SHADAB YUSUF MUKADAM AND 14 ORS vs MOHAMMED ALI MOHAMMED SALIH DECEASED THROUGH LH A TO E AND ANR

2026:BHC-OS:5678

Judgment-CARBP-3903-23+5353 - FINAL.doc


IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CHAITANYA
ASHOK
JADHAV
Digitally signed by
CHAITANYA ASHOK
JADHAV
Date: 2026.03.05
18:41:17 +0530
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (L) NO. 3903 OF
2023
Mohammed Ali M. Sali (since deceased)
Through Legal Heirs (a) Fatima Nalakath
Sahusintavide & Ors. …Petitioners
Versus
Rajaram Chavan Real Estate Private Limited …Respondent
WITH
INTERIM APPLICATION (L) NO. 4575 OF 2023
IN
COMMERCIAL ARBITRATION PETITION (L) NO. 3903 OF
2023
ALONG WITH
COMMERCIAL ARBITRATION PETITION (L) NO. 5353 OF
2023
Shadab Y. Mukadam …Petitioner
Versus
Mohammed Ali M. Sali (since deceased)
Through Legal Heirs (a) Fatima Nalakath
Sahusintavide & Ors. …Respondents
Mr. E.A. Sasi
a/w. Tejas Shinde, for Petitioner in
CARBPL/3903/2023.
Mr. Mutahhar Khan i/b. Lokesh Zade for Petitioners in
CARBPL/5353/2023.
Mr. Simil Purohit, Senior Advocate a/w. Mr. Rishikesh Soni
i/b. Ashok Purohit & Co., for Respondent No.2
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CORAM : SOMASEKHAR SUNDARESAN, J.
RESERVED ON : JANUARY 17, 2026.
PRONOUNCED ON : MARCH 5, 2026.
JUDGEMENT :
1. The Commercial Arbitration Petition (L) No. 3903 of 2023 is
a Petition filed under Section 37 of the Arbitration and Conciliation Act,
1996 ( “ the Act ”) , challenging orders passed by the Learned Arbitral
Tribunal on February 14, 2019 (“ First Impugned Order ”) and
December 15, 2022 (“ Second Impugned Order ”), under Section 17
of the Act (collectively , “ Impugned Orders ” ) . This Petition is filed by
the legal heirs of the original Petitioner ( “ Owner ” ), late Mohammed Ali
M. Sali, who are aggrieved by the Learned Arbitral Tribunal refusing to
hand over the possession of 16 flats developed by the Respondent,
Rajaram Chavan Real Estate Private Limited ( “ Developer ” ), as an
interlocutory measure pending conduct of the arbitration proceedings.
This Petition is referred to as “ Owner’s Petition ”.
2. The Commercial Arbitration Petition (L) No. 5353 of 2023 is
also a Petition filed under Section 37 of the Act, impugning the same
Impugned Orders, and is filed by Flat Purchasers led by Mr. Shadab Y.
Mukadam, a flat purchaser, seeking a direction for possession of flats
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legitimately acquired by them under validly executed registered
agreements with the Owner, which have been withheld by the
Developer, with such denial of possession not having been interfered
with by the Learned Arbitral Tribunal. This Petition is referred to as the
“ Flat Purchasers’ Petition ”. An Intervention Application being
Interim Application No. (L) 4575 of 2023 came to be filed by the Flat
Purchasers in the Owner’s Petition.
3. Both the captioned Section 37 Petitions have been heard
together. By consent of the parties, they were taken up for final hearing.
These matters were originally heard in 2025 along with ten connected
petitions under Section 9 of the Act filed by the Flat Purchasers, along
with Review Petition No (L) 20967 of 2022 in Arbitration Petition No.
769 of 2017, an earlier Section 9 Petition of the Flat Purchasers; an
Interim Application No. (L) 36224 of 2024, being an intervention
application filed by tenants of the Owner in Commercial Arbitration
Petition No. 128 of 2017, a disposed of Section 9 Petition filed by the
Owner against the Developer; and a connected contempt petition of the
Tenants. This was heard as per the then applicable roster and reserved,
and thereafter, due to efflux of time, clarifications were sought from the
parties and de-reserved.
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4. The parties also indicated that they were in the process of
reaching a potential settlement, which would work out the matter
entirely. The matters were de-reserved and set for hearing afresh.
However, as it transpired, the parties have been unable to settle their
disputes and differences and requested the Court to hear the matter and
adjudicate the captioned Petitions. The matters were taken up as per
the extant roster for hearing in November 2025 on a day-to-day basis.
5. In December 2025, the parties requested that the matter be
stood over to enable them to pursue and conclude a settlement, but in
January 2026, the parties jointly indicated that settlement had
remained elusive and requested that the matters be heard and
adjudicated by this Court. Therefore, the Section 37 Petitions were
heard as per the extant roster and are being adjudicated finally by this
judgement. The parties agreed that the Section 37 Petitions could be
heard and disposed of, leaving the parties to move the other proceedings
before the relevant benches having roster in those matters.
Context and Factual Background:
6. At the heart of the relationship and disputes among the
parties is a redevelopment project contracted between the Owner and
the Developer by way of a Joint Development Agreement dated August
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20, 2009 (“JDA”). The JDA envisaged the development of land
bearing CTS No. 372/A (part) and CTS No. 372/B situated in Kurla,
Mumbai, admeasuring about 3,000 square metres (“Subject Land”).
The Developer made a refundable and recoverable advance payment of
Rs. 35 lakhs to the Owner and the Developer was to have a lien on the
Subject Land. The Developer had contracted to provide 4,500 square
feet to the existing 22 tenants of the Owner; 3,000 square feet to a
tenant Mr. Pandurang Wagh (“ Wagh ”); and in addition, the Owner
would be entitled to 50% of the free sale component arising out of the
development potential on the reserved area. Therefore, in the aggregate,
7,500 square feet of developed area was attributable to the tenants of
the Owner.
7. Wagh was an occupant of a structure on the portion of land
that had been reserved for a recreational ground under the applicable
development plan. Currently, that structure has been demolished. The
Owner and Developer have disputes over Wagh’s entitlement and the
approach to de-reservation of the plot and the accrual of rights from the
reserved land should it not be de-reserved.
8. The JDA provided that unless and until the Owner discharges
his share of the construction costs for the component attributable to the
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tenants’ rehabilitation, the Owner would be prohibited from selling 25%
of the free sale component falling within the Owner’s entitlement. The
balance 75% of the free sale component falling in the Owner's
entitlement could be sold by the Owner, but the sale proceeds would
need to be first utilized towards discharging the amounts due to the
Developer.
9. Until the entire amounts due were paid by the Owner to the
Developer, the Owner was prohibited from creating any third-party
rights in the aforesaid 25% component. The Developer was also entitled
to a lien and charge on the Owner's share of the free sale component to
the extent of the amounts owed by the Owner to the Developer. Upon
failure by the Owner to discharge his obligations, the Developer was
entitled to sell the portion of the Owner's share at Rs. 5,000 per square
foot to recover the outstanding amount.
Allocation in 2013:
10. Pursuant to the JDA, the redevelopment was undertaken. On
September 4, 2013 the Developer addressed two letters to the Owner,
one of which specifically demarcated the flats that would fall within the
entitlement of the Owner and the Developer respectively (“ Allocation
Confirmation Letter ”). The Developer also identified two lien flats,
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which were meant not to be sold by the Owner in terms of the JDA. In
these letters, the Developer specifically identified sixteen flats, namely
Flat Nos. 101, 103, 104, 109 and 111, and Flat Nos. 201 to 211 (“ Subject
Flats ”) as falling within the Owner's entitlement. Two flats, namely Flat
Nos. 111 and 207 were identified as flats that the Owner was not entitled
to sell (“ Lien Flats ”). In other words, admittedly, under the JDA,
according to the Owner, the Subject Flats were within the Owner's
entitlement to sell while the Lien Flats were subject to a prohibition on
sale by the Owner.
11. In 2013 and 2014 the Owner and the various Flat Purchasers
executed and registered Agreements for Sale in respect of the Subject
Flats falling within the Owner's entitlement in the free sale component
with full liberty to sell them. The Owner received part consideration and
also confirmed that the balance consideration was payable only against
delivery of possession of the flats. The Lien Flats were not covered by
the sales effected in 2013 and 2014.
Confirmation in 2016:
12. On March 9, 2016, the Owner enquired with the Developer
about the status of the completion of construction and receipt of the
occupation certificate, since the Flat Purchasers had been making
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enquiries. In reply, on April 29, 2016 (“ OC Confirmation Letter ”)
the Developer wrote to the Owner requesting the Owner to inform the
Flat Purchasers that the Occupation Certificate would be received
within 15 days . Indeed, the Occupation Certificate was received on May
4, 2016.
Litigation Among the Parties:
13. On November 28, 2016, the Owner addressed a letter to the
Developer, calling on the Developer to hand over possession of the flats
to be delivered to the tenants and the Subject Flats to be delivered to the
Flat Purchasers. In reply, the Developer asserted that the Owner owed a
sum of Rs. 1.75 crores as outstanding and raised other disputes.
14. This led to the Owner filing Commercial Arbitration Petition
No. 128 of 2017 against the Developer, invoking Section 9 of the Act
(“ Owner’s Section 9 Petition ”). The Owner demanded that the
obligation to deliver flats owed to the tenants ought to be discharged
and possession ought to be handed over. The Flat Purchasers sought to
intervene in the Owners’ Section 9 Petition by filing Chambers
Summons (CHSCD/45/2017) on March 10, 2017. The Flat Purchasers
asserted that they had been promised possession by December 31, 2014
and had yet not been given any possession.
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15. A Learned Single Judge of this Court passed an order dated
April 5, 2017 in the Owner’s Section 9 Petition giving directions to the
Owner and the Developer in respect of the obligations owed to the
tenants. The order also held that the Flat Purchasers could not
intervene, not being parties to the arbitration agreement between the
Owner and the Developer, indicating that they would need to pursue
their independent remedies.
16. On May 26, 2017, a consent order was passed in the Owner’s
Section 9 Petition, which, among others, led to the pending disputes
between the Owner and the Developer in relation to possession of the
Subject Flats, and any adjustment or reversals claimed on those
transactions being referred to arbitration (“2017 S.9 Order”) . The
2017 S.9 Order also directed the parties to maintain status quo in
relation to the Subject Flats until the Arbitral Tribunal is constituted in
the matter and is able to consider interlocutory arrangements and pass
appropriate orders.
17. Separately on August 4, 2017, the Flat Purchasers filed
Commercial Arbitration Petition No. 553 of 2017 under Section 9 of the
Act (“ Flat Purchasers’ Section 9 Petition ”), against the Owner and
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the Developer, seeking to be put in possession of the Subject Flats either
directly or as an agent of the Court Receiver.
18. On October 13, 2018, the Owner filed an appeal against
various orders passed in the Owner’s Section 9 Petition including the
2017 S.9 Order. This Appeal came to be dismissed as an order of
disposal passed by consent was held to be not appealable.
First Impugned Order:
19. On October 15, 2018, the Learned Sole Arbitrator was
appointed to adjudicate the disputes between the Owner and the
Developer. This is what eventually led to the Impugned Orders and the
Section 37 Petitions now under consideration. In the arbitral
proceedings, on February 14, 2019, the First Impugned Order came to
be passed, whereby the interim reliefs sought by the Owner against the
Developer were dismissed. The reliefs sought had been in relation to
de-reservation of the area reserved for recreational ground; and the
handing over of possession of the Subject Flats.
20. As regards the second relief about possession of the Subject
Flats, the Learned Arbitral Tribunal held that the Developer was entitled
to sell flats out of the Owner's free sale component if the Owner failed to
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pay amounts owed by him. The amounts owed towards construction
costs and other obligations under the JDA were noticed. It was held that
the Owner’s contentions about how the amounts paid to the Developer
and also recovered by the Developer by sale of flats out of the Owner’s
entitlement in the course of the Owner’s Section 9 Petition, had led to
the Developer having excess security than the amounts owed, is a matter
that could only be determined upon final adjudication. It was held that
the Owner's precise liability could not be quantified at an interim stage.
21. In a nutshell, the Learned Arbitral Tribunal accepted the
Developer’s contention that if the Owner were permitted to deal with
the Owner's free sale component, it would render the provisions of the
JDA otiose. Therefore, the status quo agreed to by consent in the
Owner’s Section 9 Petition, was left undisturbed.
Flat Purchasers’ Section 9 Petition:
22. Meanwhile, just about three weeks later, by an order dated
March 7, 2019 (“ FP Section 9 Disposal Order ”) the Flat Purchasers’
Section 9 Petition was disposed of by a Learned Single Judge. The
Court found that the Flat Purchasers were sandwiched in the litigation
between the Owner and the Developer. It was held that at all material
times, the Developer had always been aware of the rights that had been
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created in favour of the Flat Purchasers. It was found that the Flat
Purchasers indeed had legitimately acquired rights to the Subject Flats
and had paid substantial sums. The Flat Purchasers had contended that
the Developer had permitted the Flat Purchasers to enter into the
Subject Flats in December 2015 to undertake interior work, and even if
this is disputed by the Developer it was not relevant since the Developer
was not oblivious to the entitlements of the Flat Purchasers.
23. It was held that the Developer had not alleged that the
agreements with the Flat Purchasers were illegal and indeed no steps
had been taken by the Developer to challenge the agreements with the
Flat Purchasers. It was also noticed that the claim of the Developer was
purely a money claim. Only because the status quo order contained in
the 2017 S.9 Order had been passed by consent, and it had not been
disturbed by the Learned Division Bench, no relief was granted by the
Section 9 Court.
24. The Flat Purchasers then filed Interim Applications in the
Owner’s Section 9 Petition seeking a review of the 2017 S.9 Order, to the
limited extent of the order directing maintenance of status quo on the
Subject Flats until resolution of disputes in the arbitration. In these
Applications, a Learned Single Judge of this Court passed an order
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dated March 17, 2022, clarifying that the 2017 S.9 Order could not
possibly come in the way of the Flat Purchasers independently
establishing their rights in any proceedings that they instituted. It was
held that since the Flat Purchasers were not parties to the Section 9
Petition initiated by the Owner, no order made by consent in those
proceedings could bind the Flat Purchasers.
25. Separately, the Flat Purchasers filed an Appeal against the FP
Section 9 Disposal Order. This came to be disposed of on November 28,
2022 by a Learned Division Bench of this Court, stating that the Flat
Purchasers may move an appropriate Section 17 Application before the
Learned Arbitral Tribunal which would be decided notwithstanding the
FP Section 9 Disposal Order.
Owner’s Second Section 17 Application:
26. The Owner filed a fresh Section 17 Application before the
Learned Arbitral, which was dismissed by the Second Impugned Order
dated December 15, 2022. The Learned Arbitral Tribunal held that the
relief sought had already been dealt with by the First Impugned Order.
Dealing with whether there had been any change in circumstances, the
Learned Arbitral Tribunal held that the findings of the Court in the FP
Section 9 Disposal Order, the filing of a statement of defence by the
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Developer, which the Owner contended, established the admission of
receipt of monies in excess of what was claimed against the Owner, and
the undue hardship faced by the Flat Purchasers would not constitute a
change in circumstances.
27. The Learned Arbitral Tribunal reiterated that it would not be
possible at the interim stage to ascertain the exact scope of amounts
owed by the Owner to the Developer and therefore, it could not be
ascertained if the Developer was enjoying security in excess of its
monetary claim. Therefore, it was held that there is no change in
circumstances warranting re-consideration of reliefs in the fresh Section
17 Application filed by the Owner.
Commercial Suit by a Flat Purchaser:
28. Meanwhile, in parallel, one of the Flat Purchasers filed
Commercial Suit (L) No. 8458 of 2023 which led to a Learned Single
Judge of this Court granting relief of possession of the Subject Flat in
that case. It was explicitly held by an order dated July 20, 2023
(“Commercial Suit Order”) that the direction sought by the Flat
Purchaser to be put in possession as an agent of the Court Receiver does
not adversely affect the claim of the Developer. It was explicitly held
that the interim arrangement between the Owner and the Developer
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could not be a basis for depriving the Flat Purchaser of possession of the
flat legitimately acquired by him. In any case, it was held that the
direction to put the Flat Purchaser in possession as an agent of the
Court Receiver would not be an order granting full possession and could
not disturb the interim arrangement between the Owner and the
Developer, and that nothing in the orders passed by this Court would
operate as a hurdle for putting the Flat Purchaser in possession as an
agent of the Court Receiver.
29. Examining the registered Agreement for Sale between the
Owner and the Flat Purchaser, as indeed the Allocation Confirmation
Letter, it was found that the Developer had acknowledged the Flat
Purchaser's rights, and a strong prima facie case had been made out
and that failure to grant interim relief would make the Flat Purchaser
suffer by having to pay equated monthly instalments (“ EMIs ”) on the
home loan to finance the Subject Flat, without enjoyment of possession
of the Subject Flat. The Court observed that the other Flat Purchasers
would need to make out their own case independently.
Commercial Suit Appellate Order:
30. Aggrieved by the Commercial Suit Order, the Developer filed
an Appeal (L) No. 20428 of 2023 which was dismissed by Learned
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Division Bench, by an order dated September 12, 2023 (“CS Appellate
Order”) . The CS Appellate Order recorded that the order of status quo
was an order passed by consent between the Owner and the Developer,
and that the registered Agreement for Sale predated the status quo
order. The Allocation Confirmation Letter clearly recognised the
Owner's entitlement to deal with the Subject Flat. The Developer was
always aware of the Owner dealing with the flats and took no steps to
restrain the Owner, should the Developer have felt entitled to so restrain
him. While the Developer's claim may be denominated as a claim for
area, it was effectively a money claim, as already observed by two
benches, which the Learned Division Bench was in agreement with. In
any case, no steps had been taken for adjudication of the area by the
Developer and it was found that the Flat Purchaser had an
“ overwhelmingly strong prima facie case ”.
31. It was held that before claiming entitlement to the Subject
Flat, it was incumbent on the Developer to establish default on the part
of the Owner of an obligation owed to the Developer for him to
appropriate the area from out of the Owner's share. Effectively, it was
held that the Developer was attempting to deprive the Owner of his
entire entitlement to claim possession of flats already legitimately sold
to third parties, solely upon the contention of the Developer that the
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Owner is in default. Therefore, it was held that the Developer's claim for
possession of the flat was ex facie untenable and not lawful. Paragraphs
16 to 18 of the CS Appellate Order is emphatic and clear in how it
crystallises the factual situation and how competing claims stand in
relation to one another. The Developer was directed to hand over the
keys to the Subject Flat to the Court Receiver in four weeks, who would
place the Flat Purchaser in possession as an agent of the Court Receiver
without payment of any royalty, as directed in the Commercial Suit
Order.
32. The CS Appellate Order was challenged in Special Leave
Petition (C) No. 21725 of 2023 before the Supreme Court. It was
dismissed as withdrawn, with the Court noting the Developer's
submission that it would take up all contentions available in law so far
as other persons similarly situated are concerned.
Contentions of the Parties:
33. It is against the aforesaid chequered factual backdrop that the
contentions in the respective Section 37 Petitions need to now be
considered by me.
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34. The short question that falls for consideration is whether,
taking into account the scope of review under Section 37 of the Act, it
can be said that the Learned Arbitral Tribunal was justified in passing
the Impugned Orders, in the manner that it did. Needless to say, the
jurisdiction of a Section 37 Court is rather specific and narrow and it is
not open to a Section 37 Court to substitute a plausible view adopted by
the Learned Arbitral Tribunal with a view that appears to be more
plausible to the Section 37 Court. Unless the interlocutory arrangement
appealed against is considered perverse and arbitrary or falls foul of any
other facet of what a reasonable interlocutory arrangement would be in
the facts and circumstances presented to the Learned Arbitral Tribunal,
the Section 37 Court would not ordinarily intervene, bearing in mind the
1
principles laid down in Wander v. Antox , which has been repeatedly
followed in the Section 37 jurisdiction.
35. In this context, I have heard at length, Mr. Mutahhar Khan,
Learned Advocate on behalf of the Flat Purchasers, Mr. E. A. Sasi,
Learned Advocate on behalf of the Owner and Mr. Simil Purohit,
Learned Senior Advocate on behalf of the Developer. With their
assistance, I have examined the material on record.
1
Wander Ltd. v. Antox India (P) Ltd. – 1990 Supp SCC 727
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36. Mr. Khan would contend that the Impugned Orders are ex
facie perverse in their interpretation of the JDA. He would submit that
the agreement between the parties was explicit in its terms as to what
the Owner's entitlement to the free sale component would be and how
any lien over such component would be structured between the parties.
The Developer's lien stands extended over all the free sale Subject Flats,
which is contrary to the very provision of the contract and ignores vital
documentary evidence in the form of the Allocation Confirmation Letter
and the OC Confirmation Letter. The Owner had sold the flats to the
Flat Purchasers with full knowledge of the Developer and it would
follow that those sales were legitimate and the Owner ought not to be
exposed to an unlimited security interest when the parties had
consciously structured the extent of their security interest and that too
to the detriment of the Flat Purchasers.
37. Mr. Khan would also allude to the fact that the Developer
took no independent steps to challenge the rights and entitlements
acquired by the Flat Purchasers as has been judicially noticed and held
in the FP Section 9 Disposal Order, the Commercial Suit Order and the
CS Appellate Order. It has also been judicially noticed that the
Developer's claim is essentially a money claim and that cannot be
converted into a fully secured claim and that too in a manner that
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impedes validly created third party rights. Mr. Khan would submit, the
Developer's contention that no possession can be claimed until
adjudication of the entire arbitration proceedings would be a blanket
security for all time to come and this would fly in the teeth of the JDA
and the conduct of the parties consistent with the JDA, from which
flows, the legitimacy of the Flat Purchasers’ acquisition of the Subject
Flats out of the Owner's fully acknowledged free-sale component.
38. In any case, Mr. Khan would submit that all that the Flat
Purchasers are seeking is to be put in possession as agents of the Court
Receiver and this would not in any case create any finality to jeopardise
the Developer's claim. If and when the Developer overcomes the hurdle
of demonstrating that his claim is not a money claim, the possession in
the hands of the Court Receiver would abide by the outcome of the
arbitration proceedings. Mr. Khan would also submit that the
extraordinary hardship caused to legitimate Flat Purchasers needs to be
redressed.
39. Mr. E. A. Sasi, Learned Advocate on behalf of the Owner,
would submit that the terms of the JDA were explicitly clear in terms of
the deadlines that had to be met and the activity to be carried out by the
Developer. He would give an overview of various provisions of the JDA
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to indicate that if the reserved plot were de-reserved and constructed
upon, the Owner would be entitled to an additional 50% constructed
area free of cost after settling with Wagh. Mr. Sasi would submit that
Wagh had forfeited his rights owing to sub-letting, and constructing an
unauthorised structure and making permanent alterations to structures,
which have even led to the structure being demolished by the Municipal
Authorities. The grievance against such demolition is subject matter of
Writ Petition.
40. In a nutshell, Mr. Sasi would submit that the JDA specifically
points to the Developer having to construct 7,500 square feet of area for
the tenants, with the rest of the area being squarely covered by the free
sale entitlements contracted between the parties, which is further
clarified by the Allocation Confirmation Letter and the assurance held
out in the OC Confirmation Letter.
41. Against that backdrop, Mr. Sasi would point out that the
Developer has a money claim of Rs. 3.75 crores and Rs. 1.75 crores
towards construction costs, against which the Developer has Rs. 7.32
crores belonging to the Owner. The Developer's total claim is only Rs.
2.58 crores and therefore, he is holding security far in excess and is
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withholding the reserved plot as well without any consideration being
made to the Owner.
42. Invoking the Commercial Suit Order and the CS Appellate
Order, which correctly deal with the legal position, Mr. Sasi would
submit, the Flat Purchasers should be put in possession. On
instructions, he would also confirm that the Owner would have no
quarrel with the residual consideration payable by the Flat Purchasers
also being deposited with the Court Receiver, so that the same could be
subject to the outcome of the arbitral proceedings.
43. In sharp contrast, Mr. Simil Purohit, Learned Senior
Advocate on behalf of the Developer, would contend that there is no
perversity in the Impugned Orders. He would submit that the 2017 S.9
Order had categorically directed the parties to maintain status quo and
that any adjustment or reversal in respect of transaction in the flats
would be referred to arbitration, which arbitration is pending. Mr.
Purohit would defend the First Impugned Order to contend that it has
rightly held that at the interim stage it would not be possible to
determine the exact extent of the Owner's liability owed towards the
Developer. The First Impugned Order (dated February 14, 2019) was
not challenged and the Section 37 Petition was filed on February 08,
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2023, pegged to the Second Impugned Order (dated December 15,
2022), and therefore, the challenge to the First Impugned Order is
contended by him to be time-barred. He would submit that since it has
been held that there is no change in circumstances since the First
Impugned Order, the challenge to the Second Impugned Order cannot
overcome the limitation to challenge the First Impugned Order, which
has attained finality.
44. Mr. Purohit would also submit that the FP Section 9 Disposal
Order noted the hardship faced by the Flat Purchasers, but did not grant
relief. He would contend that the Developer is not pursuing just a
monetary claim. He would rely on clauses II(f) and II(d) of the JDA to
contend that it was the Owner's sole responsibility to deal with the 22
tenants and if the area provided to the tenants exceeded 4,500 square
feet, the same would need to be deducted from the Owner's share which
they would be entitled to as per the JDA. He would also submit that it
was the Owner's obligation to settle with Wagh, the tenant who occupied
3,000 square feet in the reserved portion and should any alternate
accommodation need to be given to Wagh, the same would need to come
from the Owner's share. That apart, Mr. Purohit would submit that the
construction costs for the tenants were to be borne by the Owners and
after the JDA, the area for the tenants was re-negotiated and it
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increased from 4,500 square feet to 6,073 square feet and such
additional area was and is to be borne by the Owner which the Owner
has refused to do. Therefore, he would contend, the Owner has to hand
over an area of 1,573 square feet to the Developer and this is part of the
Counter Claim. Therefore, he would submit that the Impugned Orders
were right in not granting any reliefs at the interim stage.
45. Mr. Purohit would submit that the Owner was required to
engage with the Developer to have the Agreement for Sale prepared in
consultation with the Developer’s solicitors to safeguard the Developer’s
interests, but the Owner executed the agreements with the Flat
Purchasers on his own and appropriated the amounts without any
reference to the Developer. The Developer, Mr. Purohit would submit,
has contended in the arbitration that the Developer should be declared
as the Owner of the units located on the ground floor at the rate of Rs.
5,000 per square foot. The Counter Claim also seeks a declaration that
the agreements with the Flat Purchasers should be declared as not
binding on the Developer, therefore, he would submit the Developer's
claim is not to be characterized as a monetary claim.
46. Mr. Purohit would also submit that in the Owner's Section 9
Petition, by an order dated July 19, 2017, the Owner had been directed
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to deposit a sum of Rs. 40.25 lakhs, which, till date, has not been
deposited. He would point to the ongoing arbitration between the
Owner and the Flat Purchasers being for specific performance and for
possession. The Owner being the Respondent therein has opposed the
claim of the Flat Purchasers and since those proceedings are pending,
the Flat Purchasers would not have any right to approach this Court,
under Section 37 of this Act or under Section 9 for possession at the
interim stage. He would submit that the arbitration is being delayed,
because the Owner has delayed filing his evidence in-chief before the
Learned Arbitral Tribunal and he would submit that unless and until the
final Arbitral Award is passed, no relief should be granted to the Owners
or to the Flat Purchasers.
47. Mr. Purohit would also submit that if the area reserved for
recreational ground under the development plan is not handed over, the
Municipal Authorities could revoke the building approval and also the
Occupation Certificate in respect of the buildings. He would submit that
the Owner has no desire to hand over alternate accommodation to
Wagh, and the Writ Petition by Wagh is pending. That dispute too is
something that would likely jeopardise the status of the Developer's
interests in the re-development project, which need to be protected.
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48. Mr. Purohit would submit that the Flat Purchasers are third
parties to the Arbitration Agreement and have no locus to challenge the
Impugned Orders under Section 37 of the Act. The other appropriate
proceedings that they ought to initiate ought not to be under Section 37
or any other application under the Arbitration Act. It ought to have been
proceedings such as the commercial suit filed by one of the Flat
Purchasers. Mr. Purohit would oppose reliance being placed on orders
passed in the Commercial Suit by one of the Flat Purchasers since the
others have not chosen to file such suits. Therefore, not having filed
suits themselves, they cannot take benefit of findings in the Suit in the
Section 37 proceedings.
Analysis and Findings:
49. The points for determination for adjudicating these Petitions
may be summarised as follows:
a) Whether the Flat Purchasers are at all entitled to
challenge the Impugned Orders, not having been parties to
the arbitration agreement; and
b) Whether the Impugned Orders are right in not
interfering with the entitlement of the Flat Purchasers to the
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Subject Flats being held up in arbitration proceedings
between the Owner and the Developer.
Findings on Jurisdiction –Locus for Section 37:
50. At the threshold, I wish to deal with the jurisdictional
question of whether the Flat Purchasers could at all invoke the
jurisdiction under Section 37 of the Act, not being parties to the
arbitration agreement. In this regard, Mr. Khan's reliance on the
decision by a Learned Single Judge of this Court in a bunch of Section
2
37 Petitions, the lead petition being Prabhat Steel Traders , is
illuminative of the declared law on whether non-parties to an
arbitration agreement, who are affected by findings in decisions under
Section 17 of the Act, would at all have locus to mount a challenge under
Section 37 of the Act.
51. The Learned Single Judge who considered such an identical
objection, in Petitions filed by such third parties to the arbitration
agreement, but whose interests had been affected by the Section 17
Order, had the following to say:-
“42. The question therefore arises for consideration of this Court is whether
a third party who is aggrieved by any such order of interim measures granted

2
Prabhat Steel Traders Pvt. Ltd. v. Excel Metal Processors Pvt. Ltd. and Others,
with connected petitions – 2018 SCC OnLine Bom 2347
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by the arbitral tribunal can file an appeal under section 37 of the Arbitration
& Conciliation Act, 1996 after obtaining the leave of the Court or otherwise
and whether can impugn such order of the arbitral tribunal in respect of any
goods or properties in respect of any such right, title or interest claimed by
such third party or in any other manner affected by such interim measures or
not.
43. This Court in case of Narayan Manik Patil (supra) in the notice of
motion filed by a third party who was affected by an order of the Court
appointing the Court Receiver in respect of his property held that such third
party aggrieved by the appointment of the Court Receiver himself can
approach the Court and have the Court Receiver discharged. It is held that
the power of the Court to be justified to a third party who is adversely
affected by an order passed without affording him an opportunity of being
heard could in any event be traced to section 151 of the Civil Procedure
Code, 1908.
44. This Court held that where the Court finds that any order appointing
the Court Receiver affects the rights of a third party and the circumstances
discloses that such third party ought to have been impleaded or proceeded
against in accordance with law before affecting its rights, it is open to the
Court to discharge the Court Receiver and to leave it to the parties to the
proceedings to adopt appropriate proceedings against the third party and to
apply therein for interlocutory reliefs against such third party including by
appointment of a Court Receiver. In the said judgment, it is held by this Court
that even as a matter of practice, the Courts refuse to pass interlocutory
orders which would adversely affect third party in the matters where it is
brought to the notice of the Court that the third party rights have been
created and are in existence. The principles laid down by this Court in the
said judgment in my view would apply to the facts of this case. Even in this
matter, the respondent no. 1 had placed before the learned arbitrator that the
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goods in respect of which the relief or interim measures was sought by the
respondent no. 2 did not belong to the respondent no. 1, but belong to the
third parties. Learned arbitrator however, did not go to the said crucial
aspect and appointed the Court Receiver in respect of various Coils which
were admittedly claimed by these petitioners in the arbitration petitions and
the plaintiffs in the suit.”
[Emphasis Supplied]
52. I am in respectful agreement with the aforesaid iteration of
applicable principles. The upshot of the Learned Single Judge’s reading
3
of the ruling in Narayan Manik Patil , is that if a third party is
affected by an interlocutory arrangement made for adjustment of
equities between the parties directly engaged in the proceedings, they
cannot be left unheard. The foundational principle would be the wider
concept of how acts of the Court should prejudice no one and that
ordinarily, no Court ought to pass any interlocutory orders which would
affect a third party. Where third party rights have already been validly
and legitimately created and are in existence, such third party ought to
be impleaded and must be heard.
53. In fact, in my view, this is the very principle on which the
innumerable proceedings under Section 9 of the Act are filed,
entertained and adjudicated in this Court, where members of co-

3
Narayan Manik Patil & Ors. v. Jayawant Patil – (2009) 2 BCR 247
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operative housing societies, even when they are not parties to the
arbitration agreement between a developer and the society, are made
parties to a Section 9 Petition, and are routinely directed to vacate their
premises in terms of orders passed by the Section 9 Court.
54. The other legal principle that would conceptually apply is the
principle of such third parties vitally being affected by the proceedings
being up for consideration as “veritable parties” by reason of their
intricate involvement in the subject matter of the arbitral proceedings.
Such third parties may not be able to invoke the arbitration agreement
themselves, and positively trigger a dispute resolution, donning the hat
of dominus litis , because the other parties have not agreed to resolve
their disputes with such parties by way of arbitration. However, the
parties with privity to an arbitration agreement who are engaged in
arbitration proceedings, and choose to make interlocutory
arrangements by consent, cannot inflict any adverse impact on such
third parties. At the least, if an interlocutory order is passed which
affects the vital interests of such third parties, the statutory remedy
available to them to address their grievances by grant of an interim
measure under Section 17, would permit such persons to invoke Section
37 of the Act to appeal against such decision, as has been held in
Prabhat Steel Traders , where the Learned Single Judge, went on to
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hold that a third party could even apply for an impleadment or
intervention in Section 9 proceedings and can apply for modification
and variation of the order of interim measures passed by a Court. The
following extracts from the judgment would be noteworthy :
“46. Be that as it may, even if such third party is not impleaded as a party
to such application filed under section 9 of the Arbitration & Conciliation
Act, 1996 , such third party can certainly apply for impleadment or
intervention in such proceedings filed under section 9 of the Arbitration &
Conciliation Act, 1996 and can apply for modification and/or variation of
the order of interim measures passed by a Court. In my view, such third
party cannot be asked to file a civil suit and to challenge the order of
interim measures granted by the arbitral tribunal. The validity of the order
passed by the arbitral tribunal under section 17 of the Arbitration &
Conciliation Act, 1996 cannot be challenged in a civil suit. The Civil Court
does not sit in an appeal against an order of the arbitral tribunal passed
under section 17 of the Arbitration & Conciliation Act, 1996 .
47. The question thus arises for consideration of this Court is that
whether the remedy of an appeal under section 37 of the Arbitration &
Conciliation Act, 1996 can be availed off by such a third party who is
affected by an order of interim measures granted by the arbitral tribunal
under section 17 of the Arbitration & Conciliation Act, 1996 . Learned
counsel for the respondents did not dispute the proposition that if a third
party is impleaded in the proceedings under section 9 of the Arbitration &
Conciliation Act, 1996 filed by a party to the arbitration agreement or the
rights of any third party is affected by an order passed by a Court in an
application under section 9 of the Arbitration & Conciliation Act, 1996 filed
by a party to the arbitration agreement, such third party can apply for
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impleadment or intervention in such proceedings and to apply for
modification and/or for variation of such order. If such third party does not
succeed in such application for modification or variation of the order
passed by a Court in favour of a party to the arbitration agreement affecting
the right, title and interest of such third party, such third party can file an
appeal under section 37 of the Arbitration & Conciliation Act, 1996 before
the Court under section 2(1)(e) of the Act.”
[Emphasis Supplied]
55. As regards the reference I have made above to the
innumerable Section 9 Petitions that are filed in the context of
redevelopment of buildings owned by societies, it is well known that
such intervention has its foundation in the decision of the Learned
4
Division Bench of this Court in Girish Mulchand Mehta . There is
no room to hold that by an interim measure, the rights of a third party
could be interfered with, without hearing such third party. The Learned
Division Bench examined Rule 803E of the Original Side Rules of this
Court and held that when it comes to Section 9 of the Act, the remedy of
seeking interim measures would also cover persons who need not be
either a party to the Arbitration Agreement or to the arbitration
proceedings.
56. In the facts of that case, a third party had been impleaded,
because the grant of the relief sought would have, as an incidence of the

4
Girish Mulchand Mehta v. Mahesh S. Mehta – ( 2010) 2 MH LJ 657
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wider relief, affected the interests of such third party. The Court
entertained an Appeal filed by such third party under Section 37 of the
Act and considered the challenge. It is another matter that as a facet of
the merits of the matter, the third party did not prevail in the Appeal.
The Learned Single Judge in Prabhat Steel Traders has rightly
concluded in this regard in the following manner :-
“50. In view of the fact that powers of Court under section 9 to grant
interim measures and powers of the arbitral tribunal under section 17 of the
Arbitration Act are identical in view of the amendment to section 17 with
effect from 23rd October 2015, in my view, even a third party who is
directly or indirectly affected by interim measures granted by the arbitral
tribunal will have a remedy of an appeal under section 37 of the Arbitration
Act. The principles of law laid down by the Division bench of this Court in
the case of Girish Mulchand Mehta and Durga Jaishankar Mehta v. Mahesh
S. Mehta and Harini Cooperative Housing Society Ltd . (supra) can be
extended to this situation.
54. Though a stranger to an agreement cannot be allowed to be
impleaded as party to the arbitral proceedings before the arbitral tribunal
and more particularly under section 17 of the Arbitration Act nor can such
third party seek impleadment to the proceedings before the arbitral tribunal,
he is however not precluded from challenging the said order before the
arbitral tribunal under section 17 if he so aggrieved by such order by
invoking the remedy of an appeal under section 37 of the Arbitration Act.
88. Insofar as the submission of the learned counsel for the respondent
no. 2 that since the petitioners or the applicants were admittedly not the
parties to the arbitration agreement, none of them could be a party to the
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arbitration proceedings before the learned arbitrator is concerned, there is
no dispute about this proposition. However, since the order passed by the
learned arbitrator for interim measures at the behest of one of the parties to
the arbitration agreement which would prejudice the right, title and interest
of a third party, such third party who is not allowed to seek impleadment in
the arbitration proceedings or to apply for modification and/or vacating the
order of interim reliefs, will have a right of appeal under section 37 of the
Arbitration & Conciliation Act, 1996 against such order. I am not inclined to
accept the submission made by the learned counsel for the respondent no. 2
that there is any statutory bar against a third party from filing an appeal
under section 37 of the Arbitration Act though an order is passed by the
arbitral tribunal in the proceedings filed by the parties to the arbitration
agreement under the provisions of the Arbitration & Conciliation Act, 1996
would affect the rights of such third party. It is not the case of the respondent
no. 2 that even a party to the arbitration agreement could not have filed an
appeal under section 37 of the Arbitration & Conciliation Act, 1996, before
the Court be defined under section 2(1)(h) on the ground that such appeal
would be in the middle of the arbitration process.
[Emphasis Supplied]
57. I would wholeheartedly agree with the aforesaid observations
and would respectfully adopt the same in the specific facts of this case.
It is clear to me that Section 37 permits a challenge to decisions made
under Section 17 of the Act. Even if one were to depend on the meaning
of the term “party” as a party to the arbitration agreement, it is well
settled that the meanings given in definitions are capable of variation
where the context otherwise requires. Section 37 is a check and balance
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against decisions under Section 17 of the Act. The context in the Act,
which is a self-contained code, is to provide a wholesome check and
balance in the course of conduct of arbitration proceedings. A person
aggrieved by a decision under Section 17 has been given Section 37 as
the avenue for such check and balance. That is meant to run its full
scope and such legislative policy objective cannot be lost sight of.
58. The Flat Purchasers have entered into registered flat
purchase agreements with the Owner who has been squarely authorized
by the JDA in 2009, to transact with the flats that fall within his
entitlement. The contracted fetter on such right in the form of a lien was
translated into specifically earmarked flats by the Allocation
Confirmation Letter of 2013. The OC Confirmation Letter made an
assurance of completion with specific reference to the Flat Purchasers in
2016. The Flat Purchasers validly and legitimately acquired the Subject
Flats through registered sale agreements executed in 2013 and 2014.
The Developer has mounted no challenge to these agreements as being
founded on non-existent title. The Developer’s claims are based on his
interpretation of the JDA and his security interests flowing therefrom.
These are to be adjudicated in the arbitration proceedings. In the
interim, it cannot follow that the legitimate interest of the Flat
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Purchasers can be jeopardised with no recourse to the statutory right to
challenge under Section 37 of the Act.
59. For the aforesaid reasons, I find that the Flat Purchasers can
indeed maintain a challenge under Section 37 of the Act considering
that the Impugned Orders are passed under Section 17 of the Act, and
they do not interfere with the pro-tem measure of status quo that had
been put in place since May 2017 when the 2017 S.9 Order was passed.
Findings on Merits:
60. Once it is held that the Flat Purchasers can maintain their
challenge to the Impugned Orders, whether the grounds for interference
are made out is to be considered. As already stated above, the scope of
interference under Section 37 of the Act is limited.
61. Orders passed under Section 17 of the Act are indeed
interlocutory in nature. They are capable of being moulded and
modified and varied as time goes by and the conduct of the proceedings
are underway. In that sense, the scope of jurisdiction under Section 17
of the Act read with Section 37 of the Act are co-extensive and work in a
continuum with developments on the subject matter informing the
approach to the interlocutory measures sought and dealt with. That
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apart, purely on facts, one must first examine whether the Impugned
Orders are well informed by the material on record and the provisions of
the JDA and the written conduct of the parties thereafter.
62. Against that backdrop, it would be appropriate to first
examine implications of the material on record and see if the Impugned
Orders are perverse or patently illegal in their consideration of the
material. Should any vulnerability arise, in exercise of the scope of the
Section 37 jurisdiction, one must examine if the vulnerability can be
redressed. In this approach, it would also be useful to examine findings
judicially returned on the very same subject matter at hand. This has to
be carefully seen for the period before the Impugned Orders and the
period after the Impugned Orders.
63. It is clear on the face of the record that the JDA provided for
the tenants being provided tenements of an area of 7,500 square feet
and anything above that was the free sale area. The Developer would
contend that dealing with the tenants was the Owner’s responsibility but
the Developer was left to fend for himself in engaging with the tenants.
The Owner contends that the Developer went behind the Owner’s back
and freely eroded the Owner’s entitlements by providing greater area.
These are disputed questions of fact that would be adjudicated at the
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time of trial in the arbitration proceedings. For purposes of this
judgement, the focus has to be on whether in the dispute between the
Owner and the Developer, the interests of the Flat Purchasers can be
undermined.
64. While the JDA was executed in 2009, it is clear that factoring
in all the developments since then and until September 2013, in which
period, the parties had disputes and differences over the redevelopment,
the resolution reached by them culminated in the Allocation
Confirmation Letter. It is apparent that the clear and specific allocation
of entitlements reduced to writing in the Allocation Confirmation Letter
is not some initial sharing plan but one arrived at after the full flow of
events. The Allocation Confirmation Letter identified precisely, the
specific flats that fell within the Owner’s entitlement from the free sale
component. The Subject Flats fall within such confirmed entitlement.
The Owner went on to sell the Subject Flats to the flat purchasers. Each
of these is said to be through registered sale agreements. In 2016, three
years later, when the Owner followed up on the timing of the delivery
and the Occupation Certificate, the Developer issued the OC
Confirmation Letter, assuring the certificate would come in 15 days, and
it indeed came in by then. Till date, there is no whisper of any action
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taken by the Developer to challenge and question the validity of the
agreements between the Owner and the Flat Purchasers.
65. Worse, the JDA read with the Allocation Confirmation Letter
clearly identifies the flats over which the Developer would have a lien.
This would mean that the Developer not only confirmed what the Owner
was entitled to sell, but also reduced to writing, the scope of coverage of
his lien under the JDA. The sales of the Subject Flats took place
thereafter. Legitimate third-party rights were created in favour of the
Flat Purchasers. Such rights could not have been trampled upon in the
teeth of the aforesaid facts. The status quo ordered in the 2017 S.9
Order was merely a pro tem arrangement. It was for the Learned
Arbitral Tribunal to examine the facts and the merits and arrive at a fair
interlocutory arrangement. It is in this light that the finding in the First
Impugned Order – that the actual amounts that would be owed by the
Owner to the Developer could only be ascertained at the end of the trial
in the arbitration proceedings and thereby extending the lien over the
Owner’s entire entitlement to free sale area – is perverse. It flies in the
teeth of the Developer’s own position on the scope and extent of the lien
in the Allocation Confirmation Letter. It ignores vital evidence in the
form of the OC Confirmation Letter.
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66. In the Second Impugned Order, the subsequent
developments sought to be relied upon by the Owner were dismissed as
not being new developments. The two grounds introduced by the
Owner were the pleadings of the Developer about what has been
realised by sale of two flats under this Court’s orders and the
acknowledgement of receipt of funds. While this may ordinarily not be
a new facet going by what was claimed by the Owner in his pleadings,
admission in pleadings in response, is a facet that could turn the needle
and ought to have been considered.
67. By the time of the Second Impugned Order, there was judicial
comment in the 2017 S.9 Order on the status of the Flat Purchasers and
the weakness in the prima facie case of the Developer insofar as it
related to claiming a security interest over property already sold to the
Flat Purchasers with the full knowledge of the Developer. The Second
Impugned Order dismisses the same on the premise that the same order
in fact did not alter the position. It ought to have been remembered that
while a third party would not be able to invoke Section 9, when the
Learned Arbitral Tribunal was exercising jurisdiction under Section 17
and a judicial comment on the very same subject matter and facts were
brought to the attention of the Learned Arbitral Tribunal, the
implications of the Subject Flats already having been sold to the Flat
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Purchasers with the full knowledge and tacit consent and the absence of
any challenge to the sale to counter this position, ought to have been
dealt with by the Learned Arbitral Tribunal.
68. Even thereafter, the Flat Purchasers claim to have been
allowed to carry out the work of interiors in their respective flats with
full knowledge of the Developer who was always in possession of the
property of the Flat Purchasers in question. It is remarkable that the
Learned Division Bench commented on the reaction in the course of
Commercial Suit that the Developer’s protest against such a contention
did not inspire confidence. It must be remembered that the Commercial
Suit Order and the CS Appellate Order would come about only in July
2023 and September 2023 respectively. The Impugned Orders cannot
be tested on the anvil of these subsequent judicial findings even through
on a prima facie basis that are subsequent in time. However, it cannot
be forgotten that the Section 37 jurisdiction is an extension of the
jurisdiction under Section 17 of the Act. Interlocutory arrangements
operate in a continuum as events unfold. This Court would not be right
in ignoring these observations and yet must also examine the material
on record on its own.
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69. The OC Confirmation Letter was written by the Developer to
the Owner on April 29, 2016, three years after the Allocation
Confirmation Letter. In this letter, it is squarely stated by the Developer
that “ in case if you have received any letter from the flat purchasers,
we request you to kindly inform them that the Occupation Certificate
will be issued within 15 days ”. It is noteworthy that this letter is a
response to a letter dated March 9, 2016 issued by the Owner to the
Developer. Specifically, the Owner has referred to Flat Purchasers
following up with him about the Occupation Certificate, reminding the
Developer that possession was meant to be handed over by December
31, 2014. The Owner requested the Developer to complete the
construction work and obtain the Occupation Certificate within 15 days
of the receipt of that letter.
70. Having examined the record, I am of the view that indeed the
JDA entailed allocation of areas between the Owner and the Developer
and this was crystallised in the Allocation Confirmation Letter of 2013,
which led to legitimate rights being created in favour of the Flat
Purchasers. Even the follow up in 2016 from the Owner about the status
of the Occupation Certificate drew no protest or surprise from the
Developer, who instead asked the Owner by way of the OC Confirmation
Letter, to inform the Flat Purchasers that the Occupation Certificate
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would be received in 15 days. To my mind it is clear that the Developer
had consciously restricted his lien to the identified Lien Flats. The
Developer had unequivocally communicated the right of the Owner to
alienate the Subject Flats. This was done. Disputes thereafter about the
income from such sales is a matter of a money dispute. Even if the area
is to be considered the denomination of the dispute, the rate of Rs.
5,000 per square foot contracted by the parties was a pointer to the rate
at which value was to be adjusted.
71. Transactions in immovable property cannot be tied down in
value terms forever. The JDA itself entailed development within a
specific timeframe of 24 months from the date of obtaining vacant
possession. The rate of Rs. 5,000 per square foot contracted for
identifying the portion of Owner’s entitlement that could be sold has a
temporal element and is meant to indicate the area that could be sold to
recover what is but a right to receive money. It is clear to me that when
the material is read holistically, what was contracted between the
parties is that the Developer would need to bear the financial obligations
as contracted. The parties have disputes over how the facts are to be
read. This is subject matter of adjudication. Pending such adjudication,
it cannot be said that the entire area of the Owner’s entitlement,
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including what was already legitimately sold without challenge from the
Developer would form subject matter of a lien.
72. It cannot also be forgotten that the Developer himself has
even issued a confirmation to a bank about noting the bank’s
encumbrance rights over the Subject Flats financed. A letter dated
September 23, 2016 by which the Developer has written to the Branch
Manager of Chembur Branch of the State Bank of Hyderabad, noting the
lien over the property financed in favour of the Bank forms part of the
record. This letter explicitly notes the Bank's interests and confirms that
such interest has been noted in the Developer's books against Flat No.
104 in the ‘A’ wing (one of the Subject Flats). This Subject flat is a flat
acquired by a Flat Purchaser from the Owner, which is also squarely and
explicitly referred to by the Developer.
73. Mr. Purohit would try to get over the lien letter issued in
favour of one of the Flat Purchasers by indicating that similar lien letters
do not exist in respect of other Flat Purchasers. This contention too does
not turn the needle in favour of the Developer, inasmuch as the
Developer was dealing with one of the species in the larger genus of Flat
Purchasers. If no flat could ever be sold to any Flat Purchaser by the
Owner, there is no point in differentiating between the lien being
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confirmed to one bank and not being confirmed to other banks of other
Flat Purchasers. In fact, this Subject Flat was suit property in the
Commercial Suit that led to the Commercial Suit Order and the CS
Appellate Order. To overcome this, Mr. Purohit would submit that
there was no such confirmation to any bank about the other Subject
Flats. That contention seeks to sidestep the core point – that the
alienation of the Subject Flats was with the full approval and
confirmation by the Developer.
74. The confirmation to a bank is a symptom of the position of
the parties before the litigation started. It is a well settled principle that
correspondence and conduct of parties ante litem motam (before the
litigation began) has greater probative value and is more reliable than
those created post litem motam (after the litigation began). The
Allocation Confirmation Letter, the OC Confirmation Letter and the
letter of assurance to the bank, all carry serious probative value and this
ought to have been considered by the Learned Arbitral Tribunal.
Instead, the Learned Arbitral Tribunal has taken a view that regardless
of these instruments, the JDA executed in 2009 containing references to
entitlement of the Developer to area if dues are not paid by the Owner,
renders the approach perverse and not a plausible and reasonable one.
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75. It is in that light that I cannot ignore the persuasive strength
of the three judicial findings on the same subject matter – in the FP S9
Disposal Order (after the First Impugned Order but before the Second
Impugned Order); the Commercial Suit Order and the CS Appellate
Order (both, after the Second Impugned Order), which are available on
the record at the time my consideration of the Section 37 Petitions.
76. I have also carefully examined the other material on record
such as the confirmation of accounts exchanged between the Owner and
the Developer. A letter dated May 12, 2012 from the Developer to the
Owner indeed highlighted the fact that the costs that were meant to be
borne by the Owner were being borne by the Developer and also dealing
with various reasons for delay in the development. The parties already
had a dispute before the Allocation Confirmation Letter, about the
payments due and the monetary claims that the Developer believed that
the Owner ought to bear. It is noteworthy that this letter was dated over
one year prior to the Allocation Confirmation Letter of September 4,
2013.
77. Therefore, the arrangement set out in the Allocation
Confirmation Letter and other correspondence exchanged between the
parties on the very same day, would indicate that the conduct of the
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parties on September 4, 2013 is conduct even after payment disputes
arose between the parties. It cannot be forgotten that the Developer
specifically confirmed to the Owner that “ except flat Nos. 111 and 207
which you are not to sell ” the other flats named in that letter were
squarely authorized as flats that the Owner would be entitled to sell. It is
based on such entitlement that the Owner executed the sale agreements
with the Flat Purchasers.
78. Having examined the record in the course of the Section 37
jurisdiction, I am of the view that it is impossible to take a view that the
interests of the Flat Purchasers created with full knowledge, authority
and approval from the Developer can be wished away. At the same
time, I am careful to leave the adjudication of facts to the Learned
Arbitral Tribunal.
79. Therefore, it would only be appropriate to borrow from the
formulation contained in the Commercial Suit Order as upheld in the CS
Appellate Order and direct the Developer to part with possession of the
Subject Flats to the Court Receiver of this Court, who shall hand over
possession to the Flat Purchasers as agents of the Court Receiver
without payment of royalty. In exchange, the Flat Purchasers shall
tender and deposit with the Court Receiver, the entire balance
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consideration payable for the Subject Flats, which shall be kept in a
fixed deposit to abide by the outcome in the arbitration proceedings.
80. It is remarkable that in the disputes over payment of
construction costs between the Owner and the Developer, the interests
of the Flat Purchasers have been held to ransom for so long by refusing
to acknowledge their legitimately-created entitlement to have
possession despite having paid consideration in terms of the registered
flat purchase agreements.
81. It can be safely stated that the Learned Arbitral Tribunal
simplistically holding that the quantum of amounts or Owner’s
entitlement area that would fall within the control of the Developer can
be held to be perverse for rewriting the JDA read with the Allocation
Confirmation Letter, which itself was a product of a conscious resolution
of the then-prevailing disputes between the Owner and the Developer.
What needs to be considered is the interplay between the claim of the
Developer to construction payable by the Owner and the Owner’s claim
that the Developer has already realised more than what is owed to him;
and juxtapose that with the rights legitimately and validly created by the
Owner in favour of Flat Purchasers even before new disputes between
the Owner and the Developer gained steam towards the end of 2016.
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82. The interests of the Flat Purchasers have been validly
contracted in accordance with law and in accordance with the
entitlement of the Owner under the JDA. The alleged non-compliance
by the Owner with other provisions of the JDA would indeed give a
cause of action to the Developer, but whether such cause of action is
meant to be secured by way of a lien over the flats acquired by the Flat
Purchasers is a completely different matter altogether. Seen in this light,
holding up the interests of the Flat Purchasers with whom the Owner
has validly contracted sale of flats falling within his entitlement,
constitutes the Learned Arbitral Tribunal having granted security in
advance by way of encumbrance over the Subject Flats to secure other
facets of performance under the JDA that are disputed between the
Owner and the Developer.
83. In this view of the facts, the Developer can be said to have
been secured in anticipation of trial on damages when prima facie it is
writ large that specific performance in terms of area being handed over
is potentially not possible, or even fair if possible, and for which
damages would not suffice. It can be determined in the trial what the
Developer is entitled to, in the arbitral proceedings. Even if the Learned
Arbitral Tribunal felt it fit to grant a lien by way of an interlocutory
measure under Section 17 of the Act, the Learned Arbitral Tribunal
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ought to have been mindful of the pre-existing legitimately created
rights in favour of the Flat Purchasers and it was not open to make
inroads into those rights without any consideration of the interests of
the Flat Purchasers that have been validly contracted with the
acknowledgement and confirmation by the Developer.
84. It is a settled principle of law that when an equitable relief is
considered by a Court or a quasi-judicial forum in exercise of an
equitable jurisdiction, the measure that is purported to balance and
adjust equities ought not to create new inequities on other parties who
have otherwise conducted themselves in accordance with law. This
principle would apply to the Section 17 jurisdiction, which is primarily
guided by contract but is not meant to be blind to equities created by the
parties to the contract whose instrument is subject matter of
enforcement.
85. It is in this light, that the with prejudice offer made on behalf
of the Flat Purchasers ought to be considered. Mr. Khan had specific
instructions to submit that the Flat Purchasers would even be willing to
hand over the balance consideration to the Developer provided the Flat
Purchasers are given possession, but with the settlement attempts
having failed, a case is made out to mould the relief.
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Certain Other Facets:
86. The de-reservation attempts envisaged in the JDA too had a
temporal element to it – 12 months from the JDA. The parties have
competing versions on how to account for Wagh. The Developer
contends that absence of settlement with Wagh can lead to the
Occupation Certificate itself being cancelled while the Owner contends
that Wagh’s illegal structure has been demolished and there can be no
such existential threat. These are all facets left to the Learned Arbitral
Tribunal. The adjudication of these Section 37 Petitions is restricted to
resolving the foundational errors that cut to the root of the matter, and
that approach lends itself to interceding in respect of the Flat
Purchasers’ interests in the interlocutory measures that are meant to
preserve the subject matter of the arbitration agreement. All facets are
left to the Learned Arbitral Tribunal to adjudicate and conclude on the
basis of evidence led in the course of the trial.
87. For good order’s sake and completeness, a word would be in
order on the point about limitation. Section 17 proceedings are in the
nature of interlocutory proceedings and occupy the nature of a
continuum. In the instant case, there have been continuous
developments with multiple iterations of the same subject matter
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coming about in various forums. The Flat Purchasers were hamstrung
running from pillar to post with the parties to the arbitration
proceedings occupying the forums with jurisdiction under Section 9 and
Section 17 of the Act. After the First Impugned Order, the Flat
Purchasers indeed pursued their own petition under Section 9 and also
filed an interim application in the Owner’s Section 9 Petition to review
the 2017 S.9 Order. They pursued an appeal as well against dismissal of
their own Section 9 Petition, which was disposed of on November 28,
2022. The Second Impugned Order was passed on December 15, 2022.
88. These are bona fide efforts that they were taking to redress
the situation they found themselves in. Meanwhile the Owner filed a
second Section 17 Application, which led to the Second Impugned
Order. The Flat Purchasers then filed their Section 37 Petition. Their
efforts indicate that they were not idling and were not negligent. They
pursued the remedies as best advised and indeed filed the challenge to
the Second Impugned Order in time. Developments in parallel also took
place, which would place a different emphasis on the underlying facts,
and the Flat Purchasers filed the Section 37 Petition within reasonable
time. While this was not pressed hard by Mr. Purohit, this facet is also
dealt with for the sake of completeness.
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Conclusions and Directions:
89. Undertaking of transactions as contracted in the JDA, is a
legitimate exercise of enterprise to take an informed decision on the
embracing of legal risks. The parties have adjusted their respective
positions and allocated responsibilities between each other. It is in that
context, that the JDA of August 2009, the Allocation Confirmation
Letter of September 2013, the OC Confirmation letter of April 2016, the
lien confirmation in favour of the bank in September 2016, must all be
read in conjunction to get a realistic and holistic picture of the nature of
the commercial transactions between the parties.
90. In itself, this may be a matter of appreciation of evidence at
the prima facie stage, but the key is to see if the manner of appreciation
returns a view that no reasonable person would take. We have three
instances of judicial forums consistently appreciating the same evidence
to return the view that a reasonable person would take.
91. The view of the Learned Arbitral Tribunal simply adopts a
blanket lien over every inch of property developed for unascertained
liability that would be affixed only at the end of arbitration, and pending
that, held up the interests of even legitimate third parties. That is why I
have interfered with the Impugned Orders, which are vulnerable on the
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premise of being perverse and ignoring vital and material evidence that
ought to have been examined and dealt with and forms part of the
record.
92. In this view of the matter, having examined the material
record and the contents of the Impugned Order, in my opinion, I am
afraid a case has been made out for interfering with the Impugned
Orders, insofar as the Flat Purchasers’ Petition is concerned. As regards
the Owner’s Petition, in my opinion, the same terms of disposal of the
Flat Purchasers’ Petition would be dispositive of it. The examination of
accounts and the amounts owed and paid and reconciliation of numbers
may be conducted before the Learned Arbitral Tribunal. In the second
Section 17 Application, the Owner had restricted his prayer to the
Subject Flats and in this challenge, I do not go beyond that scope.
93. The Learned Arbitral Tribunal is requested to put the parties
to terms to complete the arbitration proceedings at the earliest,
imposing such measures including costs on any party indulging in
dilatory tactics, if any, to ensure that the proceedings are brought to a
closure at the earliest.
94. Both the Petitions are disposed of with the following
directions:
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a) Each Flat Purchaser is directed to deposit the
balance consideration due on the respective Subject Flat with
the Court Receiver within a period of four weeks from the
upload of this judgement on the website of this Court;
b) The Developer too shall deliver the keys to the
Subject Flats to the Court Receiver within a period of four
weeks from the upload of this judgement on the website of
this Court;
c) Upon the expiry of four weeks from the upload of
this judgement on the Court’s website, the Court Receiver
shall release the keys of each Subject Flat to the respective
Flat Purchaser and an agency agreement shall be executed
without payment of royalty, making the Flat Purchaser an
agent of the Court Receiver;
d) The consideration amount received from each Flat
Purchaser shall be kept in a fixed deposit account for the
period that grants the maximum interest rate and that shall
be kept renewed from time to time in accordance with the
applicable rules for such deposits, with the deposited
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amounts and accruals thereon, abiding by the outcome in the
arbitral proceedings;
e) Each party shall file an affidavit before the Learned
Arbitral Tribunal indicating the specific factual update on the
aforesaid process; and
f) The Learned Arbitral Tribunal is directed to convene
at the earliest and issue directions for conduct and
completion of the arbitration proceedings at the earliest.
95. I anticipate that a request for stay would be made at
pronouncement of this judgement. I have already provided for a
timeline in the aforesaid directions which should suffice should any
party be desirous of carrying the matter higher. With the aforesaid
directions, all the captioned proceedings are finally disposed of .
96. Interim Application too stands disposed of .
97. All actions required to be taken pursuant to this order shall
be taken upon receipt of a downloaded copy as available on this Court’s
website.
[ SOMASEKHAR SUNDARESAN, J.]
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