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Cites 1 docs
The Companies Act, 1956
Citedby 3 docs
Ou vs C on 6 May, 2010
C vs H on 21 September, 2010
Dadar, Mumbai - 400 028 vs Dadar, Mumbai - 400 028 on 6 April, 2011

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View the actual judgment from court
Bombay High Court
C vs Smt.Perviz Sarosh on 28 January, 2009
Bench: S. J. Kathawalla

-1-

mgj

IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J.

Notice of Motion No. 1860 of 2006

rt

in

Suit No. 1650 of 2006

ou

Wizard Realtors & Logistics )

Pvt. Ltd., a company )

incorporated under the )

Indian Companies Act, 1956 )

having its registered office)

C

at 2/B-1, India United Mills)

Building, Dr.B.A.Road,Parel )

Mumbai 400 012 ) ..Plaintiffs. versus

h

1. Smt.Perviz Sarosh )

Batliwalla, age not known)

ig

Occupation Household.

2. Kum.Tricia Sarosh

)

)

Batliwalla, age not known)

Occupation Trustees of )

H

Family Trust, residing at)

Supertrish Suyojana )

Society, Koregaon Park, )

Pune 411 001 ) ..Defendants. ....

Mr.Sandeep Parikh, a/w. Ms.Vijaya Mishra, i/b. y

India Law Alliance, for the Plaintiffs. Mr.Shailesh Shah, i/b. Mr.U.L.Shah, for the ba

Defendants.

....

Judgment Reserved on :18.12.2008.

Judgment Pronounced on:28.01.2009.

om

CORAM: S.J.KATHAWALLA J.

DATE : 28TH JANUARY,2009.

J U D G M E N T:

B

1. The plaintiffs are a private limited company which claims to have purchased the property, viz. land admeasuring 473.92 sq. meters and building standing thereon known as "Yasmin Villa", situated ::: Downloaded on - 09/06/2013 14:16:54 ::: -2-

at Parel, on the side of Sopari Baug Road, Mumbai, more particularly described in Schedule which is annexed as Exhibit A to the plaint (the said rt

property) from the defendants.

ou

2. By an agreement dated 4th August, 2003 executed between the defendants, referred to as "vendors" C

and the plaintiffs referred to as "developers", the vendors agreed to sell the said property to the h

developers granting absolute development rights to the plaintiffs at a price therein mentioned and on ig

terms and conditions recorded in the said agreement dated 4th August, 2003. An irrevocable power of H

attorney dated 4th August, 2003 was executed by the defendants simultaneously in favour of two of the Directors of the plaintiffs, granting full y

authority and power to do and execute all acts, ba

deeds and things with regard to demolition of the existing structure, constructing a new building and om

selling the premises in the new building without reference to the defendants. The present suit is filed by the plaintiffs seeking a declaration that B

the alleged termination by the defendants of the development agreement and irrevocable power of attorney both dated 4th August, 2003 is illegal, null and void and that the said agreement and the ::: Downloaded on - 09/06/2013 14:16:54 ::: -3-

power of attorney are valid, subsisting and binding. The plaintiffs have also sought a decree, order and direction against the defendants for rt

specific performance of the development agreement ou

dated 4th August, 2003 and irrevocable power of attorney dated 4th August, 2003. In the Notice of Motion, the plaintiffs have sought ad-interim C

relief against the defendants in respect of the said property, viz., appointment of the Receiver of h

the suit property and injunction in respect thereof.

ig

3. The plaintiffs, after filing of the above suit, H

had moved an ad-interim application before this Court (Coram: Smt.Nishita Mhatre J.) when this Court by its order dated 28th June, 2006 refused y

ad-interim relief to the plaintiffs on the ground ba

that the agreement is a development agreement and not for sale.

om

4. The plaintiffs being aggrieved by the said ad-interim order, preferred an appeal. The Hon'ble B

Appeal Court passed an ad-interim order dated 9th August, 2006 restraining the defendants from dealing with, disposing of, alienating or encumbering the said property. The appeal was ::: Downloaded on - 09/06/2013 14:16:54 ::: -4-

disposed of by an order dated 19th September, 2006. From the said order it is clear that the Counsel for the parties agreed that until disposal of the rt

Notice of Motion the ad-interim order passed by the ou

Hon'ble Appeal Court on 9th August,2006 shall remain operative. The Hon'ble Appeal Court by its order dated 19th September, 2006 requested the C

Trial Court to hear and decide the Notice of Motion expeditiously and if possible within a period of 3 h

months from the date of the order i.e. 19th September, 2006. The defendants were also granted liberty to

ig apply to the Trial Court for vacating the ad-interim order. It was further clarified H

that the Notice of Motion shall be decided by the learned Single Judge on its own merits without being influenced by the ad-interim order dated 9th y

August, 2006.

ba

5. The defendants have filed their affidavit in om

reply to the Notice of Motion and their written statement on 3rd October, 2006. The plaintiffs have filed their rejoinder on 29th November, 2006. B

Despite the pleadings being complete and despite the orders obtained from the Hon'ble Appeal Court for expeditious hearing of the Notice of Motion, admittedly, when the Notice of Motion was taken up ::: Downloaded on - 09/06/2013 14:16:54 ::: -5-

for hearing on 20th February, 2007 and 3rd October, 2008, the parties sought time on the ground that the parties are negotiating for settlement. On rt

25th November, 2008 when the matter reached hearing ou

before this Court the parties once again sought time on the ground that parties have settled the matter and would be filing the consent terms C

shortly. This Court, therefore, after recording that the parties are seeking time since last one h

and half years on the ground that they are negotiating settlement, as a last chance adjourned the hearing

igof the Notice of Motion to 10th December, 2008. On 15th December, 2008 the parties H

once again sought time on the ground that they are negotiating settlement. In view of my earlier order dated 25th November, 2008 the parties were y

asked to proceed with the hearing of the Notice of ba

Motion. A day's time was sought which was granted. The Notice of Motion was, therefore, heard on 16th om

and 18th December, 2008.

6. Under the said agreement dated 4th August, B

2003, the plaintiffs and the defendants have, inter alia, agreed thus:

i) in recital (f) of the agreement, it is provided ::: Downloaded on - 09/06/2013 14:16:54 ::: -6-

that the plaintiffs (developers) proposed to redevelop the said property by demolishing the existing structures and constructing the new rt

building thereon in accordance with the plan to be ou

sanctioned by the Mumbai Municipal Corporation and for that purpose, the developers are negotiating with the tenants and have agreed to give self C

contained flats to the tenants on ownership basis in the new building proposed to be constructed; h

ii) Under clause (1)a of the agreement, the defendants

ig

(vendors) granted unto the plaintiffs (developers) exclusive development rights in H

respect of the said property and clarified that the developers will be entitled to all rights arising out of the said property including by way of y

additional/extra FSI available, as the structures ba

on the said property are cessed structures, or by way of purchase of T.D.R. or Road set back etc. om

iii) Under clause 2 of the said agreement, it is agreed that the total consideration payable by the B

developers to the vendors for acquiring the development rights in respect of the said property is an aggregate lumpsum of Rs.45,00,000/- out of which Rs.5,00,000/- would be paid on execution of ::: Downloaded on - 09/06/2013 14:16:54 ::: -7-

the agreement; Rs.39,00,000/- would be paid within 15 days from obtaining the consent letters/agreement for alternative accommodation rt

from all the tenants or 90 days from the date of ou

agreement whichever is earlier. Balance Rs.1,00,000/- was payable at the time of executing the conveyance deed in favour of the society or C

within 18 months from the date of agreement, whichever is earlier.

h

iv) Clause 3 of the agreement provided that the vendors

ig

shall hand over peaceful possession of the said property to the developers only after H

receiving the balance consideration of Rs.40,00,000/-

y

v) Under clause 4 of the agreement, the vendors ba

declared that the title to the said property is free from all encumbrances save and except the om

tenancy/occupancy rights of the persons residing therein. The vendors further stated that they have not entered into any agreement under which they B

have created any rights in respect of the suit property in favour of any third party. The vendors declared that they shall cooperate to obtain all necessary approvals, permissions, sanction from the ::: Downloaded on - 09/06/2013 14:16:54 ::: -8-

concerned authorities for selling the land and transferring the development rights and ultimately transferring the said property to the developers. rt

ou

vi) Under clause 5 of the agreement, it was agreed that the vendors shall at all times as may be required and in such manner as may be required C

execute and cause to be executed in favour of the developers or their nominees such further deeds, h

documents and writings including the conveyance inrespect of the said property.

ig

vii) Under clause 7 of the agreement, it was inter H

alia agreed that after demolition of the structures on the said property, the remaining debris, steel, wood and other material shall be the property of y

the developers and the developers shall have the ba

right to sell it and retain the sale proceeds thereof.

om

viii) Under clause 8 of the agreement the vendors undertook to pay all the taxes, cess taxes, cess B

repair payments and other outgoings and payments to the Mumbai Municipal Corporation , MHADA or any other Government or semi government authorities in respect of the said structure and property till the ::: Downloaded on - 09/06/2013 14:16:54 ::: -9-

date of handing over the said property to the developers.

rt

ix) Under clause 9 of the agreement it was agreed ou

that the developers alone shall be entitled for additional FSI along with the regular FSI and the vendors do not and shall not claim any share, right C

and interest of any nature whatsoever in such additional FSI or income or sale proceeds thereof. h

x) Under clause 11 of the agreement, it was agreed that the

ig

developers upon taking possession shall have the right to demolish the structure on the H

said land and to commence construction as per necessary permissions and to carry out the same in accordance with law at the costs and at the risk y

and responsibility of the developers and for the ba

exclusive benefit of the developers. om

xi) Under clause 13 of the agreement, it was agreed that the developers shall subject to the vendors' right under the agreement have the right to raise B

loans from the financial institutions by mortgaging the said property and that it would be the sole responsibility of the developers to repay the loans and not to hold the vendors responsible therefor in ::: Downloaded on - 09/06/2013 14:16:54 ::: -10-

any manner whatsover.

xii) Under clause 16 of the agreement, the vendors rt

agreed and undertook to execute the ou

conveyance/other documents for transferring the said property to the society or other entity of the premises, as and when called upon to do so by the C

developers provided all the amounts payable under the agreement are paid to the vendors. h

7. Under the power of attorney executed ig

simultaneously with the said development agreement, almost all the powers of the owners were given to H

the developers including the power to enter upon the said property and to carry out the development work in respect thereof. The developers were y

amongst others also given power to sell, lease, ba

mortgage or transfer the said property or any part thereof to such person/s and on such terms and om

conditions as the developers would deem fit and proper for the purpose of complying with the provisions of Maharashtra Ownership Flats Act. In B

short, every power to deal with the said property was given by the defendants (vendors) to the plaintiffs (developers) under the said power of attorney also dated 4th August, 2008. ::: Downloaded on - 09/06/2013 14:16:54 ::: -11-

8. Admittedly after the execution of the said Agreement and Power of Attorney both dated 4th rt

August, 2003, no correspondence is carried out ou

between the plaintiffs and the defendants until the defendants purportedly terminated/cancelled the said agreement and the power of attorney by their C

letters dated 23rd December, 2005. and 29th January, 2006.

h

9. The plaintiffs have submitted that the relations

ig

between the Directors of the plaintiffs and the defendants were extremely cordial. The H

Directors of the plaintiffs regularly requested the defendants to deliver the original documents of title for the purpose of inspection of title. The y

defendants assured them that they would trace the ba

original documents and deliver them to the plaintiffs' Directors. The defendants failed to do om

so and the plaintiffs were, therefore, unable to instruct their Advocate to inspect the title of the property for certifying the marketability of the B

title. The defendants have submitted that prior to the execution of the said agreement, the photostat copies of the documents were provided to the plaintiffs. The plaintiffs have denied having ::: Downloaded on - 09/06/2013 14:16:54 ::: -12-

received photostat copies and have submitted that in any event,the Advocates would not certify the marketability of the title without inspecting the rt

originals. It was submitted that the declaration ou

of the vendors in the agreement that they have not created any rights in respect of the said property in favour of any third party can only be verified C

if the original documents are shown/given to the plaintiffs for inspection/investigation. h

10. It is an admitted fact that upon execution of the

ig

said agreement, the plaintiffs paid an amount of Rs.5,00,000/- to the defendants towards the H

agreed consideration of Rs.45,00,000/-. However, the plaintiffs submit that the obligation to make payment of Rs.39,00,000/- as per clause 2 of the y

agreement was waived and/or not insisted upon by ba

the defendants because the defendants were unable to trace the original title deeds of the said om

property and also because the defendants were fully aware of the difficulties faced by the plaintiffs in dealing with some of the tenants of the building B

who were not cooperating with the plaintiffs. It is submitted that the defendants, therefore, did not insist upon the plaintiffs making full payment of Rs.39,00,000/- to the defendants after expiry of ::: Downloaded on - 09/06/2013 14:16:54 ::: -13-

90 days from the date of execution of the agreement. The defendants requested the plaintiffs to make part payment of Rs.3,00,000/- in cash in rt

March, 2004 which was paid on 30th March, 2004, ou

receipt whereof is acknowledged by the defendants. It is submitted that pursuant to the terms of the said agreement read with the irrevocable power of C

attorney the plaintiffs entered into the possession of the property.

h

11. The plaintiffs submitted that since the ig

obligation of the plaintiffs to make payment as per clause 2 of the said agreement was waived and/or H

not insisted upon by the defendants, it was felt necessary to execute another document which would state that the development agreement and y

irrevocable power of attorney are valid, subsisting ba

and binding. Therefore, the defendants after more than a year from the date of execution of the said om

agreement dated 4th August, 2003 executed a declaration dated 21st October, 2004 confirming that the said agreement for sale and development B

agreement is valid, subsisting and binding and further stated that on finalization of the list of tenants and negotiations with the tenants for temporary and permanent alternative accommodation, ::: Downloaded on - 09/06/2013 14:16:54 ::: -14-

the defendants shall register the development agreement and irrevocable power of attorney. The said declaration dated 21st October, 2004 is at rt

Exh.E to the plaint.

ou

12. It is submitted by the plaintiffs that after prolonged negotiations the plaintiffs were able to C

execute the agreement with the tenants and obtained their consent for development of the property and h

to deliver to the plaintiffs the possession of their respective premises. The plaintiffs have ig

agreed to provide free accommodation to the tenants in the proposed new structure.

H

13. It is submitted that since the plaintiffs were dealing with the said property they incurred y

various expenses for the said property. The ba

plaintiffs inter alia paid the property taxes to the Mumbai Municipal Corporation, electricity om

charges, repairs cess charges to MHADA. The plaintiffs have annexed a chart being Exh.F to the plaint setting out the details of payment made by B

the plaintiffs for development of the said property aggregating to Rs.14,59,297.05. Except for the alleged cash payment of Rs.3,00,000/- all the expenses incurred by the plaintiffs are by cheque. ::: Downloaded on - 09/06/2013 14:16:54 ::: -15-

The defendants as pointed out hereinafter initially denied on oath all the expenses made by the plaintiffs but later on upon being pointed out by rt

this Court that the amounts are paid by the ou

plaintiffs by cheques the particulars of which are given, the defendants, interalia admitted that the bills pertaining to the property taxes and repairs C

cess were paid by the plaintiffs to the Mumbai Municipal Corporation and MHADA respectively. h

14. The plaintiffs further submitted that with ig

their efforts they got the letters addressed to the defendant no.2 being the owner of the said property H

from the Executive Engineer, Mumbai Building and Repairs and Reconstruction Board, Parel, Mumbai 400 012 dated 29th June, 2004 inviting the attention of y

the defendants for directions of the Government for ba

grant of additional 2.5 FSI for redevelopment of the property category "A". The said property is om

classified by the Municipal Corporation of Greater Mumbai as "A" category for the purpose of levying repairs cess.

B

15. It is submitted by the plaintiffs that they were unable to submit the development plan of the said property to the Municipal Corporation of ::: Downloaded on - 09/06/2013 14:16:54 ::: -16-

Greater Mumbai in view of the interim relief granted by this Court in Public Interest Litigation being Writ Petition No.3189 of 2004 challenging the rt

grant of additional FSI to redevelopment of the ou

property under the DCR and further restraining the Planning Authorities to grant additional FSI under the DCR. This Court by its order and judgment C

dated 17th October, 2005 finally disposed of the said writ petition appointing two committees, one h

to ascertain the structural condition of the buildings requiring redevelopment and another ig

committee for ascertaining whether the occupants of the respective buildings are the genuine tenants in H

the property to be developed under the said DCR. Though the plaintiffs are aware that the Special Leave Petition against the said order and judgment y

dated 17th October, 2005 is pending for admission, ba

the plaintiffs have now commenced and are in the process of submitting all the information, the om

documents and plans to the Court appointed committees for the purpose of obtaining their sanction for development of the said property. B

16. The plaintiffs have submitted that the defendants were regularly kept informed by the plaitniffs about various steps taken by the ::: Downloaded on - 09/06/2013 14:16:54 ::: -17-

plaintiffs with regard to the said property and also about the orders issued by this Court in the PIL. However, to the utter shock and surprise of rt

the plaintiffs, the defendants addressed to the ou

plaintiffs a letter dated 23rd December, 2005 and incorrectly stated that the plaintiffs were in alleged serious breach of the said agreement for C

having failed to pay the sum of Rs.39,00,000/- within a period of 90 days from 4th August, 2003 h

being the date of the said agreement. The defendants in the said letter made an illegal demand

ig

for payment of interest at the rate of 18% p.a. on the said sum of Rs.39,00,000/- from 3rd H

November, 2002 to 3rd January, 2006 amounting to Rs.22,23,000/- and also demanded additional 50% of Rs.45,00,000/- in view of the increase in the price y

of the immovable properties. It was recorded that ba

if the plaintiffs failed to pay the entire sum of Rs.83,73,000/- within 15 days from the date of om

issue of the letter then the defendants will sell the property to other parties who have already approached the defendants for the same. B

17. According to the plaintiffs on receipt of the said letter the plaintiffs' Directors immediately contacted the defendants and held negotiations with ::: Downloaded on - 09/06/2013 14:16:54 ::: -18-

a view to arrive at an amicable settlement and avoid unnecessary litigation. The plaitniffs made it clear to the defendants that the plaitniffs were rt

not in breach of the said agreement and the ou

defendants were not entitled to forfeit the money and the said agreement was valid, subsisting and binding on the defendants. The plaintiffs stated C

that the defendants demand for interest and enhanced consideration was illegal and without any h

basis. The plaintiffs also offered to make full payment of balance sum of Rs.39,00,000/- to the defendants.

ig The defendants sought time to consider the plaintiffs' offer. However, the defendants' by H

another letter dated 29th January, 2006 addressed to the plaintiffs stated that the defendants have terminated the development agreement by their y

letter dated 23rd December, 2005 and further sought ba

to revoke the irrevocable power of attorney. om

18. The plaintiffs, therefore, by their Advocate's letter dated 8th February, 2006 addressed to the defendants inter alia brought to the notice of the B

defendants the failure on their part to perform their obligations under the said agreement. It was pointed out that the defendants had executed the declaration dated 21st October, 2004 confirming ::: Downloaded on - 09/06/2013 14:16:54 ::: -19-

that the development agreement and irrevocable power of attorney are valid, subsisting and binding. It was stated that the plaintiffs had rt

dealt with the said property with the knowledge and ou

consent of the defendants and that the plaintiffs had after prolonged negotiations obtained the consent letter from the tenants and that the C

plaintiffs have also paid the property taxes. It was stated that time was not made the essence of h

the contract and that the defendants had till date failed to hand over the original title deeds to the plaintiffs

ig

for the purpose of verification of the defendants' title to the said property. H

19. The defendants have by their letter dated 17th February, 2006 denied the plaintiffs' statement and y

for the first time raised the contention that the ba

plaintiffs had allegedly committed a fraud on the defendants by obtaining unlimited power of attorney om

from the defendants and that the defendants were under the impression that they had executed a limited power of attorney to only deal with the B

tenants. The defendants also for the first time contended that the said agreement was signed on a false representation made by Mr.Ameya Naik, namely,that the property is being purchased by the ::: Downloaded on - 09/06/2013 14:16:54 ::: -20-

State Bank of India through its Labour Union whereas Mr.Ameya Naik is doing business on behalf of his son and his friend. The defendants also rt

alleged that the declaration dated 21st October, ou

2004 was obtained on a false promise, namely, that the plaintiffs are bringing the full amount of consideration. In short, the defendants have C

alleged that all the documents i.e. the development agreement and the power of attorney h

both dated 4th August, 2003 and the declaration dated 21st October, 2004 are all executed by them because

ig

of fraud/misrepresentation on the part of the plaintiffs. The plaintiffs by their letter H

dated 11th March, 2006 addressed to the defendants denied the allegations made by the defendants and once again offered to pay to the defendants the y

balance consideration amount subject to the ba

defendants handing over the original documents/title deeds for the plaintiffs' title om

verification. The plaintiffs have submitted that the defendants have continued to permit the plaintiffs to deal with the said property after B

expiry of the period of 90 days from the date of development agreement and have not insisted upon payment being made as per clause 2 of the development agreement. The plaintiffs have paid ::: Downloaded on - 09/06/2013 14:16:54 ::: -21-

the property taxes and incurred expenditure to the tune of Rs.14,59,296.05 and has proceeded to obtain the consent letters from the tenants. Due to rt

defendants' active consent the plaintiffs have ou

dealt with the said property and have altered the position to its detriment. The defendants are, therefore, estopped from alleging that the C

plaintiffs are in breach of the terms of the development agreement and/or that the plaintiffs h

have failed to perform with their obligations under the same.

ig

20. The plaintiffs have submitted that they are, H

therefore, entitled to the relief sought in the suit filed by them on 11th May, 2006 and pending the suit the said property needs to be protected y

and they are also entitled to the reliefs sought in ba

the Notice of Motion.

om

21. The first submission made on behalf the defendants is that the agreement dated 4th August, 2003 is a development agreement and no interest can B

be said to have been created in favour of the developers i.e. the plaintiffs. In support of this contention the defendants have submitted two unreported decisions of this Court. The first ::: Downloaded on - 09/06/2013 14:16:54 ::: -22-

decision is in Notice of Motion No.1568 of 2004 in Suit No. 1455 of 2004 dated 7th/8th December, 2006 (Coram: S.J.Vazifdar J.) and the second decision rt

is in Notice of Motion No.3820 of 2006 in Suit ou

No.3151 of 2006 dated 13th April, 2007 (Coram: D.K.Deshmukh J.). As is stated in all the decisions on this subject/issue, even in the C

aforesaid two decisions it is stated that an absolute inflexible rule prohibiting the specific h

performance of all development agreements would work extremely unfairly to developers who may have invested

ig

their resources pursuant to the agreement or otherwise altered their position to their H

detriment. It is neither possible nor desirable to enumerate exhaustively the circumstances in which specific performance of a development agreement can y

be granted. It would depend upon the nature of the ba

agreement and facts and circumstances of each case. It is important always to distinquish between om

development agreement and mere construction contract. In the latter it would generally be difficult to sustain a clause for specific B

performance.

22. In view of the above, this Court will have to examine the nature of the agreement and the facts ::: Downloaded on - 09/06/2013 14:16:54 ::: -23-

and circumstances in the present case. The relevant clauses setting out the terms and conditions of the development agreement dated 4th rt

August, 2003 are already set out hereinabove. It ou

is clear from the same that the vendors and developers under the development agreement dated 4th August, 2003 agreed as follows: C

i) that the developers would be entitled to all h

rights arising out of the said property including by way of additional/extra FSI available or by way ig

of purchase of TDR or Road set back. H

ii) that the vendors do not and shall not claim any share right, title or interest of any nature whatsoever in the said additional FSI or income or y

sale proceeds thereof.

ba

iii) that the vendors shall co-operate to obtain om

all necessary approvals, permissions and sanctions from the concerned authorities for selling the land and transferring the development rights and B

ultimately transferring the said property to the developers.

iv) that the vendors shall execute in favour of the ::: Downloaded on - 09/06/2013 14:16:54 ::: -24-

developers or their nominee all deeds, documents and writings including conveyance in respect of the said property.

rt

ou

v) that the developers at their own costs and expenses have to settle with all the 14 tenants by offering permanent alternative accommodation in the C

new proposed building for which the vendors shall not be finally or otherwise responsible. h

vi) that after demolition of the structures on the said lands,

ig the debris, steel, wood and other materials would be the property of the developers H

and the developers are given right to sell the same and retain the sale proceeds thereof. y

vii) that the responsibility of the vendors for ba

payment of taxes,repairscess etc. to Mumbai Municipal Corporation/MHADA or any other Government om

authority in respect of the said structures is only till date of handing over the property to the developers.

B

viii) that the developers upon taking possession shall have the right to demolish the structure on the said land and commence construction at their ::: Downloaded on - 09/06/2013 14:16:54 ::: -25-

costs and at their risk and responsibility and for their exclusive benefits. It is also agreed that the developers subject to the vendors' right would rt

have a right to raise loan from the financial ou

institutions by mortgaging the said property and the responsibility to pay loans would be that of the developers and the vendors would not be held C

responsible in any manner whatsoever. h

ix) that the vendors have further agreed and undertaken to execute the conveyance/other ig

documents for transferring the said property to the agency or other entity of the premises as and when H

called upon to do so by the developers provided all the amounts payable under the agreements are paid to the vendors.

y

ba

23. On the date of execution of the said agreement the vendors have also simultaneously executed in om

favour of the plaintiffs a power of attorney dated 4th August, 2003 whereunder the plaintiffs (developers) are allowed to enter upon the said B

property and to carry out the development work. The plaintiffs (developers) are also allowed to sell, lease, mortgage or transfer the said property or any part thereof to such person/s and on such ::: Downloaded on - 09/06/2013 14:16:54 ::: -26-

terms and conditions as the plaintiffs (developers) deem fit and proper and/or to enter into the agreement and contracts with the third parties rt

selected by the developers for the purpose of ou

complying with the provisions of the Maharashtra Ownership Flats Act.

C

24. The defendants have made a feeble attempt of alleging that the power of attorney, according to h

them, was for a limited purpose that is to deal with the tenants and only after receiving the entire

ig

consideration they were to give full power of attorney and that full power of attorney is, H

therefore, obtained by fraud by the plaintiffs and the plaintiffs were never allowed to enter upon the said property as set out in the power of attorney y

dated 4th August, 2003. This contention of the ba

defendants is inter alia belied from the following: om

i) Under clause 3 of the said agreement it is agreed that the vendors/defendants shall hand over possession of the said property to the B

developers/plaintiffs only after receiving balance consideration of Rs.40,00,000/-

ii) Under Clause 8 of the Development agreement the ::: Downloaded on - 09/06/2013 14:16:54 ::: -27-

vendors have undertaken to pay all taxes, cess, cess repairs payment and other outgoings and payment to Mumbai Municipal Corporation/MHADA in rt

respect of the said structures and the property ou

till the date of handing over the said property to the plaintiffs/developers. Admittedly, till the purported termination of the agreement by the C

vendors the plaintiffs have not paid the balance consideration of Rs.40,00,000/- After initial h

denial, and now admittedly, the plaintiffs / developers have paid the municipal taxes from 22nd ig

September, 2003 to 13th April, 2005 and repairscess for the period 6th January, 2005 to 13th November, H

2005.

iii) The aforesaid facts establish beyond doubt y

that the power of attorney immediately came into ba

effect and the plaintiffs/developers entered upon the said property in accordance with the said power om

and also started paying taxes/repairscess which under the agreement was to be paid by the vendors/defendants until the developers pay the B

balance consideration of Rs.40,00,000/- and obtained possession of the said property from the vendors/defendants.

::: Downloaded on - 09/06/2013 14:16:54 ::: -28-

25. From the aforesaid terms of the agreement and power given by the vendors to the developers under the power of attorney I am prima facie of the view rt

that though the Agreement is termed as development ou

agreement it is in fact an agreement for sale entered into by the vendors in favour of the developers whereunder interest is created in favour C

of the developers in respect of the said property which include the structures standing thereon. In h

fact, there is no doubt that in terms of the said power of attorney the defendants also entered upon the said

ig

property and started carrying out the work. As stated in the agreement, they entered H

into negotiations with all the 14 tenants and obtained their consent letters. Apart from admittedly paying Rs.8,50,000/- to the y

vendors/defendants, they have paid the property ba

taxes and incurred expenses as shown in Exh.F to the plaint. Except for the amount of Rs.3,00,000/- om

paid in cash they have given the particulars of all the cheque payments made by them. The plaintiffs by their efforts have got the letters addressed to B

the 2nd defendant from the Mumbai Building and Repairs and Reconstruction Board inviting the attention of the defendants for direction of the Government for a grant of additional 2.5 F.S.I. ::: Downloaded on - 09/06/2013 14:16:54 ::: -29-

for redevelopment of the property which is classified by the Municipal Corporation as "A" category for the purpose of levy of repairscess. rt

The plaintiffs are also in the process of ou

submitting all information, documents and plans to the Court appointed committees for the purpose of obtaining their sanction for the development of the C

said property. In view of the above, taking into account the nature of the agreement and the facts h

and circumstances of the case and taking into consideration the decision of the Hon'ble Division Bench

ig

of this Court, reported in 2007 (3) Mh.L.J. 402, I am of the prima facie view that the H

agreement dated 4th August, 2003 is capable of being specifically performed.

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26. Admittedly the parties have not entered into ba

any correspondence after 4th August, 2003 until the agreement was purportedly terminated by the om

defendants' letters dated 23rd December, 2005 and 29th January, 2006. The plaintiffs have stated that this is so because of the cordial relations B

between the plaintiffs and defendants. The defendants have denied that the relations between the plaintiffs and defendants were cordial. However, they have admitted before the Court that ::: Downloaded on - 09/06/2013 14:16:54 ::: -30-

they cannot explain as to why there was no correspondence between the parties from the date of execution of the agreement till its purported rt

termination. The purported termination is on the ou

ground that the plaintiffs have failed to deposit Rs.39,00,000/- within 90 days of the execution of the agreement i.e. on or before 4th November, C

2003. The plaintiffs have submitted that the defendants/vendors waived/did not insist on the h

said clause because they have misplaced the title deeds and also because the defendants have realised the

ig

problem which the plaintiffs were facing with the tenants qua the negotiations and obtaining H

their consent for alternative accommodation in the proposed new construction. The defendants have denied this submission of the the plaintiffs and y

have submitted that there is no waiver on their ba

part qua the said condition of payment of Rs.39,00,000/- on or before 4th November, 2003. om

Therefore, if it is prima facie established that the defendants had waived the requirement of payment of Rs.39,00,000/- by the plaintiffs on or B

before 4th November, 2003 on any ground whatsoever, the termination of the agreement would be prima facie bad and illegal.

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27. That the conduct of the defendants is not bonafide and it prima facie appears that they had waived the condition of deposit of Rs.39,00,000/- rt

by the plaintiffs on or before 4th November, 2003 ou

is clear from the following.

i) After execution of the agreement and even in the C

letters of cancellation/termination of the agreement/power of attorney dated 23rd December, h

2005 and 29th January, 2006 the defendants have not alleged that the agreement itself (dated 4th ig

August, 2003) was entered into by fraud perpetrated by the plaintiffs. The only allegation found in H

the letter dated 17th February, 2006 is that Mr.Umesh Naik representative of the plaintiffs had informed the defendants that he is doing business y

on behalf of his son and his friend and the ba

property was to be purchased by the State Bank of India through its labour Union. It was alleged om

that Mr.Umesh Naik is the officer of State Bank of India which the defendants came to know after his last visit to Pune. However, when the written B

statement is filed a completely new story of fraud has surfaced. For the first time the defendants have alleged that Mr.Umesh Naik representative of the plaintiffs had represented to the defendants ::: Downloaded on - 09/06/2013 14:16:54 ::: -32-

that part of the newly constructed building would be used as a Holiday Home for the benefit of the members of the State Bank of India Staff Unit who rt

are taking treatment for cancer at Tata Memorial ou

Hospital at Parel and the defendants were induced to accept the offer of the plaintiffs which was less than the market price and, therefore, the said C

agreement is void. Interestingly, though as stated aforesaid in the letter dated 17th February, 2006 h

it was alleged that Mr.Umesh Naik had suppressed that he was the officer of the State Bank of India ig

and that the defendants have now come to know about this only after his last visit to Pune, in H

paragraph 7 of the written statement, it is alleged that the representation made to the defendants was that Mr.Umesh Naik being the employee of the State y

Bank of India could not be the Director of the ba

Defendants company.

om

ii) The defendants, as set out earlier, have alleged in their letter dated 17th February 2006 that they were still under an impression that the B

plaintiffs have taken the power of attorney only to deal with the tenants. The detailed power of attorney obtained from the defendants by the plaintiffs has been fraudulently obtained. As set ::: Downloaded on - 09/06/2013 14:16:54 ::: -33-

out hereinabove, in the agreement it is expressly agreed that the possession of the suit property would be given to the plaintiffs only upon the rt

plaintiffs making payment of the balance ou

consideration of Rs.40,00,000/- to the defendants and until possession is so given to the plaintiffs, the vendors would pay all the property taxes/cess C

to the Municipal Corporation/MHADA. Under the power of attorney the plaintiffs have been given h

the power to enter upon the said property and start development work. Since the plaintiffs were ig

allowed to enter upon the suit property pursuant to the power of attorney, the vendors stopped paying H

taxes/cess which the vendors were not supposed to stop until the balance consideration was paid to the defendants by the plaintiffs under the y

agreement and the same was admittedly paid by the ba

plaintiffs/developers which itself shows that the detailed power of attorney was in force to the om

knowledge of the defendants who are now wrongly contending that the power of attorney is obtained from them by fraud.

B

iii) The plaintiffs have submitted that since the obligation of the plaintiffs to make payment as per clause 2 of the said agreement was waived and/or ::: Downloaded on - 09/06/2013 14:16:54 ::: -34-

not insisted upon by the defendants it was felt necessary to execute another document which would state that the development agreement and the power rt

of attorney were valid, subsisting and binding. ou

Therefore, the defendants executed the declaration dated 25th October, 2004 confirming that the said agreement for sale and development agreement is C

valid, subsisting and binding and further stated that on finalising the list of tenants and h

finalising the negotiations with the tenants for temporary and permanent alternative accommodation the

ig

defendants shall register the development agreement and irrevocable power of attorney. This H

document itself shows that the defendants have waived the condition requiring the plaintiffs to make payment of Rs.39,00,000/- on or before 4th y

November, 2003. The defendants while confirming ba

that the development agreement is valid, subsisting and binding are not making even a whisper of om

requirement of payment of Rs.39,00,000/- by the plaintiffs even though the same is executed on 21st October, 2004. Both the letters of B

termination/cancellation from the defendants to the plaintiffs dated 23rd December, 2005 and 29th January, 2006 are silent as regards the said declaration dated 21st October, 2004. It is only ::: Downloaded on - 09/06/2013 14:16:54 ::: -35-

when the plaintiffs mentioned about the said declaration in their Advocate's reply dated 8th February, 2006 that the defendants have in their rt

letter dated 17th February, 2006 addressed to the ou

Advocate for the plaintiffs, for the first time come up with a story that the said declaration was obtained by the plaintiffs from the defendants on a C

false promise that the plaintiffs would bring the full amount of consideration but never turned up h

after obtaining the defendants' signature on 21st October, 2004. Apart from the fact that the said contention

ig is nowhere found in the termination/cancellation letter as aforestated, H

interestingly, the defendants, who deny that the relations between the plaintiffs and defendants were cordial, have not bothered to write a single y

letter after 21st October, 2004 to the plaintiffs ba

setting out that the said declaration was obtained from them by misrepresentation.

om

iv) The plaintiffs have set out the expenses incurred by them after entering upon the said B

property, particulars of which are given in Exh. F to the plaint. The defendants in paragraph 20 of their written statement denied that the plaintiffs have paid any amount alleged to have been spent by ::: Downloaded on - 09/06/2013 14:16:54 ::: -36-

them and further submitted that the defendants have failed and neglected to give inspection to the defendants. When the matter was being argued rt

before this Court on 16th October, 2008 the ou

defendants once again denied that the plaintiffs had paid property taxes/repairscess as alleged, despite having taken inspection of the cheque C

book/cheque numbers from the plaintiffs on 6th September, 2006. It is only when this Court h

pointed out to the learned Advocate for the defendants that particulars by way of dates, cheque ig

numbers and amounts pertaining to the payments made towards the property taxes/repairscess, are H

provided by the plaintiffs and the defendant cannot be heard to say that the plaintiffs have not made any such payments, the defendants admitted that the y

said property taxes and repairscess were paid by ba

the plaintiffs. It is clear that the defendants were through out disputing the said payments om

because the defendants were conscious of the fact that if the said amounts are admitted to have been paid by the plaintiffs, it would be established B

that the plaintiffs pursuant to the power of attorney dated 4th August, 2003 have entered into the said property and started development work which in turn would show that the said clause of ::: Downloaded on - 09/06/2013 14:16:54 ::: -37-

the plaintiffs being required to pay the amount of Rs.39,00,000/- to the defendants on or before 4th November, 2003 was waived/ not insisted upon by the rt

defendants.

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28. In view of the aforesaid, I am prima facie convinced that the defendants had waived/not C

insisted upon the condition of making payment of Rs.39,00,000/- to the defendants within three h

months of the date of execution of the agreement i.e. on or before 4th November, 2003. No reasonable

ig

and/or prudent seller who denies any cordial relations with the plaintiffs, would keep H

waiting for the said amount and allow the buyers to enter upon the said property and start development work unless he has waived the condition of such y

payment on or before the specified date. With such ba

a requirement in force no prudent seller would after more than a year make a declaration that the om

agreement is valid and binding without making a whisper about the requirement to pay the said amount of Rs.39,00,000/- which was required to be B

paid within three months from the date of execution of the agreement. In fact, the declaration dated 21st October 2004 executed by the defendants, itself establishes the fact that the defendants had ::: Downloaded on - 09/06/2013 14:16:54 ::: -38-

waived/ not insisted upon the payment of Rs.39,00,000/- by the plaintiffs on or before 4th November 2003.

rt

ou

29. I am therefore convinced that the defendants who had waived the condition of receiving payments on or before 4th November, 2003 C

have wrongly terminated the said agreement and power of attorney dated 4th August, 2003 on the h

ground that the plaintiffs were required to pay the amount of Rs.39,00,000/- to the defendants within 90 days

ig

of the date of the agreement, time being the essence. The reason given for such termination H

is, therefore, incorrect to the knowledge of the defendants.

y

30. As set out earlier, the plaintiffs have out ba

of the said consideration of Rs.45,00,000/- admittedly paid an amount of Rs.8,50,000/- to the om

defendants. The plaintiffs have been allowed to enter upon the suit premises by the defendants. The plaintiffs have entered into prolonged B

negotiations with the tenants and obtained their consent for development of the property and to deliver to the plaintiffs possession of their respective premises. The plaintiffs have agreed to ::: Downloaded on - 09/06/2013 14:16:54 ::: -39-

provide free accommodation to the tenants in the proposed new structure. The plaintiffs have incurred substantial expenditure towards the rt

architect's fees electricity charges, property ou

taxes paid, repairs cess, professional fees of the Advocates etc. The plaintiffs have also taken steps and approached the office of the Executive C

Engineer, Bombay Building Repairs and Reconstruction Board and have made them to issue h

letters to the defendants inviting attention of the defendants for directions of the Government for grant of

ig

Additional 2.5 FSI for redevelopment of the property classified under Category "A". The H

plaintiffs have also commenced and are in the process of submitting all information documents and plans to the Court appointed Committee for the y

purpose of obtaining their sanction for development ba

of the said property. The balance of convenience is also in favour of the plaintiffs. Since I have om

as aforestated prima facie come to the conclusion that the Agreement dated 4th August, 2003 is capable of being specifically performed; the B

condition of deposit of Rs.39,00,000/- to be paid on or before 4th November 2003 by the plaintiffs to the defendants being waived/not insisted upon by the defendants the conduct of the defendants ::: Downloaded on - 09/06/2013 14:16:54 ::: -40-

rt

ou

C

h

ig

H

y

ba

om

B

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H

lacking bonafide, I am of the view that pending hearing and final disposal of the suit, the said property needs to be protected. The Notice of y

Motion is, therefore, made absolute in terms of ba

prayer clauses (b) and (c) except the words 'dealing with' in prayer clause (c), on condition om

that the plaintiffs deposit in this Court a sum of Rs.38,50,000/- being the balance consideration under the said agreement dated 4th August, 2003 B

within a period of two weeks from the date of this order. On such amount being deposited, the Prothonotary and Senior Master shall invest the entire amount in a fixed deposit of any ::: Downloaded on - 09/06/2013 14:16:54 ::: -42-

Nationalised Bank initially for a period of one year which shall be renewed thereafter from year to year or until further orders of this Court. In the rt

event of failure on the part of the plaintiffs to ou

deposit the said amount as above, the interim injunction granted would stand vacated forthwith without reference to this Court.

C

31. Needless to add that all the observations h

herein are prima facie and the suit between the parties shall be decided by this Court without ig

being influenced by any observations made herein. H

32. The learned Advocate for defendants seeks stay of order for a period of 4 weeks. The Court Receiver shall not take possession for a period of y

4 weeks from today.

ba

33. Notice of Motion therefore stands disposed om

of. Defendants to pay costs of this notice of motion to the plaintiffs.

B

(S.J.KATHAWALLA J.)

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