Law Web: Whether housing society can terminate development contract with developer if he fails to pay transit rent?

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.

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. Gopi Gorwani v Ideal Cooperative Housing Society Ltd & Ors, 2013 SCC OnLine Bom 1967. Indeed, I would go a step further. There is urgency for the society. Therefore, the slightest delay in project completion, unless 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.

REPORTABLE

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

IN ITS COMMERCIAL DIVISION

COMM ARBITRATION PETITION (L) NO. 74 OF 2020

Rajawadi Arunodaya Co-op Hsg Soc Ltd Vs Value Projects Pvt Ltd.,

CORAM : G.S.Patel, J.

DATED : 15th March 2021

1. 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

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

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.

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 stands at the junction of 4th and 7th 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 middleincome

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 registered a little later that month on 29th 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 worded in the negative — from the MCGM came in on 9th

December 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.

11. To return to the chronological narrative, on 18th 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.

14. There was a meeting on 18th July 2017. This follows in

relevance from the previous document. Rent had not been paid since

December 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.

15. About a month later, on 5th August 2017, at a meeting on 5th

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.

17. There was another meeting on 15th 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 followed on 14th January 2018, with minutes dated

11th 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.

19. On 3rd 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.

20. By 16th 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, the Society conducted a search and found that on 28th

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 30th April 2019 was dishonoured because of stop payment

instructions. A replacement cheque dated 7th October 2019, when

deposited, was almost predictably dishonoured for insufficiency of

funds.

24. On 15th 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.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.

27. The Society held an extraordinary general meeting on 8th

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

the Developer filed its own cross-petition on 26th 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 the Thane Bank was of free-sale flats, but at

least one member’s flat (No. 804) was apparently

mortgaged to Damani.

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 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 subclauses

(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 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 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 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 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 Sadhu,1 gave him time to consider it and invited him to

make his submissions on it. I heard him and Mr Khandeparkar on this

decision and submissions in regard thereto on 18th 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

1 (2019) 2 SCC 241.

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 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 the contract that permits the pursuit of profit.

It is only this aspect of the matter with which we are concerned. In

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.

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

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.

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 within the Girish

Mulchand Mehta & Ors v Mahesh S Mehta & Ors3 line of

judgments and need not detain us. That is now a

separate jurisprudence of its own.

3 2019 SCC OnLine Bom 1986; Aditya Developers v Nirmal Anand Coop

Hsg Soc Ltd & Ors, 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.

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 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.

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 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 short of this will do.4

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.

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.

56. I have previously had occasion to hold in Borivali Anamika

Niwas CHSL vs Aditya Developers & Ors5 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 Ltd:6

13. Before me today Mr. Tamboly for the 2nd

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

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.

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 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.

16. Consequently, Mr. Tamboly’s task as an advisor to

the 2nd 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 that can conceivably be invoked by the 2nd

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.

17. The only argument available to the 2nd

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 which matters would not have come to this pass. The

2nd 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

Ltd vs Meeti Developers,7 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 conduct of parties

the Addendum of 13th December 2017 was somehow

novated and a modified Agreement was arrived at. This

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.

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 reaccommodate

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 profitoriented,

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.

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 as 18th 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 execution of the Addendum i.e. only on 15th 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 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 vs Kumar

Builders Mumbai Realty Private Limited8 and Gopi Gorwani vs Ideal

CHSL.9

61. I am leaving aside any argument about the pandemic and

Covid. The defaults of this Developer go back much further than that.

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.

62. The legal position that I have mentioned above is also the view

taken by this Court in SSD Estatics Pvt Ltd vs Goregaon Pearl Co-op

Housing Society Ltd;10 The New Aarti Co-operative Housing Society Ltd

vs Kabra Estate & Investment Consultants;11 and Solaris Developers Pvt

Ltd vs Eversmile Co-operative Housing Society Ltd.12

63. 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 nor are outside the frame of present discussion.13

64. 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 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

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

11 2015 SCC Online Bom 5929.

12 Arbitration Petition (L) No. 593 of 2019.

13 Goregaon Pearl CHSL Dr Seema Mahadev Paryekar & Ors, 2019 SCC Online Bom 3274; Vaidehi Akash Housing Pvt Ltd vs New DN Nagar Co-operative Housing Society Ltd & Ors, MANU/MH/2888/2014.

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.

65. 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

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.

66. 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