciliation Act 1996. The first
Petition is filed by the Rajawadi Arunodaya Co-operative Housing
Society Ltd. (“Rajawadi”; “the Society”) against the Respondent
builder, Value Projects Pvt. Ltd. (“Value Projects”; “the Developer”).
The opposing petition is by Value Projects.
2. While the narrative runs the usual pattern with some minor
factual variations, I believe it is important to begin with an analysis of
the rival claims and the relief that each seeks. Rather than set out the
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prayers in full, I will summarise them, thus. Rajawadi seeks, first, a

mandatory injunction directing Value Projects to deliver possession of
the project site or plot along with the structures on it, whether
complete or partially complete. It then seeks the appointment of a
Receiver to take possession (a prayer added by amendment); a
temporary restraint against the Developer from creating third party
rights over the land and building; another restraint against the
Developer from interfering with or obstructing the redevelopment
process being taken up by the Society or from interfering with
Rajawadi's possession; and, finally, an order to deliver to the society
the necessary documents regarding the redevelopment project.
3. The Developer's Petition first seeks an order of status quo in
regard to the Development Agreement as it stood prior to the
termination notice of 13th December 2019; a restraint against the
Society from appointing another developer; another restraint from
creating third party rights; a restraint against the Society from taking
steps to eject the Petitioner from the project; and a prayer for a bank
guarantee of about Rs. 20 crores to secure the Developer's monetary
claim.
4. Before I proceed to the factual narrative and the legal questions
that arise, I must record here that, although the Society's Petition was
filed in January 2020, much of that year was lost to an effective hearing
on account of the pandemic. Hearings could not be regularly scheduled
to ensure some continuity. Despite this, whenever possible, I took up
the matter on several dates in an effort to bring both sides together to
avoid precipitating a more protracted legal battle. I did this because
there is a partially complete construction on site. The Society and its
members have been out of possession and without their new homes for
a long time (some members have possession of commercial units).
Proceeding on its own or through a new developer is, I thought, very
likely a complex and delicate business demanding a next level of civil
engineering and construction skill. Plus, there were financial
considerations on both sides. If, therefore, both sides could be brought
together, the building completed, the Developer's financial obligations
under the contract met, and all this done in a stated time-frame under
Consent Terms with a built-in default clause, then the needs of all sides
could be met and litigation costs, time and trouble saved. To this end, I
involved the Municipal Corporation of Greater Mumbai (“MCGM”)
though not a party to the Society's petition on the aspect of arrears of
property tax. I asked Mr. Shah for the Developer more than once to
submit without prejudice proposals by which the various issues could
be resolved. He has done this, identifying the various financial and
development matters that need to be addressed. The most recent of
these proposals was just a few days ago. None of these proposals has
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met with the Society's approval. But this is not to suggest that the
Society and its members have been unreasonable or that they are
unjustified in declining to consider the proposals that come from the
Developer. There is, and now there is no doubt about it, an irreversible
and irredeemable loss of confidence in the developer. To put at its most
blunt, the Society simply does not trust this Developer one inch. It says
through its Counsel, Mr. Khandeparkar, that it has ample reasons for
this distrust. Some of the considerations that must weigh with a Court
of equity are well known, and I will return to these towards the end of
this judgment. But, at this stage, it is simply not possible for any Court
to compel one or the other side to accept any particular offer. While
addressing his case, Mr. Shah has fairly stated that his instructions are
not to resist the Society's application to be permitted to appoint
another developer or to proceed with the redevelopment, but to submit
instead that provision be made to safeguard the Developer's rights
emanating from the contract. He clarified this to mean that while the
development may proceed by the Society through any other developer,
and members may take possession of their common areas, amenities
and individual apartments or commercial spaces if not already done,
the free-sale components should be preserved so that no third party
rights are created and are kept available as security for the claim that
the Developer undoubtedly intends to make in arbitration. His
instructions are to say that the Developer has spent between Rs. 19 to
20 crores on the project. But this will not be the fullness of the claim.
There will be a claim for loss of profit and possibly for damages. The
expenditure by the Developer is not such that can be denied. Therefore,
in his submission, some provision must be made to secure at least the
return of the Developer's investment in the project. After all, he
submits, the Developer started work, and admittedly did a fair amount
of it, but none of it was intended to be done gratuitously. Thus,
whether one looks at the money claim of the Developer as arising under
the contract or even as a claim for quantum meruit, there can be no
doubt that this claim must, in equity, be appropriately safeguarded. If
this is not done, he submits, the Developer will be left with a paper
award in arbitration and without any effective means of recovery.
Section 9 requires an order to be both just and equitable. The
requirement of equity, in Mr. Shah's formulation, is that the competing
rights of both sides must be judiciously balanced so that one side is not
left without any remedy or recourse in future at all.
5. I note this at the forefront because it considerably narrows the
controversy to be decided. What needs to be seen is whether the
Developer in this case or, for that matter, any developer in such a case,
can demand security for what is essentially a claim in restitution or
damages or both.
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6. The facts are actually not many, but they traverse a considerable
period of time. I will deal with these as quickly and as briefly as the
requirements of such an order allow. The Society's property is on a plot
of land at Ghatkopar (East). The plot is just under 1000 sq mtrs. It
th th
stands at the junction of 4 and 7 Road at Ghatkopar (East), Mumbai
400 077. On this, there stood the old Rajawadi Arunodaya Cooperative
Housing Society's building. This was a mixed-use structure with 20
residential units and seven commercial units. It was very possibly the
sort of typical middle-income enclave that one finds everywhere in this
city. The shops would have been the routine small and medium
vendors, and the residences were unlikely to have been either very
spacious or very upmarket. The community was probably an old and
well-knit group of friends and neighbours with associations going back
many years. The two-wing building itself was constructed prior to 1985.
Over time, it required major repairs. Sometime in 2012, the Society's
members got together and decided that these persistent repairs could
not be sustained. The existing building required to be redeveloped.
7. Evidently, the Society could not do this re-development itself,
because it involved, as all such projects do, the demolition of the
existing building, the accommodation of existing occupants in some
form of transit or temporary accommodation while re-development was
going on, obtaining a large number of permissions with their attendant
complexity, completing construction and then putting the Society's
members, both residential and commercial, into possession of their
redeveloped premises. So the Society invited tenders from respective
developers. The matter then followed the usual trajectory. On 20th July
2012, the Society unanimously appointed Value Projects as the
developer.
8. This led to a Deed of Redevelopment of 5th April 2013. This was
th
registered a little later that month on 29 April 2013. I will turn to the
relevant clauses and provisions of this Agreement for a closer analysis a
little later in this judgment. At this stage, it is enough to note that the
Developer was to complete the project within 24 months of being
delivered vacant possession by the members of the Society and receipt
of a commencement certificate. There was a six-month grace period. At
its broadest level, the Developer agreed to pay stated amounts as
monthly transit or relocation compensation, corpus, reallocation or
shifting charges, and some share in the profits. A day later, the Society
executed a Power of Attorney in favour of the Developer. This would
have been required to obtain the necessary permissions.
9. An Intimation of Disapproval or IOD — as the initiating building
permission in Mumbai is oddly called, with all permissions being
th
worded in the negative — from the MCGM came in on 9 December
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2014. Up to this point, the Society members was still in occupation of

their respective premises. Very shortly after the IOD, in January 2015,
the members of the Society delivered vacant possession to the
Developer.
10. This is important because this is the trigger or starting point of
the development process. It is also this that triggers a large range of
financial obligations on the part of the Developer, including payment of
transit rent, etc. This assumes importance for two reasons. First, it has
not been shown to me that these financial obligations of the Developer
were in any way conditional or contingent upon any further act of the
Society or its members. In other words, the obligations began to
operate once the Developer had possession. Second, and this is an
aspect to which I will return towards the end of the judgment, is that
the delivery of vacant possession of the old flats, and the transition of
Society members into transit accommodation, have a profound societal
and human impact. This is seldom, if ever, explicitly acknowledged in
judgments. But, in my judgment, this must affect any consideration of
the balance of convenience, irreparable prejudice and balancing of
competing equities.
th
11. To return to the chronological narrative, on 18 March 2015,
there was a letter from the Developer noting the discussions that were
held a few days earlier on 11th March 2015. Every member was given
the Permanent Alternative Accommodation Agreements (what I will call
the P3As) for signature. These were to be returned for registration. It
was also apparently agreed that in lieu of the contractually-mandated
bank guarantee, the Developer would provide its 500 sq ft office and
another 800 sq ft built-up area at Vidhyavihar as security.
12. A partial commencement certificate was received on 28th July
2015.
13. Then there is something of a hiatus for the next two years or so.
On 15th April 2017, Value Projects came forward with a confirmation
letter proposing a scheduled date of completion, a date for possession
of units and other compliances with MCGM rules, dates for payment of
corpus and pending transit rent amounts, and in relation to some
documents regarding additional FSI. A copy of this document is at
Exhibit “E” to the Petition. I do not propose to scrutinize each
document in detail — that must await a trial in arbitration — but I look
at this only to note item 7 at page 212, for this indicates that even
now, the Developer was already in some default of its obligations for
payment of transit rent.
th
14. There was a meeting on 18 July 2017. This follows in relevance
from the previous document. Rent had not been paid since December
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2016. The second instalment of corpus fund was unpaid. Rent and
other cheques were regularly dishonoured. The Developer said that
because of adverse market conditions, there were no investors or
buyers and that completion was likely to be inevitably delayed. Despite
this, the Developer promised a part occupation certificate at least for
the commercial premises by August 2017. The earlier formats of the
P3As had to be changed for RERA compliance.
th th
15. About a month later, on 5 August 2017, at a meeting on 5
August 2017, the Developer informed the Society that the timeline for
completion would have to be extended even further, now until June
2019.
16. Pausing for a moment, it will be noticed that this is a meeting of
August 2017 proposing a completion date of June 2019. The Agreement
in question contemplated completion of the entire project by April 2015
or, at the most, with a further six-month extension until about October
2015. There was thus already a delay of at least four years in project
completion. The Society members themselves had by now been out of
possession for a full two years. There were already admitted arrears of
transit rent. At the meeting, the members demanded an increase of
10% in the monthly rent with effect from December 2017. The
Developer agreed.
th
17. There was another meeting on 15 September 2017. The
Society noted that, despite the earlier promise, the partial occupation
certificate for the commercial units promised by August 2017 had not
been received. There was now rent pending for over eight months. The
Developer asked the Society not to insist on the provision of a bank
guarantee and said that it was obtaining a loan from the Thane Bharat
Sahakari Bank (“Thane Bank”). The Society declined to waive the
requirement for the bank guarantee. There was another meeting on 8th
November 2017. The Developer agreed to provide a cheque of Rs. 2
crores as security. It also agreed that if it defaulted in payment of rents
by April 2019, the cheque could be deposited. Another meeting
th th
followed on 14 January 2018, with minutes dated 11 February 2018.
There was again a discussion of pending amounts of transit rent. There
was some discussion about the drafts of the P3As. On 26th February
2018, the Developer mortgaged nine residential flats to raise loan
funding of Rs. 4 crores from the Thane Bank.
18. In June 2018, the Developer substituted its contractor and
appointed another, one Jagruti Enterprises. The arrangement between
the Developer and Jagruti was one of ‘barter’. The Developer allotted
Jagruti two flats and also promised certain remuneration. The
contractor was apparently at liberty to sell these flats to recoup its
costs.
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rd
19. On 3 August 2018, the Developer sent the Society rent
cheques for one month. The amount outstanding since December 2016
(nearly two years) was yet not paid. According to the Society, there
was even now no work at the site. On 24th September 2018, the
Society finally sent a legal notice to the Developer demanding that it
clear all outstanding rent and corpus payments, demanding interest on
these amounts, demanding that the P3As be executed and registered
and that there be a confirmation in respect of other obligations. I find
no reply to this notice.
th
20. By 16 March 2019, there was now in place a new development
regime in the form of DCPR 2034. This is a point in time six years down
the road from the execution of the Development Agreement. The
Developer now proposed that new applications be submitted in
accordance with the new development regime (with the Society's
approval) so as to obtain a revalidated IOD. Necessarily, the completion
timeline would be pushed back even further now from June 2019 to
March 2020. The Developer promised payments of arrears of rent by
15th April 2019.
21. This met with the almost predictable response of outrage from
the Society. It said that the project had been delayed now for six years.
The draft P3As was not in place. There was no clarity on the additional
areas to be offered to members. Timelines for completion were not
finalized. Approvals on drawings and designs had not been disclosed.
Funding arrangements were still unclear.
22. By now apprehensive of the Developer's bona fides and abilities,
th
the Society conducted a search and found that on 28 October 2015,
the Developer mortgaged some flats with one SN Damani Holdings
Private Limited (“Damani”). The Society also found that some flats
earmarked for existing members, i.e. flat Nos. 502, 503, 901 and 902,
had been sold to third parties under Agreements for Sale. Several
crores of rupees have been borrowed from the Thane Bank by
mortgaging 12 residential flats and three commercial units.
23. Matters went from bad to worse. A cheque for Rs. 2 crores dated
th
30 April 2019 was dishonoured because of stop payment instructions.
th
A replacement cheque dated 7 October 2019, when deposited, was
almost predictably dishonoured for insufficiency of funds.
th
24. On 15 September 2019, the Society resolved to terminate the
Development Agreement and the Power of Attorney. Up to this time,
there was only a shell constructed to the 7th floor, although the
construction was of 13 upper floors.
25. At about this time, there came a demand from the MCGM for Rs.
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9,35,579/- as arrears of property tax.

26. In October 2019, two members of the Society lodged police
complaints against the Developer's partners for illegally creating third
party rights in respect of those members' flats.
th
27. The Society held an extraordinary general meeting on 8
December 2019 and resolved to terminate the Deed of Redevelopment.
This was followed a few days later by a formal notice of termination
dated 13th December 2019. The notice lists a number of breaches,
including a failure to complete construction, a failure to deliver copies
of building plans, a failure to pass on the benefits of the
implementation of the new development regime, the failure to execute
P3As, the failure to pay the monthly rent, the failure to pay hardship
compensation, non-payment of taxes and dues, selling members flats
to third parties etc. A day later, the Society issued a public notice. In
early January 2020, the Society resumed possession of the suit
property. It affixed a notice board at the site and appointed security
guards. There is some controversy about the Developer allegedly
attempting to break open locks and manhandling the Society's guards
and staff, but I will let that pass at the moment.
28. On 13th January 2020, the Developer's Advocates wrote to the
Society, asking it to refrain from acting on its termination notice. Now
th
the Developer filed its own cross-petition on 26 September 2020. The
Developer has invoked arbitration under the very same Redevelopment
Agreement of 5th April 2013. The Society has not done so, but it is now
settled law that the Petition itself, and especially one that has followed
a route such as this one, may be treated as a notice of invocation of
arbitration. This only stands to reason, for what else but arbitration is
the Society pursuing? In any case, Mr. Khandeparkar states that the
Society will formally invoke arbitration within 48 hours from today.
29. Mr. Khandeparkar for the Petitioners lists nearly a dozen
breaches that he claims the Developer has committed. In no particular
order of priority, these are:
(a) Selling four flats supposedly reserved for members to third
parties without the members' consent.
(b) Mortgaging premises without earmarking or allotting four
premises to existing members of the Society. There is no absolute
ban in the agreement from creating a mortgage, but Clauses
5.2.4 and 14(a) say that the Developer is not to make a
mortgage, charge or lien until flats are allotted to members. Mr.
Khandeparkar says that the mortgages in favour of Damani were
without the Society's consent. These mortgages were apparently
created to clear old or historical dues. The mortgage in favour of
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the Thane Bank was of free-sale flats, but at least one member's
flat (No. 804) was apparently mortgaged to Damani.
(c) There was a default in payment of rent. As of the date of
termination, the amount is 1,62,88,391/-. This is only the amount
payable to residential members. In addition, there is the rent
payable to commercial shop members from March 2017 to August
2017, Rs. 60,69,400/-.
(d) The second instalment of corpus or hardship compensation is
even now unpaid.
(e) The Developer has not paid his share of property taxes and other
statutory dues.
(f) The Developer has not provided a bank guarantee of Rs. 3.48
crores.
(g) The Developer converted a fourth-floor podium parking area in to
residential. There may be some controversy about this because I
have understood Mr. Khandeparkar to say that this was a proposal
by the Developer. Mr. Shah clarifies that there is no such proposal
and even if it was once made, it is withdrawn. I will, therefore,
ignore this aspect of the matter for the time being.
(h) Then there are additional breaches alleged in regard to the P3As
and the delay in completion.
30. Until 2018, after which there has been no work on the site, the
project status is this. The proposal contemplated a new structure of one
basement, a commercial ground floor and first floor, a three-level
parking (part parking and partly for a gymnasium on the third level
parking), and nine upper habitable floors. As last done, the basement,
commercial ground and first floors, three levels of parking and the shell
only of just three upper habitable floors had been completed. The total
number of residential flats proposed was 35, of which 20 were reserved
for members and 15 were free sale flats. All flats in the free-sale
component had been sold. This was in addition to the mortgages of
members' flats and mortgages in favour of the Thane Bank and
Damani. Of the shops, there were thirteen proposed in the redeveloped
building. Of these, eleven were to be handed over to members, and two
were to be sold in the free sale. One has been sold and is used as a
dental clinic, and one is mortgaged to Damani. The status of the
proposals has not much changed since July 2015.
31. According to Mr. Khandeparkar, there is long list of admitted
breaches, including non-payment of rent, arrears of property tax, non-
execution of the P3As and delay in construction. This is how the parties
are respectively positioned today.
32. The Developer does not necessarily accept this delineation of the
breaches as portrayed by Mr. Khandeparkar. But that is a matter of
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detail perhaps best left to arbitration. I am not required in this Section

9 proceeding to examine to each of those of rival contentions in detail.
What I am required to do is assess which of the two petitions discloses
a sufficient prima facie case for the grant of equitable and discretionary
relief. Second, I must assess whether the defence in each can be said
to be tenable, in which case some equities will need to be adjusted, or
whether the defence is wholly unstatable in which case no equities will
arise in favour of the respondent in each case. Conveniently, the
Developer's defence to the Society's petition is the Developer's
affirmative case in the other petition, and vice versa.
33. Our starting point for this discussion must be the Development
Agreement itself. This will tell us what the reciprocal rights and
obligations of the two sides are. It will also facilitate a clearer
understanding of the submissions Mr. Shah makes before me, one that
is entirely predicated on a certain reading of the Development
Agreement.
34. A copy of this Agreement is from page 40 of the society's
petition. Every member of the Society has joined and is shown as a
consenting member. There is a recital at the very beginning which
asserts that the Society has a good and marketable title to the plot of
land that I have described above. The building, and its separation
between residential and commercial units, is mentioned in recital ‘B’.
The proposal for redevelopment is narrated in recital ‘C’. There then
follow the operative portions of the Agreement. Mr. Shah invites
attention inter alia to the first recital and to clause 2.1 and its sub-
clauses (a) to (g) to assert that the entire project was predicated on
the Society having good title to the entire land. In 2013, when the
development was proposed, this would have allowed for an FSI of 2.7.
He says that it was found that at least part of the land required
Collector's permission and was therefore not freehold but leasehold.
This hindered funding from being obtained in a timely fashion.
According to Mr. Shah, this had a cascading or domino effect. Without
the necessary FSI entitlement in hand at the time of execution of the
Agreement, the Developer's entire funding arrangement was thrown
into disarray. All that the Developer had was a fraction of the FSI
represented to be available on the basis of full ownership. The
Developer was unable to raise the necessary funding. This, he
contends, was a fundamental breach, or a breach of fundamental term,
by the Society. If the Society represented that it had plenary
dispositive rights as an owner of the property and it was then found
that it did not, thus limiting, reducing or constricting the Developer's
planning and benefits, then equity demands that the Developer cannot
be held to its obligations irrespective of this factor while the Society is
allowed the fullness of its rights. Of course, the project has been
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delayed. Of course, there have been difficulties in making payment of

transit rent and other obligations. But none of this would have
happened had the promised FSI been in place, and had there not been
this false or misleading representation by the Society, to begin with.
The rectification of that title lacuna did not actually happen until
December 2018. So it is utterly pointless for the Society to allege
defaults on the part of the Developer from April 2013 to December
2018. On the contrary, he submits, despite the very significant
impediment and hurdle of an imperfection in title, the Developer did
everything possible to keep the project afloat. It is not as if the
Developer did not obtain the building permissions. It did. It is not as if
the Developer did not put up any construction at all; even on the
Society's showing, it did. Only a few floors remained to be done, and
the interiors and finishing work. In the current Development Control
Regime of DCPR 2034 there may be additional benefits. There is no
reason at all, he submits, for the Society therefore to be allowed to
terminate the Agreement without having regard to these factors; and,
in particular, the question of title. On the question of equitable rights in
continuing with the project, the submission from Mr. Shah is not that
the Developer necessarily has interest in the land, but he most
emphatically has an interest in the project. There is a real, though
subtle, distinction between the two.
35. Mr. Shah's construct, therefore, rests on two principle
foundations. First, there is the submission that the inaccurate
representation as to title itself provides an almost complete answer to
the question of delay in project completion. The second is that,
demonstrably, the Developer has spent between Rs. 19 and 20 crores
on the project. Of course, the Developer has done so with a profit
motive, i.e. to recoup returns on his investment from the sale at market
prices of the free sale units. But that is not only not illegal, let alone a
crime; it is his contractual entitlement to begin with.
36. The two arguments must be addressed somewhat differently.
The first, as to imperfection of title, is perhaps a more complex
question and will require some level of examination when parties lead
evidence. Two things militate against its immediate acceptance at this
stage. Mr. Shah has relied on one set of representations and statements
in the Agreement itself. But equally, there is the statement and
assertion by the Developer in Clause 2.1(i) at page 58:
“2.1 (i) That the title of the said property in the hands of the
Owners/Society is clear and marketable and free from all
encumbrances and reasonable doubts of any nature whatsoever.
Prior to entering into this Deed of Redevelopment, the
Developers have caused the search of the title of the property
in the hands of the Owners/Society and have accepted the
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same. The Developers shall not be entitled to raise any query

as to the title of the said property in the hands of the
Owners/Society. However, in the event of any claim being made
by any third party in respect of the said property or any part thereof,
the same shall be defended by the Owners/Society at its own costs,
charges and expenses.”
(Emphasis added)
37. The other dimension to this first argument by Mr. Shah is to see
whether, in the correspondence prior to this petition, the Developer has
ever said, or contended in response to the legal notices, that it is this
lacuna in title that has caused the delay. Mr. Shah points to a
Resolution of 30th November 2014 in this regard at page 623, which
suggests that there were some CTS numbers in the Property Card that
reflected as a B1 tenure, and there is also a question of road setback,
thus limiting FSI. This is a less than persuasive argument for two
reasons. First, these facts are ones that the Developer knew or must be
deemed to have known in April 2013. The clause that I have just
reproduced contains the Developer's representations that it has taken
full search and satisfied itself as to title. A Developer is not some wide-
eyed innocent child wandering about in a development wonderland. In
a fiercely competitive field, with an eye firmly to vast profits, the
Developer is undoubtedly astute about its business. And its business is
development. And fundamental to property development is
knowledgeability and skill in handling title issues. How could the
Developer not have known about the tenure? Was there active
concealment? Fraud? There is no such case.
38. The second is a consequence in contract law. If, as Mr. Shah
says, this was a breach of a fundamental term or was a fundamental
breach, then we must ask if the Developer's conduct shows that it saw
it as such. Did the Developer terminate the Agreement and sue for
damages or restitution or both? Did it allege misrepresentation or fraud
and attempt to void the Agreement on that basis? If the Developer is
seeking specific performance, as I imagine that it will in arbitration,
then it must stand to reason that the Developer has not repudiated this
contract. On the contrary, it has condoned this alleged breach and
proceeded on the footing that the Agreement is subsisting, valid and
binding, and capable of being specifically performed. In other words, its
own previous conduct does not show that it has treated this as a breach
by the Society.
39. Can the financial obligations of the Developer be fairly said to be
linked to any corresponding obligation of the Society or a correctness or
otherwise a particular representation? It is only if Mr. Shah can show
such a linkage that his argument will have any heft. One of the
representations by the Developer is to be found in Clause 2.3(a) at
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page 60. This tells us that, for its part, the Developer warranted that it
had not only sufficient experience and expertise but also the finance to
carry out the development of the project. Putting these two together,
what we see is that on its search of the title and its assessment of the
FSI entitlement as it then stood, the Developer warranted that it had
the sufficient experience, knowledge of title, expertise and finance to
fulfil the obligations it undertook. The obligation to enter into an
agreement with the members in Clause 2.3(b) is not contingent on any
other factor. Clause 5 deals with the obligations of the Developer. These
include the obligation to demolish, to purchase and acquire TDR, to
obtain the necessary sanctions, get layouts of plans approved, pay all
costs and so on. The Developer was bound to furnish the Society with
certified copies of the sanctioned plans. Clause 5.1.3 says that the
Developer shall be solely bound and liable to pay all municipal taxes,
water, power bills use of the Collector from the date of commencement
of demolition of the existing building until expiry of 30 days' after the
Developer has offered possession of the new premises. Then there is an
obligation in Clause 5.1.5 to complete the construction within 24
months. The financial obligations in the Agreement include payment of
temporary transit rent or compensation in Clause 6(iv)(a) for residential
premises and Clause 6(v)(a) for commercial premises. The obligation to
pay hardship compensation is in Clause 6(iii). Not one of these
obligations is conditional or contingent upon either FSI or any
representations or warranties.
40. While Mr. Shah invokes the indemnity provision of the
Agreement in Clause 21, this only means that if there is a claim against
the Developer by any third party or someone claiming by, through or
under the Society, the Developer is entitled to be damnified. But if the
Developer seeks to enforce an indemnity, the Developer must sue on
that indemnity. There is no such third party claim, and the
damnification does not extend to what Mr. Shah describes as a failure
to make out a good title, or a fundamental breach. That is not a reason
to deny interim discretionary relief here.
41. The more troubling aspect of the matter is that Mr. Shah's
construct really amounts to a re-writing of fundamental and essential
terms of the Agreement. This is despite Clause 24 which says that no
addition, alteration or amendment is to be valid, operative, effective or
binding unless in writing and signed by the parties hereto. There is no
such agreement.
42. If, therefore, it is to be held that the default by the Developer in
meeting its financial obligations is not a fundamental breach because of
the alleged misrepresentation as to title, then that really amounts to
inserting an entirely new conditionality into the Agreement. In my
understanding of it, arbitration law is a constricted branch of the wider
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law of contracts. It provides a method by which contractual disputes

are to be resolved. It does not actually create a contract. Contractual
rights are governed by the law of contracts. The Arbitration Act controls
the manner in which those contractual disputes are to be resolved. For
this reason, an arbitrator — being necessarily a creature of contract,
one who would not exist as an arbitrator but for a contractual
agreement to that effect — cannot ever re-write the terms of a contract.
For an identical reason, neither can an arbitration Court.
43. This sort of argument, and one that comes so late in the day,
can hardly be said to be one that will work in favour of the Developer.
44. As I see it, the Developer may be entitled to mount a claim for
damages or specific performance or restitution or any combination of
these. But that does not by itself means that it should be allowed to
continue to throttle the Society's attempt to complete its development.
45. On the question of an interest in the project, I drew Mr. Shah's
attention to the Supreme Court decision in Sushil Kumar Agarwal v.
Meenakshi Sadhu1, gave him time to consider it and invited him to
make his submissions on it. I heard him and Mr. Khandeparkar on this
th
decision and submissions in regard thereto on 18 March 2021.
46. Mr. Shah's submission was that the Sushil Kumar Agarwal
judgment makes a distinction between different types of agreements in
relation to development. Of course, this judgment was rendered in the
context of a claim for specific performance challenging the termination
of an agreement and seeking an injunction against the owner from
engaging a third party. In paragraph 17, the Supreme Court considered
the expression ‘Development Agreement’. It said that this is a catch-all
nomenclature that may apply to a range of agreements that a property
owner may enter into for the development of immovable property.
Paragraph 17.3 speaks of an agreement by a property owner (or a
person with other rights in immovable property) with another person
who is granted development rights. Typically, the developer is required
to deliver a part of the constructed area to the owner, and, as
consideration, is entitled to deal with the balance constructed area.
Sometimes, a society or other association is formed and the land is
conveyed or leased to such society or association. In some categories of
development agreements, thus, a developer may acquire a valuable
right either in the property or constructed area. A right in the project is
thus distinguishable from a right in the land. A developer may not have
an interest in the land but may nonetheless have a valuable right in the
project. In paragraph 19, the Supreme Court spoke of a developer
possibly acquiring such a valuable right sought in the property or
constructed area. This is a divesting by the owner of part of the owner's
complex of in rem rights. Where the developer has incurred a
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substantial investment, altered the state of the property or created

third party rights in the property, a different set of considerations might
well arise. In such a case, it might be difficult to hold that an
agreement is “per se incapable of being performed”. Where a developer
is able to show that for no fault on its part, the property owner is
seeking to resile from the agreement and terminate it, it may be
difficult to hold that the developer is not entitled to enforce his rights.
It is this portion on which Mr. Shah places great reliance. One of the
assessments required, he submits, is the extent of harm or injury
allegedly suffered by the developer, and whether or not compensation
is sufficient recompense for the losses suffered if the contractual breach
on the part of the owner is established.
47. But the question, as Mr. Shah points out, is what is to happen
when there is, as it were, a midstream upending of a contractual
possession as originally contemplated. He submits that rights that have
accrued and third party rights that have been created must necessarily
be protected. A termination of such agreement is not to be easily
allowed. In this context, and in response to one of my queries, he
pointed out that there is no standalone or distinct termination clause in
this agreement. Clause 9.1 at page 108 speaks of a specific set of
circumstances, i.e. if demolition of the existing building is not
commenced within six weeks after issuance of IOD and of members
having delivered possession. In that case, the Society and its
consenting members could terminate the Deed of Redevelopment.
Nobody has invoked this clause. The only other clause is 13(i) at page
118. This says that if the Developer fails to obtain approvals and start
construction from the date of the agreement, the agreement and the
Power of Attorney would automatically end, the Society could enter into
an agreement with a third party without any claims from this
Developer, and the Developer would not be entitled to claim a refund of
any amount that is paid to the Society.
48. I do not believe Mr. Shah is completely correct in saying that
this excludes the possibility of termination on account of any other
breach by the Developer. Even if neither of these clauses is invoked,
the general law in contracts and especially Section 39 will apply.2 It is
surely unreasonable to suggest that a developer may commit a breach
of a term of the contract, even a fundamental term, but the Society is
shackled.
49. In all this, we should not miss something that seems to me to
be cardinal. It is a mistake, in my view, to pillory a developer for being
profit-oriented. That is the nature of every developer's business. That is
what it does. Pursuing a profit is, as Mr. Shah points out, neither illegal
nor criminal. It is perfectly legitimate. The question is not whether the
pursuit of a profit is a good or a bad thing. It is a question of fidelity to
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the contract that permits the pursuit of profit. It is only this aspect of
the matter with which we are concerned. In the course of pursuing that
profit, the developer will create third party rights. Those cannot, in
turn, create equities in favour of the developer against its contractual
counterparty, the society. The developer takes the risk of satisfying
those third-party claims simply because those third-party rights are
principal-to-principal agreements between the developer and third
parties. The developer created them and incurred liabilities to third
parties on his own and in pursuit of his gains. But that is only ever
legitimate if the developer is not in default of its obligations to the
society in the first place. No developer can be heard to say it has rights
vis-à-vis third parties or free sale areas while yet in default of its
obligations to the society. The fulfilment of the obligations to the
society by the development is the sine-qua-non that entitles the
developer to create third party rights and make profits from the free-
sale areas. Absent a fulfilment of a foundational obligation to the
society, there are no equities or rights that inhere in a developer vis-à-
vis others or in respect of any free-sale areas.
50. The other fundamental factor never to be lost sight of is this :
the Society is the owner of the property. It belongs to the Society. The
Society and the members will decide how and through whom they want
to exploit their legal ownership rights over that property. It is not for
any other outsider to say in generality that the rights of an owner have
been compromised. If the Society has divested itself of ownership
rights, there are ways in law of doing this. If the Society has found that
its redevelopment project has not proceeded in the manner that it
intended, then the Society is always within its legal entitlement to
undertake the development itself or through any other developer of its
choice. To resist this, a developer must able to show unequivocally that
it is the society that is in default and it must show this in the clearest
and most unambiguous terms, not in some roundabout, inferential or
speculative manner. I imagine Mr. Shah understands this perfectly well.
This is indeed the reason he has been at pains to try and make out a
case in regard to deficiency of title. But if that case is not a clear and
unambiguous breach, i.e. a fundamental breach, then his submissions
will not assist his client, the Developer here.
51. There is a considerable amount of judicial learning on this
branch of the law. I myself have had occasion to deal with such issues
in the past, but before I turn to those, I believe this is an opportune
matter to set out some broad principles.
52. There are, in my experience, and I do not say this with any
rigidity, three broad classes of disputes of this kind pertaining to
societies and their disputes with developers.
(a) In Category 1, we find those cases where an agreement is
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entered into, the society and its members for some reason or the
other do not vacate although the developer has everything ready
to proceed.
(b) In Category 2, one that is sadly quite common, we have a
situation where the society and their members vacate, the
developer takes possession, but then nothing happens for years
together; and when the society tries to take charge of its own
estate and redevelopment, the developer comes forward and cites
the pendency of the agreement. In such cases, the developer is
very often in default of huge amounts of financial obligations.
There, clearly, there is no equity on the side of the developer.
Such developers are often only speculating in land and property
prices.
(c) Category 3 cases, and this is where I believe the present case
falls, are those where the society has vacated, the developer has
taken possession, has done some amount of work, but then at
some point falls behind in payment of financial obligations and
completion of development. This is a downward spiral. The
developer gets mired more and more in debt. The arrears of
transit rent keep mounting with each passing month, and then
there is a near financial impossibility. Sometimes, these matters
are resolved by negotiations, but it is here that the questions of
law and of assessment of contracts really arise.
(d) Category 4 cases are of the kind where both the society and the
developer are on the same page. Most members of the society
have vacated. The developer is ready to proceed, but there are
one or two dissenting members. This category of cases will fall
3
within the Girish Mulchand Mehta v. Mahesh S Mehta line of
judgments and need not detain us. That is now a separate
jurisprudence of its own.
53. Each of one these requires a slightly different approach, but in
the Category 3 cases with which we are concerned, I would venture to
suggest that, again without attempting to lay down any strait jacket or
rigid formula, the following tests are among those to be applied:
(a) Can it be shown that there is a default on the part of the society
in fulfilling its obligations? For instance, has the society failed or
refused to vacate? Has it wrongly claimed arrears of transit rent or
other dues although these have been paid? Is the society itself
merely trying to squeeze more financial gain out of the developer?
If so, the society's petition will be dismissed — possibly with costs
and even strictures — and the developer will receive the full
weight of protection against unjust or unlawful termination.
(b) Can the default by the society be said to be a fundamental
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breach or a breach of a fundamental term such as would excuse

the developer from performing one or more of its obligations? For
instance, a failure to deliver possession might constitute such a
fundamental breach; for, without possession, the developer
simply cannot proceed. Unless it has vacant possession, the
developer has no obligation to pay transit compensation or,
possibly, the other dues.
(c) Can it be shown that the financial or other obligations of the
developer have a one-to-one correspondence with the obligations
of the society such that a default by the society would absolve the
developer from the performance of his obligations? Again, an
example of this might be the society's obligation to deliver vacant
possession. It is quite clear from any reading of any of these
agreements that a failure to do so will result in the developer
being excused from performing almost all his obligations including
the financial obligations. But once this has happened — and this
is why at the beginning of this judgment I called a trigger event
— then a series of consequences begin to follow. Unless it is
demonstrated that the developer's ensuing obligations have a
express conditionality attached to them, the developer cannot
seek to evade the consequences of a breach of its financial
obligations and its obligations to complete the development on
time.
54. Therefore, a final factor relates to how a Category 3 case
developer conducts itself once the society has come to court. There are
several distinct elements in play at this time : (i) accumulated arrears
of transit rent and other dues; (ii) the obligation to pay ongoing transit
rent until possession with an occupation certificate; (iii) payment of
statutory and corporation dues, including property tax (including
arrears, and irrespective of when these are actually due), for non-
payment puts at risk the very property of the society; and (iv) a
demonstration of the financial means to bring the project to
completion. To stave off a society's petition framed such as the present
one is, the respondent-developer must place an acceptable proposal
that covers all these. Accumulated arrears can be capitalized and
allowed to be paid in reasonable tranches or instalments. But while that
is happening, ongoing payment obligations must be met month to
month. All statutory dues and property taxes must be cleared. There
must be a tenable, viable and cogent statement of availability of
financing to complete the project, and this, in turn, requires a fair
estimate of the remaining costs of completion, disclosure of the source
of funding (not some woolly promise or expectation) and the actual and
ready availability of, and access to, that funding. Inevitably, there will
also be a default clause in any such re-worked understanding that
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culminates in Consent Terms or a consent order : if there is a default

(of such kind as is agreed before the Court), the developer must accept
(a) the termination; (b) ejectment from the site; and (c) its liability to
pay all accumulated financial debts until the date of default — all
resulting automatically in an enforceable order of the court. Nothing
4
short of this will do.
55. In the narrative that I have set out above, I find no explanation
or no justification for Value Projects to have created third party rights in
respect of flats allotted to members. It is simply not possible to accept
the argument that this was necessary because the alleged
misrepresentation as to title had financial consequences, and therefore,
the developer was left with no choice. This is a clear-cut breach of the
terms of the Development Agreement. It simply cannot be explained in
this manner. Similarly, there is no explanation for the non-payment of
the second instalment of the corpus or the defaults in payment of the
rent.
56. I have previously had occasion to hold in Borivali Anamika Niwas
5
CHSL v. Aditya Developers that non-payment of rent is a breach of a
fundamental term. The same consideration will apply here.
57. I have also dealt with the issue of how such equities should be
balanced in Goverdhangiri CHSL v. Bharat Infrastructure & Engineering
6
Ltd. :
nd
13. Before me today Mr. Tamboly for the 2 Respondent has
candidly accepted that there are arrears of transit rent that remain
unpaid. He does say that the 2nd Respondent has put a considerable
amount into the project. He cannot however claim that the project is
complete except for minor finishing works; there is clearly much that
remains to be done. There are pending instalments of FSI that have
not been paid. Sale proceeds from the free sale flats have not been
put into the escrow account. There are significant arrears of property
tax. A bank guarantee of about Rs. 3 crores to cover the rent to be
paid has not been furnished. The arrears of compensation until March
2020 have touched nearly Rs. 3 crores.
14. I have given both sides repeated opportunities to try
and resolve these differences. I am mindful of the condition of
the members of the society. This has to be a primary concern
of any Court of equity. Indeed this was the primary concern
that led to the Court in the contempt petition taking an
extraordinary step of appointing not only a Receiver but a
Special Committee including an independent Architect to
complete the project. The society's members had to be
provided housing at the earliest possible. They also had to be
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provided transit accommodation.

15. Let us take a step back and imagine or visualize the scenario
from the point of view of the members of the society represented by
Mr. Subramanian. He has not, in fairness, used this simply as a point
of prejudice though he was well within his rights to have done so.
His submissions have been to portray the desperate plight of
the members of the society : out of the original homes that
they had for a long time, left to fend for themselves for
payment of compensation or rent while in transit; deprived of
rent and displacement compensation; not being provided their
homes; only being given repeated assurances; and with no
real prospect of seeing their new promised homes ever
becoming reality.
nd
16. Consequently, Mr. Tamboly's task as an advisor to the 2
Respondent necessarily meant that the 2nd Respondent would, to
avoid the consequences that must now follow, have to commit
unequivocally to even more stringent conditions. One of these
would be to establish that it is not in arrears and to clear all
financial dues to the society. It is true that the society has indeed
invoked a bank guarantee but there has been no restraint against
that and that is well within the permissible contours of the law
regarding the bank guarantee. That is not an equitable consideration
nd
that can conceivably be invoked by the 2 Respondent. There is
undoubtedly an amount payable to the society. This has not
been paid. Construction has not been completed. Property tax
dues are in arrears — and this alone puts the Society's own
property in jeopardy for no fault of the Society's members.
There is no evidence before me that the 2nd Respondent has
any funds at all to complete the project. It only says that it is
on the verge of receiving financial support. That is not good
enough.
nd
17. The only argument available to the 2 Respondent is
that it has ploughed money into the project. This is
commended as an equitable consideration. It is not. It can
never be. The 2nd Respondent committed to the re-
development enterprise not out of any altruistic motivations
for the common good of the Society, but to make a profit. It
knowingly took the risk. It risked its funding. Every risk-
taking necessarily contemplates either success or failure, two
sides of a single coin. No developer can turn an open-eyed risk
into an advantage in equity unless it shows that its risk has
been caused or increased by a default by the Society, but for
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nd
which matters would not have come to this pass. The 2
Respondent developer cannot insist on contractual rights
being safeguarded or protected as a matter of equity or law. If
the developer wants equity, the developer must demonstrate
that it has done equity; clearly at least at a prima facie stage,
this appears to be far from correct.
18. As against this — and this is the ‘balance of
convenience’ test — is the condition of the Society and its
members, and the inconceivable prejudice to them. Apart from
the very many tangibles I have outlined above, there is now
the added burden of finding a source of funding, or a means of
self-financing, to complete the project, and perhaps having to
write off the promises displacement compensation altogether
short of an arbitral award in a long and expensive litigation
process. There can be not the slightest doubt that the balance
of convenience is with the Petitioners who have made out a
very strong prima facie case.
19. The prejudice to the Petitioners if relief is denied will be
incalculable. All that they are being offered today are more promises.
Promises were made before, only to be broken, again and again and
again.
(Emphasis added)
58. In Punjab National Bank Workers' Cooperative Housing Society
7
Ltd. v. Meeti Developers , while holding against the developer I said:
17. The question therefore now is whether it can truly be
said that the developers is entitled to any equitable
discretionary relief under Section 9. That can only be done if
in a matter like this the developers is able to demonstrate
prima facie that any delay is not attributable to it and that it
has, in other words, fulfilled and complied with its contractual
obligations.
18. … … …
19. … … …
20. The other argument for equitable relief that Mr. Davar
advances is that the developers has paid compensation — the
amount is not relevant — though it was ‘not bound to do so’, and the
Society members have accepted it till as late as 2020. Payment of
transit rent or displacement compensation is a contractual
provision. It is nobody's case that the developers was not
bound to pay any transit rent or displacement compensation
at all. What the submission really amounts to is that by
th
conduct of parties the Addendum of 13 December 2017 was
somehow novated and a modified Agreement was arrived at.
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This is not even remotely facie compelling. If there is to be

any alteration of the Agreement, clearly it would have to be in
writing and this is true whether or not the Agreement
contains any specific provision to that effect. I say this because
the Addendum had the signatures of all the society members and
the shopkeepers as well. I do not see how it can be said that
generalised statement of payment to one or the other or in
differential amounts could lead to a novated Agreement with the
different terms including an expansion of the time frames applicable
to all. The old residential structure still stands. It is empty and
vacant. The shopkeepers' structure still stands but they are in
occupation. Nothing whatsoever has happened.
21. This is sadly the stark reality of redevelopment project
in this city. Society members are entitled to better their living
conditions. The property is theirs. They are the owners of it. It
may be that in the course of redevelopment they are required
to confer certain rights on a developer. After all, they are not
able to afford the costs of reconstruction themselves.
Allowing a developer the right to sell free sale units is
compensation for the developers putting up the rehabilitation
units to re-accommodate members. This does not confer by
itself in every case rights in the land in favour of a developer.
There are equitable considerations to be kept in mind. A
developer is in search of only thing : the profits that it will
make from the project. The interest of society members are
entirely different. What they are looking at is better homes,
ones long promised to them, but ones that remained an
unfulfilled dream forever receding in time.
22. The contest is therefore between what is a essentially
human displacement problem and the purely profit-oriented
objective. If there is to be an equitable balance, then there
can be no doubt on which side a Court of equity will lean. The
developers may have a claim to be made in damages. It is free
to pursue that claim. That cannot give it rights in specie over
the property itself nor can it subject the full ownership rights
of the society to its demands. Not only is the developer
entirely profit-oriented, and that necessarily matters that a
developer can be compensated in money terms, immediately
putting them out of the reach of any interim relief, but they
have also cannot said to have acquired any direct interest in
the land itself. Indeed, the only situation in which a developer
may be able to get some relief is if it can demonstrate that it
has played it ‘by the book’, as it were, and there is no default
on its part.
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23. An attempt, however, on the other hand to choke up a

development to leverage changes in development policy and
available FSI to maximise profit is a strategy that comes at a
real cost to society members, and is a stratagem that no Court
of equity can, will or should ever countenance for a minute.
24. The strategy is plain and, like the Emperor's clothes, it
bares all. The idea is to keep the society and its members
hanging by a thread, stuck in an endless cycle of delayed
payments and part payments, all the while ostensibly keeping
the contract ‘alive’, claiming rights in it, and waiting to
squeeze every last drop of available buildability out of the
project only to maximize profits.
25. If therefore today Meeti Developers is unable to
demonstrate compliance, the fact it may have made some
payment in between will be of no avail. The only way it can
stave of its ejectment as a developer is to demonstrate
complete and exact compliance with its contractual
obligations under the contract. This it is clearly unable to do.
26. The society for its part does not have to do very much
more then demonstrate the lack of compliance by the
developers. The society is after all the owner of the property
and its title is paramount. The society terminated the Agreement
on 12th November 2020. I cannot understand why the developers
even then sat idly by and did not think to come to Court till as late
th
as 18 January 2021. That delay alone probably tells us all that we
need to know about the bona fides of the counter petition by Meeti
Developers.
(Emphasis added)
59. Meeti Developers was taken in appeal. A few observations of the
Appeal Court while dismissing the Appeal are relevant. In paragraphs
11, 13 and 14 the Appeal Court held:
“11. Even if we were to ignore the fact that there has been a
tremendous (and largely unjustifiable) length of time that has
passed since the original Development Agreement and consider
events only after the Addendum of 13th December 2017, in our
view, prima facie, there appears to be a complete failure on
the part of the Developer in complying with the timelines set
out in the Addendum. Admittedly, the NOC from MHADA which
was agreed to be obtained by the Developer within 90 days from the
execution of the Addendum, was obtained almost 2. 5 years after the
th
execution of the Addendum i.e. only on 15 June 2020. Even
thereafter, the IOD which was agreed to be obtained within 90 days
of the MHADA NOC, was not obtained by the Developer; the same
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was eventually obtained through the Society's new Architect on 19th

January 2021. There is no cogent justification or explanation given
for the delay between 2017 and 2020.
13. It is trite that a party must be held to the terms of its
bargain. Having failed to fulfill its part of the bargain, the
Developer cannot now seek to restrain the Society from
enforcing the provisions of the Addendum which entitle it to
terminate the Agreements and proceed with the
redevelopment through a different builder.
14. Even otherwise, on the factual matrix before us, we
cannot allow the developer continuing to hold the project to
ransom despite having miserably failed to comply with the
timelines which were solemnly agreed to by the Developer. It
is also important to note that the Society terminated the
Development Agreement on 12th November 2020 and for over
2 months, the Developer made no attempt to approach the
Court or seek a stay of the termination. In the meantime, the
Society has taken steps to appoint a new developer and has obtained
the IOD through its new architect. This delay also militates against
grant of any interim relief to the Developer pending the arbitration.
(Emphasis added)
60. The Meeti Developers Appeal Court also referred to the decisions in
Jal Ratan Deep Cooperative Housing Society Ltd. v. Kumar Builders
8 9
Mumbai Realty Private Limited and Gopi Gorwani v. Ideal CHSL .
60. I am leaving aside any argument about the pandemic and Covid.
The defaults of this Developer go back much further than that.
61. The legal position that I have mentioned above is also the view
taken by this Court in SSD Estatics Pvt. Ltd. v. Goregaon Pearl Co-op
10
Housing Society Ltd. ; The New Aarti Co-operative Housing Society
Ltd. v. Kabra Estate & Investment Consultants11; and Solaris
12
Developers Pvt. Ltd. v. Eversmile Co-operative Housing Society Ltd.
62. I need not at this stage trouble with any further issues regarding
the rights of third flat purchasers whether or not those are protected or
13
nor are outside the frame of present discussion.
63. Having said this, there are certain overriding factors that I
believe I must heed. Section 9 is a discretionary and equitable remedy,
and the consideration of equity is often determinative. After all, in such
cases, we are not dealing with any arms' length market transaction of
simply putting up a building on an empty plot of land. On the one side
is the question of development, the Developer, his commercial
intentions, genuine as these are. On the other, is a very real issue of
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human displacement and of an associated trauma caused to an entire

community by the delay in project completion. The description of this
Society, with which I began this judgment, might as easily apply to
almost any community in this city, whether Maharashtrian, Gujarati,
Tamil, Kannada, Parsi or otherwise. We are all familiar with these
communities. They are part of our lives and always have been. This city
is really nothing but an agglomeration of these communities working
together. The aridity of contractual documents, lawyers' notices and
legal argot often mask or occlude the enormous tragedy that lies
beneath. This particular Society, with its 20 houses and seven shops,
was, in all likelihood, once a community of its own. I am speculating,
but I imagine that in such a compact society, not only did everybody
know everybody, but everybody knew everything about everybody.
Families would have shared joys and sorrows, been together in good
times and bad, celebrated festivals together. Entire floors, even wings,
might have had a more or less open-door practice, with people
constantly in and out of each other's houses without needing the
formality of invitations to visit. When, therefore, in the context of a
dryly-worded contract, we speak of “development”, it does not tell us
what actually has happened — that this community has been literally
splintered and torn apart. Persons who were together perhaps for
generations are now dispersed across the city. They may have lost their
immediate and daily contact. The contact that has persisted through
generations has almost certainly been lost. When and how that will ever
be brought back is a major question mark. This is what has been lost in
translation. This is what delayed redevelopment projects do not begin
to let us understand. There is a very real human tragedy unfolding in
case after case, and it is tearing apart the social fabric of this city. It is
all very easy to say in a Court of law that “arrears of transit rent” have
not been paid. What does this actually mean? Digits and commas on a
page in a lawsuit do not let us comprehend the terrifying reality of what
that non-payment of rent month after month after month must mean to
ordinary middle-income people. For one thing, it means they have to
find their own way to pay the rent in transit. No landlord is going to
wait for a developer to pay up. That, in turn, would have meant risking
being dis-housed and put on the street with families, old parents,
young children. It might well have meant giving up any number of
things, some too frightening to contemplate — even food for the family.
These are not matters to which, just because we are in the rarefied
preserves of a court of law, we should blind ourselves. These are the
stark and terrible realities underlying such contracts.
64. I mention this (and some of this may indeed be speculation)
because when one speaks of the ‘balance of convenience’, another
umbrella term, one must attempt to give it some life and colour and
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actual societal context. This speaks of the comparative mischief or

hardship to be weighed when granting or refusing relief. But there is
nothing here but imbalance. The defaults by the Developer have
undoubtedly caused immense prejudice and harm to the members of
the Society. The hardship to the members is real and immediate; the
so-called hardship to the Developers is notional. When it spent in the
project, this was no altruism or charity. It was an investment toward
great profit. Every investment involves risk. The Developer gambled on
the project. Receiving monthly rent is not a sop, not a matter of
‘convenience’. It is a matter of survival. Therefore, the non-payment of
dues, the delays in project completion, and not paying transit rent for
months together speaks to an inherent, and constantly growing, social
injustice. It should not be allowed to continue. Therefore, apart from
the exceptionally strong prima facie case that the Society makes out,
the ‘balance of convenience’ is decidedly in its favour.
65. These development agreements are, above all, in the nature of
an entrustment. They are not entered into blindly. There is a long and
laborious process of society notices, general body meetings, the
appointment of a consultant as an advisor, calling for tenders,
scrutinizing the bids, ensuring compliance with laws and regulations,
looking at the proposals and so on to the end of the chapter. This is as
it must be. For what is it that is actually happening here? The society is
entrusting an outsider with the one single asset that justifies the
society's existence, that actually defines the society : the society's
property. This is not the entrustment of some other land on which to
build so that the society can make handsome profits; no, this is the
entrustment of the actual property being used by the society and its
members, the very homes in which they live. The society's members
agree to this upheaval, to move out altogether, to separate from each
other while their new homes are built. The promise to them is that they
will be looked after and provided for while their new homes are being
built. Days, weeks, months and years pass; the members do not
receive the promised rent. Thus begins the downward slide. The
promised homes are delayed, then delayed further, and then delayed
even further. This cuts at the root of the initial entrustment. A
development project for a society demands commitment, fidelity,
respect and honesty. When these begin to disappear, the contractual
relationship collapses. Where there was anticipation and confidence,
there is now just bitterness, disappointment and despair. There is a
breakdown of confidence, and there is only distrust. Loss of faith and
confidence on account of contractual violations and breaches by a
developer are sufficient grounds to find for the society and against the
developer.14 Indeed, I would go a step further. There is urgency for the
society. Therefore, the slightest delay in project completion, unless
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specifically accepted by the society, and even one single default in

payment of transit rent or other dues is actually sufficient to warrant a
termination. There is no such thing in these matters as ‘substantial
compliance’. That is not the principle of obligations in the realm of
private law.
66. If we, therefore, approach these two matters from this
perspective, I do not believe it is even remotely possible to suggest
that this Developer, persistently in default, persistently delaying, and
never able to come up with actual money to make good the vast
accumulated arrears of financial obligations should now be able to tell
the society, “You will not be able to eject us from this project. When we
will complete your homes, we cannot and will not say. When we will
pay your dues, we cannot say. How we will raise finances is unclear. We
have none with us now. When you will finally get what you are
contractually due, we also cannot say. Even so, we are entitled to be
here until we make our profits.”
67. What is it that the society says on the other hand? In whatever
manner the prayers are worded all that the Society says is, “Give back
to us that which was ours. Allow us to get back our homes, and restore
our lives.”
68. That is an application that, in these circumstances, is impossible
to resist.
69. Mr. Khandeparkar is mindful, as am I, that the first prayer is for
a mandatory injunction. This brings us within the frame of the law as
declared by the Supreme Court in Samir Narain Bhojwani v. Aurora
15
Properties & Investments and Dorab Cawasji Warden v. Coomi Sorab
16
Warden . This has recently been explained in Hammad Ahmed v.
17
Abdul Majeed , to say that an ad-interim mandatory injunction is not
to be granted lightly or for the asking; but it is also not forbidden. An
exceptionally strong prima facie case has to be made out. If satisfied
that withholding such an injunction would be unjust and
unconscionable, resulting in a perpetuation of injustice, then a court of
equity will indeed grant it. This, I believe, is a case that wholly
warrants such an injunction.
70. As amended, the prayers in the society's Petition read thus:
“(a) An order of mandatory injunction directing the Respondent, its
directors, servants, agents and/or persons claiming through them
hand over peaceful possession of the property viz. Land being part
of CTS Nos. 4836, 4837, 4838, 4839, 4840, 4841, 4842, 4843,
4844 and 4844A admeasuring 997.20 sq. mtrs along with the
existing structure/s (completed or otherwise) standing thereupon
titled as Redevelopment project of “Rajawadi Arunodaya” situated
at Junction of 4th and 7th Road, Ghatkopar (East), Mumbai - 400
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077;
(a-1) That this Hon'ble Court be pleased to appoint a Court
Receiver, High Court Bombay and/or any other fit and proper
person to act as a Receiver having all powers under Order XL r. 1
of the Civil Procedure Code to take possession of the said property
i.e. CTS Nos. 4836, 4837, 4840, 4841, 4842, 4843, 4844 and
4844A admesuring 997.20 sq. mtrs. equivalent to 1192.65 sq.
yards and buildings standing hereon known as Rajawadi
Arunodaya CHSL, lying and being at “Arunodaya” Rajawadi,
Junction of 4th and 7th Road, Ghatkopar (East), Mumbai - 400
077, and said project i.e. “Value Platinum” (with police
assistances, if required) and hand over the said project and
property to the Petitioner herein;
(a-2) That this Hon'ble Court be pleased to restrain the
Respondent its Directors, officers, servants, agents, and/or all or
any persons claiming through and under them b y an order of
temporary injunction from creating third party rights i.e.
mortgages, sale lien, leave and license, lease, gift and/or
encumbrance of any kind whatsoever in respect of the said
property i.e. CTS Nos. 4836, 4837, 4840, 4841, 4842, 4843, 4844
and 4844A admesuring 997.20 sq. mtrs. equivalent to 1192.65
sq. yards and buildings standing thereon known as Rajawadi
Arunodaya CHSL, lying and being at “Arunodaya” Rajawadi,
th th
Junction of 4 and 7 Road, Ghatkoper (East), Mumbai - 400
077, and said project i.e. “Value Platinum” in any manner
whatsoever;
(b) That this Hon'ble Court be pleased to restrain the Respondent its
Directors, servants, agents, contractors and/or all or any person
claiming through or under them by way of a temporary injunction
from intermeddling, interfering, obstructing in the redevelopment
process, construction by the Petitioner by appointment of a third
party developer, contractor, completion by self-development
process and/or all or any other acts done on the said property and
the said project by the Petitioner and/or its assignees, nominees,
agents, contractors, developers;
(c) That this Hon'ble Court be pleased to restrain the Respondent its
Directors, servants, agents, contractors and/or all or any person
claiming through or under them by way of a temporary injunction
from interfering in the possession of the Petitioner Society and/or
in manner dispossessing the Petitioner Society and its members
and/or its assignees, nominees, agents, contractors, developers
etc. from the said project and said property;
(d) That this Hon'ble Court be pleased to direct the Respondent its
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Directors, servants, agents, contractors and/or all or any person

claiming through or under them to hand over possession of all the
Original Documents (i.e. Development Agreement, Power of
Attorney, original approvals, original sanctions, original payment
receipts and/or all or any documents in relation to the said
property and said project) in the custody and possession of the
Respondent and/or all or any other writing executed between the
Petitioner and Respondent.”
71. I will have to make an order in terms of prayer clauses (a), (a-
1), (a-2), (b), (c) and (d) of the Society's petition, reproduced above.
Further—
(a) The Court Receiver is appointed only to ensure that there is no
disturbance at site.
(b) The Court Receiver will remain in symbolic possession of the site
until the completion of the project.
(c) Any interference with the Court Receiver by the Developer will be
treated as an act of contempt of Court.
(d) The Receiver will appoint the Society as its agent without
payment of royalty. The Society's office bearers will execute the
necessary Agency Agreement under an order of the Court.
(e) The Developer-Respondent is to hand over all necessary
documents in original within two weeks from today. If copies of
the relevant plans are not given by the Developer, Mr. Patil on
behalf of the MCGM agrees that his officers will make available
copies to the Society or its newly appointed architects on payment
of the necessary copying charges.
(f) The MCGM will accept the Society's nomination of a new architect
without insisting upon a no-objection certificate from the previous
architect/licensed surveyor.
72. The Society's Petition is disposed of in these terms. There cannot
be the kind of relief that the developer seeks in its Petition. The
developer's Petition is thus dismissed.
73. Mr. Shah points out that one of the commercial units, No. 107,
has been sold to an outsider who has taken possession and is running a
dental clinic there. In this fight between the Society and this
Developer, that medical practitioner should not suffer. On this, at least,
I believe Mr. Shah is completely correct. The Court Receiver is not to
disturb the possession of the person in occupation of Unit No. 107.
When that person seeks to join the Society as a member, that
application will be dealt with on merits in accordance with law. I see no
reason to appoint the Court Receiver of Unit No. 107, but if that owner
believes it is in his interest to be protected by a receivership, he or she
is at liberty to approach the Court Receiver. If the owner exercises the
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choice, the Court Receiver will so stand appointed of Unit No 107, to

take symbolic possession and to appoint the owner without royalty as
his agent until re-development is complete and an occupation
certificate is obtained. This direction is purely for the protection of the
owner of Unit No. 107 so that none can obstruct his or her possession
or question title. But the choice is with the owner.
74. There is yet another commercial Unit No. 108. Mr. Shah says this
is not only Developer's site office but also its commercial office. He
would have it that the Developer should be entitled to continue using
this site office. Finally, Mr. Shah submits that the Developer should be
given a reasonable time to clear its material from site.
75. The question regarding Unit No. 108 is very problematic. That
unit is mortgaged to the Damani NBFC. It was actually allotted to a
member under a letter of allotment against payment. There is some
dispute about whether the payment was received or not, but that again
will not help Mr. Shah at this stage. There is no occupation certificate
for any part of the structure. How, in these circumstances, the
developer can itself claim a right to continue to occupy these premises
is unclear. I cannot accept that claim.
76. I will give the Developer time until 19th April 2021 to remove
itself, its equipment and material from the entire site. It also has that
much time to vacate Unit No. 108. It is to deliver possession of Unit No.
108 to the Court Receiver, who will deliver possession to the office
bearers of the society.
77. This order is not a final determination of the Developer's final
contentions or claims. It may in arbitration seek suitable reliefs other
than those in its present Section 9 Petition, which is dismissed.
78. The views and findings on facts in this order are prima facie and
for the purposes only of this order.
79. At this stage, both sides request that I appoint an Arbitrator. I
nominate Mr. Karl Shroff, learned Advocate of this Court, to decide the
disputes and differences between the parties under the Agreement of
th
5 April 2013.
TERMS OF APPOINTMENT
(a) Appointment of Arbitrator : Mr. Karl Shroff, learned Advocate,
is hereby nominated to act as a Sole Arbitrator to decide the
disputes and differences between the parties under Agreement of
5th April 2013.
(b) Communication to Arbitrator of this order:
(i) A copy of this order will be communicated to the learned Sole
Arbitrator by the Advocates for the Petitioner within one week
from the date this order is uploaded.
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(ii) The Advocates for the Petitioner will forward an ordinary copy
of this order to the learned Sole Arbitrator at the following
postal and email addresses:
Arbitrator : Mr. Karl Shroff, Advocate.
Address : Frenville, Jussawala Wadi Juhu, Mumbai 400 049
Mobile : 98200 69915
Email : [email protected]
(c) Disclosure : The learned Sole Arbitrator is requested to forward,
in hard copy or soft copy (or both), the necessary statement of
disclosure under Section 11(8) read with Section 12(1) of the
Arbitration Act to Advocates for the parties as soon as possible.
The Advocates for the Petitioners will arrange to file the original
statement in the Registry. If the statement is forwarded in soft
copy, a print out of the covering email is also to be filed in the
registry.
(d) Appearance before the Arbitrator : Parties will appear before
the learned Sole Arbitrator on such date and at such place as the
learned Sole Arbitrator nominates to obtain appropriate directions
in regard to fixing a schedule for completing pleadings, etc.
(e) Contact/communication information of the parties :
Contact and communication particulars are to be provided by both
sides to the learned Sole Arbitrator. The information is to include
functional email addresses and mobile numbers.
(f) Section 16 application : The respondent is at liberty to raise all
questions of jurisdiction within the meaning of section 16 of the
Arbitration Act. All contentions are left open.
(g) Interim Application/s:
(i) Liberty to the parties to make an interim application or interim
applications including (but not limited to) interim applications
under Section 17 of the Arbitration & Conciliation Act, 1996
before the learned Sole Arbitrator. Any such application will be
decided in such manner and within such time as the learned
Sole Arbitrator deems fit.
(ii) The learned Sole Arbitrator is requested to dispose of all
interim applications at the earliest.
(h) Fees : The arbitral tribunal's fees shall be governed by the
Bombay High Court (Fee Payable to Arbitrators) Rules, 2018.
(i) Sharing of costs and fees : Parties agree that all arbitral costs
and the fees of the arbitrator will be borne by the two sides in
equal shares in the first instance.
(j) Consent to an extension if thought necessary. Parties
immediately consent to a further extension of up to six months to
complete the arbitration should the learned Sole Arbitrator find it
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necessary.
(k) Venue and seat of arbitration : Parties agree that the venue
and seat of the arbitration will be in Mumbai.
(l) Procedure: These directions are not in derogation of the powers
of the learned Sole Arbitrator to decide and frame all matters of
procedure in arbitration.
80. Rather than make an order of costs in these Section 9 Petitions,
I will leave it open to both sides to seek the costs of these Petitions as
costs in arbitration.
81. The Petitions are disposed of in these terms.
———
1
(2019) 2 SCC 241.

2
Section 39. Effect of refusal of party to perform promise wholly.—When a party to a
contract has refused to perform, or disabled himself from performing, his promise in its
entirety, the promisee may put an end to the contract, unless he has signified, by words or
conduct, his acquiescence in its continuance.

3
2019 SCC OnLine Bom 1986; Aditya Developers v. Nirmal Anand Coop Hsg Soc Ltd., 2016
SCC OnLine Bom 100 : (2016) 3 Mah LJ 761; and Sarthak Developers v. Bank of India Amrut-
Tara Staff CHSL, Appeal (L) No 310 of 2012.

4
In some cases, the court has taken the extraordinary step of having the Court Receiver
complete the project. See Goverdhangiri CHSL v. Bharat Infrastructure & Engineering Ltd.,
cited below.

5
2019 SCC OnLine Bom 10718.

6
2020 SCC OnLine Bom 2787. This was also the view taken in Chaurangi Builders and
Developers Pvt. Ltd. v. Maharashtra Airport Development Company Ltd., 2013 SCC OnLine
Bom 1530.

7
Arbitration Petition (L) No 8189 of 2020 and connected matters, decided on 11th February
2021. Here, too, there were cross petitions by the society and the developer, almost exactly
paralleling the present case.

8
Arbitration Petition (L) No. 219 of 2015, decided on 24th June 2015.

9
Notice of Motion 1393 of 2012 in Suit No. 762 of 2012, decided on 10th June 2013.

10
Commercial Arbitration Petition (L) No. 1072 of 2018.

11
2015 SCC OnLine Bom 5929.

12
Arbitration Petition (L) No. 593 of 2019.
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13
Goregaon Pearl CHSL Dr. Seema Mahadev Paryekar, 2019 SCC OnLine Bom 3274; Vaidehi
Akash Housing Pvt. Ltd. v. New DN Nagar Co-operative Housing Society Ltd., 2015 SCC
OnLine Bom 8698.

14
Gopi Gorwani v. Ideal Cooperative Housing Society Ltd., 2013 SCC OnLine Bom 1967.

15
(2018) 17 SCC 203.

16
(1990) 2 SCC 117.

17
2019 SCC OnLine SC 467, paragraphs 57 and 58.

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