Full Judgment Text
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2005:BHC-OS:16407-DB
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.645 OF 2005
IN
ARBITRATION PETITION NO.78 OF 2005
Shree Ram Mills Limited,
Avadh Building, Ganpatrao Kadam
Marg, Lower Parel Division,
Mumbai 400 013. Appellant
versus
1. Kalpataru Construction Overseas
Pvt.Ltd; 111, Maker Chamber-IV,
Nariman Point, Mumbai 400 021.
2. Vijay nfrastructure Technolo-
gies Pvt. Ltd; 8, Vithalwadi,
Kalbadevi, Mumbai 400 002. Respondents
Mr.Vinod Bobde, Mr.Jimmy Pochkanwalla and
Mr.Shyam Diwan - Sr.Counsel with Mr.P.A.Sawant
and Mr.Sameer Garad i/by M/s.Khaitan & Jaykar for
appellant.
Mr.I.Chagla, F.Divtre, Mr.D.Khambhata -
Sr.Counsel with Mr.M.S.Doctor i/by M/s.Federal &
Rashmikant for respondent no.1.
Ms.Pratibha Mehta i/by M/s.Little & Co. for
respondent no.2.
CORAM : DR.S.RADHAKRISHNAN AND CORAM : DR.S.RADHAKRISHNAN AND CORAM : DR.S.RADHAKRISHNAN AND
S.C.DHARMADHIKARI, JJ. S.C.DHARMADHIKARI, JJ. S.C.DHARMADHIKARI, JJ.
DATE OF RESERVING THE JUDGEMENT : 06.10.2005 DATE OF RESERVING THE JUDGEMENT : 06.10.2005 DATE OF RESERVING THE JUDGEMENT : 06.10.2005
DATE OF PRONOUNCING THE JUDGEMENT : 27.10.2005 DATE OF PRONOUNCING THE JUDGEMENT : 27.10.2005 DATE OF PRONOUNCING THE JUDGEMENT : 27.10.2005
ORAL JUDGEMENT : (PER - S.C.DHARMADHIKARI, J.) :-
ORAL JUDGEMENT : (PER - S.C.DHARMADHIKARI, J.) :- ORAL JUDGEMENT : (PER - S.C.DHARMADHIKARI, J.) :-
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1. This appeal under section 37 of the
Arbitration and Conciliation Act, 1996 (for short
"the Arbitration Act") read with clause 15 of the
Letters Patent challenges an order passed by a
learned Single Judge in Arbitration Petition
No.78 of 2005. By the order under challenge, the
learned Single Judge has, on a petition filed by
the first respondent herein, under section 9 of
the Arbitration Act, passed the following order:-
" ... ... ...
ORDER
(i) Interim order in terms of prayer
clause a(ii) and a(iv).
(ii) In case the Petitioners deposit an
amount of Rs.13.30 crores in this Court
and furnish a bank guarantee of a
nationalised bank in the terms in which
it is contemplated by the contract
between the parties dated 28-6-2004 to
the satisfaction of the Prothonotary &
Sr. Master of this Court, within a
period of eight weeks from today, interim
order in terms of prayer clause a(i)
shall stand granted.
(iii) In that event, the Receiver shall
take possession of the property and
appoint the Petitioners to be his agent
in possession of the property on usual
terms and conditions, but without
security and royalty. It is clarified
that in that event the Petitioners shall
be entitled to develop the property in
accordance with law.
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(iv) Petitioners shall be at liberty to
apply for further reliefs, if necessary,
either from the court or from the
Arbitral Tribunal.
(v) In case the bank guarantee is
furnished and the amount is deposited,
the amount shall be invested in a fixed
deposit in a nationalised bank during the
pendency of the Arbitration proceedings.
In relation to the bank guarantee, the
Respondents shall be at liberty to make
an application for further orders either
before the Court or before the Arbitral
Tribunal.
(vi) In case the Petitioners fail either
to deposit the amount of Rs.13.30 crores
as directed above or to furnish the bank
guarantee within the period mentioned
above, this order shall stand vacated and
the petition shall be treated as
dismissed. It is clarified that the
amount shall be deposited and the bank
guarantee shall be furnished by the
Petitioners with due notice to the
Respondents.
(vii) Petition disposed of."
2. Prayer clauses a(ii) and a(iv) of the
Arbitration Petition claim an injunction against
the appellant and the second respondent,
restraining them from selling, alienating,
transferring, parting with possession or creating
any third party rights in any manner whatsoever
in respect of the property which is more
particularly described at Exhibit A-1 and
Exhibit-T to the Arbitration Petition. The said
prayer also seeks relief with regard to certain
areas which are described at Exhibit A-2 of the
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petition. The prayer clause a(iv) of the
Arbitration Petition seeks an injunction in
respect of a larger property, which is described
in Exhibit-A. A reference would be made to these
reliefs in some details in the latter part of
this judgement.
3. For appreciating the appellant’s challenge to
the impugned order, a reference to few facts is
necessary. Appellant is the original respondent
no.1 to the above Arbitration Petition, whereas,
first respondent is the original petitioner
thereto. Original respondent no.2 is impleaded
in this appeal as second respondent.
4. The parties shall be referred to as per the
nomenclature in the Arbitration Petition.
5. Petitioner as well as first respondent are
companies incorporated under Companies Act, 1956
and have their registered office at Mumbai. The
petitioners are engaged in business of acquiring,
constructing, developing, marketing and selling
immovable properties.
6. Respondent no.1 is the owner of immovable
properties in Mumbai. It is a part of "S.Kumar’s
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Group". It is owned and controlled by members of
Kasliwal Family. It is contended that second
respondent is also a group company.
7. Respondent no.1 is the owner and absolutely
and well and sufficiently entitled to twelve
adjoining pieces and parcels of land situate at
Lower Parel in Mumbai, being partly freehold and
partly perpetual leasehold, bearing C.S.
Nos.288, 289, 1/1540, 2/1540, 3/1540, 1547, 1548,
1549 and 1550 of Lower Parel Division and also
bearing C.S.Nos.309, 210 and 1/1539 of Lower
Parel Division (corresponding Plot Nos.245 and
246 of Worli Estate Scheme No.52) totally
admeasuring 67,785.50 sq. mtrs. or thereabouts
with buildings and structures standing thereon.
The said lands and buildings are hereinafter
referred to as "the larger property". By an
Agreement dated 28th June 2004 styled as a
"Memorandum of Understanding" (for short "MOU")
between the petitioners and the respondents, the
respondent no.1, with the consent and concurrence
of respondent no.2, inter alia, agreed to grant
assign and convey to the petitioners lands
admeasuring in aggregate 20,955.40 sq. mtrs.
(out of the said larger property) situate at
G.M.Bhonsale Marg, Mumbai (hereinafter referred
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to as "the said property"). Under the said MOU,
the petitioners were also granted the exclusive
right to utilize the FSI of the said property on
the basis of existing FSI ratio of 1:1:33 i.e. a
total net FSI of 3,00,000 sq. ft. on the said
property, as therein provided.
8. The total consideration for the said transfer
was Rs.105.30 crores, being an amount of Rs.86.30
crores payable by the petitioners to the
respondents under the MOU and an amount of Rs.19
crores agreed to be paid at the respondents’
request to "Ajit Enterprises", a nominee of the
respondents, which the petitioners believe is a
partnership firm of the "S.Kumars Group" and of
the Kasliwal family. Eventually, on 10th
December 2004, an "Addendum to the MOU" was
entered into at the request of the respondents,
whereunder the amount payable under the MOU was
agreed to be Rs.105.30 crores, payable to the
respondents. The arrangement with "Ajit
Enterprises" was accordingly cancelled. The said
MOU dated 28th June 2004 and the said Addendum
thereto dated 10th December 2004 are part of one
and the same transaction and are one agreement
and are hereinafter referred to as "the said
Agreement". The petitioners annexed copies of
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the MOU and the Addendum thereto as Exhibits-B
and B-1 to the petition.
9. Acting under and in pursuance of the said
MOU, the petitioners by their cheque dated 28th
June 2004 bearing No.781766 drawn on ICICI Bank
Limited, duly deposited with the respondents’
advocates, a sum of Rs.5 crores, as recorded by
the petitioners’ advocates’ letter dated 29th
June 2004, wherein a request was also made for
various documents. On or about 7th September
2004 the petitioners made payment of a further
sum of Rs.5 crores to the respondents as provided
in the said MOU, pending compliance by the
respondents of various issues.
10. The further case of the petitioners is that
at the request of the respondents, their
Architect was deputed to assist and co-operate in
the matter of obtaining approval for the revised
lay-out and for sanction of plans etc.. There is
a reference to the correspondence with regard to
the approved revised lay-out, building plans and
title of the first respondent to the larger
property.
11. In the petition, there is a reference to the
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meeting held on 10th November 2004 wherein
several aspects with regard to the completion of
transaction were discussed. The minutes of the
meeting were prepared and signed by the
respondents, and according to the petitioners,
they are false and incorrect. There is a
reference to the further meeting held on 28th
November 2004 where again the matters were
discussed. The petition then refers to the
correspondence after this meeting. It is
contended that the respondents did not comply
with their obligations under the MOU during the
time specified. It is contended that as per the
Addendum the consideration was modified and it
was to be Rs.105.30 crores instead of Rs.86.30
crores. It is contended that acting on the
Addendum, further sums were paid and thus
petitioners paid a sum of Rs.30.00 crores. it is
then contended that necessary documents were to
be exchanged, drafts of which were also
forwarded.
12. We need not discuss these aspects in details
because admittedly the matter is pending before
the Arbitral Tribunal. It is contended by the
petitioners that they forwarded drafts as also
complied with other requisitions. They even
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consented to mortgage of a large property. It is
also contended that since there was no response
from the respondents, a meeting was held on 6th
January 2005 where again, without prejudice,
proposals were placed for consideration. It is
contended that at this meeting the respondents
demanded a higher amount for the transaction to
be completed. It is alleged that petitioners
took all steps for completing the transfer and
the transaction.
13. It is contended that one of the requirement
was furnishing of draft of Deeds of Bank
Guarantees in favour of the respondents to secure
the payments of Rs.57.5 crores, as provided in
the agreement. The respondents initially
suggested alterations in the wordings of the said
guarantees but the same were not acceptable to
the petitioners’ bankers. The correspondence
with the bank is also referred to. Ultimately,
it is contended that by a letter dated 14th
January 2005 the petitioners’ advocate addressed
a letter to the respondents’ advocate and
recorded all facts and reconfirmed that the
assignment in the clause of the bank guarantee
was in order. The petitioners’ advocate called
upon the respondents’ advocate to fix a meeting
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to finalise the last draft of the Deed of
Conveyance and Assignment. Instead of replying
to this letter, at a meeting the representatives
of parties on 17th January 2005, demand for
increased amount was repeated by the respondents.
14. It is in this context that the petitioners
contended in their petition that they are and
have, at all material times, been ready and
willing to provide said bank guarantees and to
make the payment under the agreement. They have
made all arrangements for the same and are and
have at all material times been ready and willing
to complete the transaction as per the agreed
terms even though the respondents have failed to
do so.
15. The petitioners have recorded in their
advocates’ letter dated 11th February 2005 the
entire development and the conduct of the
respondents in demanding higher sums. They have
also recorded in this letter that the respondents
have started entertaining offers from others with
regard to the property and/or considering
developing the same by themselves. In this
letter the petitioners called upon the
respondents to desist in doing so.
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16. After referring to the terms and conditions
incorporated in the documents and reciprocal
obligations, it is contended by the petitioners
that having paid a sum of Rs.30.00 crores and
expressed readiness and willingness as aforesaid,
it is clear that the petitioners are entitled to
specific performance of the agreement which is
valid, subsisting, in full force and effect and
binding on the parties. It is contended that
monetary sums would not be the compensation and
relief for non performance of the agreement.
Disputes and differences having thus arisen, the
matters are being referred to Arbitration.
17. It is in these circumstances that in the
petition, averments and prayers are made for
interim measures from the Court for protection of
the rights. The averments in this behalf are in
paras 4(a), 4(b), 5(e) and 5(f). In para 6 of
the petition it is contended that balance of
convenience for grant of interim and ad-interim
reliefs is in favour of petitioners and they have
made out a strong prima facie case. If interim
and ad-interim reliefs are not granted, grave and
irreparable loss, injury and damage will be
caused which could not be compensated in monetary
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terms.
18. As noted above, it is this petition
instituted on 14th February 2005 which was
entertained by the learned Single Judge.
19. Upon being served with the papers, the first
respondent namely appellants before us, filed
their reply. It is their case that the complete
arrangement between the parties is reflected not
only in the MOU and Addendum but also in the gist
of the meetings dated 10th November 2004 and 24th
November 2004 and the correspondence referred to
in the affidavit in reply. The bona fides of the
petitioners were challenged inasmuch as it was
contended that an attempt is made to revive the
transaction and freeze the valuable property when
the same is repudiated by the petitioners by not
performing their obligations in time and/or
committing breach thereof. Therefore, the
petition is liable to be dismissed.
20. It is contended that the arrangement between
the parties is that of development of an
immovable property by a builder as a commercial
venture for profit. The nature of the
arrangement being such the petitioner is not
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entitled to specific performance and damages
would be adequate and complete relief. Without
prejudice to the aforesaid, it was contended that
as S.Kumar Group was in immediate need of about
Rs.100.00 crores latest by October 2004 for
financing its group companies particularly the
Maheshwar Hydro Electric Project, the first
respondent proposed to sell as aforesaid a part
of the said property representing 20,955 sq.
mtrs. (FSI of 3,00,000 sq. ft.), which is
referred to as the Developable Land in the said
MOU.. These funds were needed by October 2004
mainly in order to start the construction of
Maheshwar Hydro Electric Project in the dry
season. It was, therefore, made abundantly clear
to the petitioner that any delay in receiving the
consideration for the sale of suit property would
result in the Maheshwar Hydro Electric Project
being delayed beyond the critical dry season and
may require even the Project to be abandoned
exposing the first respondent to severe penalties
and claims besides severe losses in excess of
Rs.700 crores (Seven hundred crores). It was
therefore, absolutely necessary for the first
respondent to raise these funds from sale of the
Developable Land latest by October 2004. If the
respondent no.1 had to undertake development
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themselves, it would take more than a year before
the funds required by them could be raised. This
was well known to the petitioners who all along
assured the first respondents that they would
ensure that the funds from the property
transaction would be received by the first
respondents well within the stipulated period of
four months.
21. Reliance was placed by respondent no.1 on
clause-5 of the Agreement which provided for
furnishing of unconditional bank guarantees to
the tune of Rs.57.50 crores. Reliance was also
placed on clauses 14 and 15 thereof. It was then
contended that the first respondent’s principal
obligation under the MOU was to obtain a duly
sanctioned layout from the Bombay Municipal
Corporation under Regulation 58 of the DCR,
obtain approval of the Monitoring Committee under
the provisions of Regulation 58 of the DCR,
obtain ULC permission for residential user and
obtain IOD for 3,00,000 sq. ft. FSI in addition
to making out a clear and marketable title.
Pursuant to the MOU, the first respondent have
duly fulfilled all these obligations required to
be complied with by them under clauses 2 and 3 of
the MOU and have demonstrated their ability to
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fulfil the obligations under clause 4 of the MOU
which stage has till not arrived in view of the
defaults of the petitioner in making payment and
securing bank guarantees.
22. It was contended that the first respondent
has fulfilled various requirements as enlisted by
the petitioner and details whereof are furnished
at Exhibit-VIII of the affidavit in reply.
Respondent no.1 thereafter placed reliance upon
several letters and other documents in support of
their contention that complete compliance was
made by them.
23. It was contended that the petitioner being
unable to procure Assignable Bank Guarantees Assignable Bank Guarantees has Assignable Bank Guarantees
raised frivolous issues strictly not related to
the completion of transaction. They neither
completed transaction nor made payment nor
furnished the bank guarantees within the agreed
period or the extended period, but itself
repudiated the contract by non performance in
time. The reasons for the petitioner not being
entitled to any reliefs in the petition are set
out in details in para 7 of the affidavit in
reply. As far as the aspect of non furnishing of
the bank guarantees, in the affidavit in reply
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the contention raised is realizing the
petitioner’s inability to procure the assignable
bank guarantees, the first respondent suggested
another alternative to bank guarantee viz. of
receiving monies directly from the petitioner in
place of bank guarantee after deducting interest
costs of first respondent in encashing the bank
guarantee. However, the petitioner failed to
respond to this. Even in the personal meeting of
20.12.2004, the first respondents requested the
Chairman of the petitioner to arrange for the
moneys directly. However, the Chairman of the
petitioner clearly expressed his inability to
arrange for the funds directly, or to get the
required bank guarantees issued. It was under
these circumstances that the four days grace
period was agreed setting the date of 24.12.2004
for completion of the transaction. Even by that
date the petitioner failed and neglected to
perform its obligations. This was a clear
repudiation by the petitioner.
24. On 06.01.2005 Mr.Bhansali of the petitioner
met with the Directors of the first respondent
wherein he once again reiterated the petitioner’s
inability to arrange for the assignable bank
guarantees. It was therefore, clear by then that
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the petitioner had repudiated the arrangement
under the MOU.. In the said meeting, the first
respondent accepted the repudiation and also
discussed the issue of refund of Rs.30 crores
received from the petitioner. Thus, the
arrangement between the parties was put an end
to. It was in these circumstances, that another
meeting was arranged on 17.01.2005 between the
directors of the first respondent and the
directors of the petitioner wherein the
petitioner used abusive language and instead of
any substantive discussions regarding refund of
Rs.30 crores, the meeting ended on a sour note.
25. In details, the issue, as to whether the
petitioners were at all interested in completing
the transaction and fulfilling their obligations
under the agreement, is specifically raised in
the affidavit in reply.
26. Since something turns on the ambit and scope
of the powers of the Court under section 9 of the
Arbitration and Conciliation Act, 1996, a
reference to the averments in para 12 of the
affidavit in reply becomes necessary. The same
reads thus :-
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"12. Without prejudice to the aforesaid,
I submit that in any case, the Petitioner
is not entitled to any relief in respect
of the property described in Exhibits-A
and A-2 to the Petition. In this
context, I say that the present petition
has been filed under Section 9 of the
Arbitration and Conciliation Act, 1996.
Under the said Section 9, reliefs can be
granted only in respect of property which
is the subject matter of the agreement,
under which arbitration is invoked. In
the present case, the property described
in Exhibits A and A-2 to the petition, is
not the subject matter of the said MOU or
the said addendum, and, therefore, in the
present petition, no relief can be
granted in respect of the same."
27. The entire petition was thus dealt with.
There are appropriate denials and assertions.
First respondent has set out their independent
pleas and has also placed reliance upon certain
clauses in the agreement and correspondence to
support the same. This detailed affidavit in
reply together with several annexures came to be
filed on 21st March 2005.
28. It appears that when the arbitration
petition was placed before the learned Single
Judge at initial stage, parties tendered minutes
of order recording following :-
" Without prejudice to all the rights and
contentions of the parties and only in
order to enable the First Respondent to
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file an affidavit in reply, counsel
appearing for the First Respondent states
that for a period of two weeks from
today:
1. The First Respondent shall maintain
status quo in respect of Plot No.5A which
is shown on the Relocation Plan annexed
hereto, a copy of which is made available
to the Petitioners and is also shown on
the Plan Exhibit "T" to the Petition in
blue bounded line. It is however,
clarified that the demolition of the
building "Avadh", partly situated on the
said Plot No.5A shall continue, without
prejudice to the rights and contentions
of the parties.
2. The First Respondent shall also
maintain status quo with regard to Plot
No.3(MP), Plot No.4 (PG), Plot No.6 (RG)
and Plot No.8 (MHADA) shown on the said
Relocation Plan as well as Plot Nos.4A
and 3A also shown on the Plan annexed
hereto where the proposed relocation of
"MP and PG" areas is to be done.
3. It is however clarified that the
statement of status quo will not prevent
the First Respondent from carrying out
the relocation of Plot Nos.3 and 4 (MP
and PG) respectively, in the event of the
BMC permitting the relocation of the said
Plot Nos.3 and 4 (MP and PG). In that
event the First Respondent will hand over
the said Plot Nos.3A and 4A respectively
to MCGM in accordance with the DC
Regulations.
4. It is further clarified that the
First Respondent shall keep the areas
required for the purpose of providing the
accesses to Plot No.5A as shown in black
colour on the Plan Exhibit "T" to the
petition.
5. It is also further clarified that the
statement of status quo with regard to
Plot Nos.6(RG) and 8 (MHADA) will not
prevent First Respondent from taking such
steps as may be necessary to surrender
the said Plots to BMC and MHADA as
provided in MOU (Exhibit "B" to the
petition).
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6. Counsel states that the First
Respondent has not till date created any
third party rights nor alienated or
transferred or encumbered with any of the
aforesaid Plots and areas save and except
as disclosed in the correspondence and
documents furnished to the petitioners.
7. Counsel further states that agreement
between the Respondent No.1 and
Respondent No.2 dated 27th June 1996
pertaining to Plot No.5A has been
cancelled pursuant to the deed of
Cancellation dated 21st December, 2004
and the Respondent No.2 has no right,
title, interest or claim of any nature
whatsoever in the said Plot No.5A."
29. No doubt this arrangement was till the
arbitration petition was heard and disposed of.
So also it was without prejudice to the rights
and contentions of both sides. It further
appears that the arrangement was arrived at to
enable the first respondent (appellant herein) to
file their affidavit in reply.
30. After affidavits were filed by both sides,
the petition was placed before the learned Single
Judge for hearing and final disposal. By order
under challenge, the learned Single Judge allowed
the petition.
31. In allowing the request of the original
petitioner, the learned Judge relied upon certain
admitted facts. According to the learned Judge,
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petitioner had paid an amount of Rs.30.00 crores
to the respondents. Further, according to the
learned Judge, by their letter dated 14th January
2005, petitioner through their Advocates informed
the respondents that they are in a position to they are in a position to they are in a position to
furnish bank guarantee in terms of the contract furnish bank guarantee in terms of the contract furnish bank guarantee in terms of the contract
between the parties. between the parties. Further, the learned Judge between the parties.
holds that there is no response to this letter.
The learned Judge thereafter proceeds to
reproduce clause-5 of the Addendum and concludes
that Conveyance was not executed. The Addendum
does not specify any time limit for conveyance.
The agreement between the parties being sale of
immovable property, they did not intend that time
should be the essence of contract. The learned
Judge held that there is no termination of this
contract. The contract is subsisting. The claim
before the Arbitrators being for specific
performance and that the aforesaid letter
expressing readiness and willingness on the part
of petitioner to furnish bank guarantee and
deposit further amounts, the petition needs to be
granted. The learned Judge also relies upon the
fact that readiness and willingness of the
petitioner being demonstrated, a case is made out
for appointment of Court Receiver not just for
protecting the property but for permitting the
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development and sale. At internal page 17 of the
impugned order, the learned Judge concludes that
a case for appointment of Receiver is made out
with the aforesaid permission. The reasons are
on the aforesaid lines.
32. We have set out the conclusions in a
detailed manner only with a view to appreciate
the rival contentions.
33. Mr.Bobde - learned Senior Counsel appearing
for the appellant contends that the learned Judge
fell in clear error in granting the reliefs
prayed for in the arbitration petition. He
submits that the impugned order is ex-facie
erroneous and unsustainable. He submits that the
learned Judge was aware of the fact that the
petition invokes Section 9 of the Act. He
submits that the powers of the Court under
section 9 are mainly exercised to preserve and
protect the subject matter of dispute before the
Arbitral Tribunal. He submits that Section 9
read with the sub clauses and as a whole, makes
it abundantly clear that the Court cannot grant
substantive rights to parties and that too
pending the reference before the Arbitral
Tribunal. The powers ought to be exercised in a
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manner so as not to render the reference
infructuous. Beyond that, the provision does not
empower the Court to confer any benefits and
rights. Moreso, granting final reliefs.
34. Mr.Bobde submits that the Court has no power
to finally decide the dispute and send the case
to the Arbitral Tribunal as an empty formality so
as to effectively oust the jurisdiction of the
Arbitral Tribunal over the dispute. If orders
like the impugned order can be passed as interim
measures, two Acts of Parliament become dead
letters : the Specific Relief Act, 1963 as well
as the Arbitration and Conciliation Act, 1996.
It would become futile for parties to go to the
arbitral tribunal to have the dispute as to
specific performance decided. It would also
become unnecessary for the plaintiff to abide by
the Specific Relief Act, 1963 and to -
a) prove his readiness and willingness,
by evidence and relevant material, as
mandated by Section 16(c),
b) prove that compensation in money is
not an adequate relief for denial of
specific performance under section 10(b),
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c) bypass the bar to relief contained in
section 14(1)(a) proviso (iii), and
d) satisfy the judicial conscience of the
Court/Arbitral Tribunal that a case is
made out for the exercise of the
discretionary and equitable power to
grant relief under section 20 of the Act
of 1963.
35. Mr.Bobde further submits that the power to
appoint a Receiver is a drastic power to be
exercised in cases of urgency and for securing
the ends of justice. The power is conditioned by
Order XL, Rule 1, CPC in the sense that
requirements of the provisions of the CPC have to
be fulfilled and the judicially settled
principles for appointment of Receiver are to be
observed. Circumstances must exist to justify a
finding by the Court that it would be just and
convenient to appoint a receiver. A reasoned
finding to this effect must be given by the Court
upon considering the interests of justice, having
regard to the relative merits of the case put
forth by both parties. There must also be
consideration of the balance of convenience and
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it must be found to lie in favour of appointing a
receiver. Moreover, the powers that can be
conferred on the Receiver by the Court in Order
XL, Rule 1, sub rule (1)(d) are, inter alia, for
the realization management, protection,
preservation and improvement of the property.
The Court cannot confer power on the receiver,
muchless upon his agent (the plaintiff) to
proceed to develop the property by constructing
his building on the defendant’s land and
irreversibly change it to the detriment of the
defendant. The Court cannot grant the final
relief through the appointment of a receiver.
Essentially, the power is meant to preserve and
protect and is exercisable where there is need
for taking the urgent measure. No case has been
established by the respondent, nor has the Court
given any sufficient reasons, to justify the
appointment of a Receiver at all, much less for
the purpose of developing the property.
36. The submission of Mr.Bobde is that prima
facie case in the present matter should be on the
touchstone of Specific Relief Act, 1963. He
invites our attention to the provisions of
Specific Relief Act and contends that the said
remedy cannot be availed of once there is a
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personal bar to grant any relief.
37. On merits, Mr.Bobde contends that the relief
of temporary injunction is a discretionary and
equitable remedy under section 36 of the Specific
Relief Act, 1963. Injunctions are not granted
merely because a suit or claim is filed. In
other words, freezing of proprietary rights is
not to be done as a matter of course only because
a matter is pending. As held in cases under
Order XXXIV, Rule 1, apart from other equitable
considerations like delay or not coming to the
Court with clean hands, three basic requirements
must be satisfied before a temporary injunction
can be granted namely :-
a) the party seeking injunction has made
out a prima facie case;
b) the said party would suffer
irreparable injury if injunction is not
granted;
c) the balance of convenience lies in
favour of granting the injunction.
38. Mr.Bobde further submits that the respondent
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was not ready with the bank guarantees all
through and particularly on 11th February when it
invoked arbitration clause and also on 14th
February 2005, when they approached this Hon’ble
Court under section 9 of the Arbitration Act.
39. Mr.Bobde further submits that the most
fundamental term of the contract was the
furnishing of assignable and immediately
encashable bank guarantees to the appellant. On
2nd November 2004, the respondent’s bank refused
to give such guarantees. The appellant
reiterated its urgent need for money and again
requested for the guarantees on 17th December
2004 for Rs.57.50 crores and the further sum of
Rs.13.30 crores and complete the transaction on
20th December 2004. The appellant finally
requested on 22nd December 2004 that the
transaction be completed by 23rd or 24th at the
latest. Neither the respondent’s reply of 18th
December 2004 nor of 23rd December 2004 makes any
mention whatever about the bank guarantees being
ready. There is not even a request made by the
respondent to the appellant for granting any time
to furnish bank guarantees. The respondent
claims to have written to its bank on 23rd
December 2004 requesting for issuance of the
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assignable guarantees. However, this was
obviously not pursued with any sense of urgency.
There is not a single reminder letter written by
the respondent until 12th February 2005 i.e. one
day after the arbitration notice of 11th February
2005. In fact, on 22nd December 2004, as the
bank’s General Manager’s letter dated 15th
February 2005 records that he had initially
recommended "co-accepted bills facility" and that
was being considered, not the issuance of
assignable bank guarantees. The Bank Manager
also says on 15th February 2005 that now the
request is for bank guarantees. The word "now"
suggests a point of time just before 15th
February 2005, probably after the arbitration
notice was issued on 11th February 2005. Hence
on 24th December 2004 Mr.Parag Munot of the
respondent enquired of Mr.V.K.Jain whether the
appellant would accept co-accepted bills of
exchange. It is, therefore, false to say that
the bank was ever willing - until 16th February
2005 to issue the assignable bank guarantees
which is after the filing of the petition on 14th
February 2005.
40. Mr.Bobde further submits that the internal
correspondence within the bank shows that giving
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of guarantees was sanctioned internally by the
bank only on 16th February 2005, two days after
the petition was filed under section 9 on 14th
February 2005 and five days after the respondent
gave notice of arbitration on 11th February 2005.
The actual bank guarantees have never been
voluntarily given to the appellant before 14th
February 2005 when the litigation commenced and
even now have not seen the light of the day. The
only indication that the bank became ready to
issue the bank guarantees to the respondents is
to be found in letter dated 20th April 2005
addressed to the respondent.
41. Mr.Bobde submits that there is, in this
case, not merely an absence of a prima facie
case, there is total absence of a case for
specific performance. The law prohibits grant of
specific performance in favour of the respondent.
The claim for specific performance cannot succeed
in law since the primary requirement of a prima
facie case is wholly absent. No temporary
injunction can be granted in respect of property,
which was the subject of the contract, much less
for the larger plot which was not even the
subject of the contract.
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42. Mr.Bobde submits that the learned single
Judge has patently misread the letter dated 14th
January 2005. Mr.Bobde further submits that the
letter only says that the respondent confirms and
accepts the clause suggested regarding the
guarantees. It does not say that the guarantees
have been issued by the bank or that the bank is
even agreeable to issue them and that the
respondent is ready with the guarantees. It also
does not say anything about Rs.13.30 crores to be
paid apart from the bank guarantees for Rs.57.50
crores. Significantly, it does not say that any
part of the contract remained to be performed by
the appellant. The plain position on record, on
a bare perusal of the letter, is that the
respondent never was ready with the guarantees
for Rs.57.50 crores and was never ready and
willing to pay Rs.13.30 crores.
43. Mr.Bobde submits that in this case time was
clearly of the essence as is apparent from the
language of the contract, the correspondence as
well as the Minutes of Meeting dated 10th
November 2004 and gist of discussions of 23rd
November 2004. Moreover, the object of the
contract, the nature of the property, and the
surrounding circumstances and the conduct of the
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parties, all point to the fact that time was
indeed of the essence. Even if it was not of the
essence originally it was made of the essence by
letters dated 17th December 2004 and 22nd
December 2004. It is settled law that notice to
complete within a fixed time has this effect.
The very fact that the contract concerns urban
property, where the value of the land changes
phenomenally in a short time, displaces the
ordinary presumption.
44. Mr.Bobde submits that repudiation is to be
inferred from the conduct and inaction of the
respondent in the matter of fulfilling its
essential obligations. The continued failure to
obtain and furnish assignable bank guarantees and
to pay the further sum of Rs.13.30 crores leads
to the clear inference that the respondent had
repudiated and put an end to the entire contract.
The desire to perform the contract at some later
time in the future - a time of its own choosing -
coupled with a consistent failure to honor the
fundamental term as to payments leads to the
conclusion that the respondent did not want to
proceed to complete the transaction as agreed.
Thus, the respondent repudiated the contract.
Even assuming that there was no repudiation and
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the contract subsisted, it makes no difference to
the applicability of the provisions of Specific
Relief Act, 1963, and it is clear that in the
teeth of Section 16(c) and section 10(b) read
with section 14(1)(a), the respondent is
disentitled to the equitable and discretionary
relief of Specific Performance and for interim
reliefs.
45. Mr.Bobde places reliance upon decisions of
this Court and the Hon’ble Supreme Court in
support of the above contentions. The details of
the same are set out in the written submissions.
The photocopies of the citations have been placed
before us.
46. On the other hand, Mr.Chagla - learned
Senior Counsel appearing for the original
petitioners submits that this is a case where
sanctity of a written contract is in issue. The
jurisdiction is equity jurisdiction. The
contract has to be honored. He submits that
there is no repudiation of the contract and in
fact the plea now raised is as an after thought.
He submits that the said plea was given up before
the learned Single Judge. He submits that
contract is subsisting. Readiness and
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willingness of the petitioners has been
demonstrated. He submits that once the matter is
placed on the pedestal of equity and discretion,
then such pleas must be decided with reference to
the same. He submits that equity demands that no
conditions be imposed on the original petitioner.
He submits that such conditions are imposed when
there is no prima facie case.
47. In the instant case, according to Mr.Chagla,
strong and overwhelming prima facie case is made
out by the petitioner. The defence is totally
dishonest. He submits that time is not the
essence of the contract when it is a case of sale
of immovable property. Mr.Chagla submits that
the scope of section 9 is clear and the learned
Judge has not travelled beyond the same. He
submits that there are obligations under the MOU
which are to be performed by the appellants
herein. There are encumbrances on the property.
Two agreements, one in favour of the second
respondent and another in favour of Hanumesh
Realities, had to be cancelled and their rights,
if any, were to be terminated before the
transaction with the appellants can materialise.
There is an outstanding mortgage of bank and
financial institutions. A marketable title has
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to be made out by the appellants.
48. Inviting our attention to the correspondence
on the question of bank guarantee, Mr.Chagla
submits that there is no breach of the
obligations in that behalf. He submits that a
reading of the relevant clauses would make it
abundantly clear that the bank guarantee was not
to be kept ready and what is relevant is whether
the petitioner was in a position to obtain and
furnish the same. He submits that it is not
disputed that the petitioner had made
arrangements to procure and furnish the same.
Hence, there is compliance with the requirements
stipulated in that behalf.
49. He submits that reliance on a meeting and
alleged discussions and agreements therein when
no Lawyer was present, is misplaced, when
appellants deny a meeting held in the presence of
lawyers of the parties. He submits that the
story of repudiation is ex-facie, bogus and false
inasmuch as if the agreement is repudiated on
24th December 2004, then subsequent conduct and
events do not prove even prima facie the same but
demonstrates that the alleged repudiation has
been given a go-bye. He submits that the letter
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dated 14th January 2005 demonstrates the anxiety
of the petitioner to complete the transaction.
In these circumstances, petitioner was fully
justified in seeking equitable reliefs. Whenever
such reliefs are sought, then Courts of equity
have ample powers in law to mould its orders and
adjust equities. He submits that in the present
case there are two reputed Advocates and
Solicitor firms engaged by parties. They have
enough experience in conveyancing. They
addressed requisitions which have to be complied
with by both sides. The obligations under the
agreements have to be performed. Moreso, when
there is no dispute about the same. He submits
that the agreement is for sale of land and not
mere a development agreement, as alleged.
Relying upon clauses 1, 4, 5 and 13, he submits
that there are mutual obligations and the
transaction had to be worked out with
co-operation and best efforts. It is not the
intention to make time essence of the contract.
This is amply demonstrated by clause 15 of the
agreement. That contemplates 30 days notice.
Admittedly, no notice has been given. There is
no termination of the agreement and it is
subsisting. There was no question of oral
repudiation in such circumstances. He invites
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our attention to the Addendum and contends that
the agreement impacts larger area. It affects
rights of petitioners under the agreement in
question. There is first right of refusal. He
submits that in such circumstances and
considering the conduct of the appellant in
fabricating the documents, such as Minutes of
Meeting held on 10th November 2004, it is clear
that a case was made out for grant of reliefs by
the petitioner.
50. He submits that far from repudiating the
contract, the parties proceeded ahead and in
meetings even consultant in matters of ULC
authorities was asked to expedite the matter. He
submits that if there is a repudiation by the
petitioner of the contract, then there was no
occasion to send letter to the consultant. Thus,
no injunction can be granted is a plea which is
unavailable to the appellant. On the other hand,
appellant must be held by the bargain and cannot
be permitted to wriggle out of its obligations.
He submits that it was, therefore, just and
convenient that Court Receiver he appointed and
this is what is precisely done by the learned
Single Judge. There is no need to interfere with
the said order.
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51. As far as readiness and willingness of the
petitioner is concerned, Mr.Chagla submits that
the arguments of Mr.Bobde on this issue are
misconceived and fallacious. He submits that the
question of fact will have to be ultimately
decided by the Arbitral Tribunal. However, it is
erroneous to contend that when such issue is
being considered, the party must keep the monies
ready. He submits that there is no such
requirement in law. Moreso, when the contract in
question contains mutual obligations. Hence,
there cannot be any obligation to deposit monies
or furnish a bank guarantee unless the appellant
fulfils it’s obligations. Even otherwise,
inviting our attention to the letter of Oriental
Bank, he submits that the petitioner had kept
monies ready. Once the sanction letter is issued
by the banker, then readiness and willingness is
apparent. All that was required to be done was
adding a stipulation in the model form in the
bank guarantee. The form cannot be altered
because that would be contrary to the Guidelines
issued by Reserve Bank of India. The banker
cannot flout the said guidelines. Therefore,
appropriate clarifi- cations had to be obtained
and the banker having clarified the matter and
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expressed willingness on it’s part, then the
requirement of furnishing bank guarantees is
complied with. Now, appropriate changes in the
format have been made and he invites our
attention to the documents in that behalf.
52. Mr.Chagla submits that in the above facts
and circumstances, the learned Judge was right in
placing reliance upon the letter dated 14th
January 2005 and holding prima facie that
petitioner was ready and is ready and willing
even now to fulfil his part of the contract.
53. Mr.Chagla places reliance upon a decision of
the Privy Council reported in AIR-1950-Privy
Council Judgement-90.
54. Mr.Chagla then contends that time is not of
essence in this case. Relying upon the judgement
of the Constitution Bench of Supreme Court in
Chandrani reported in AIR-1993-SC-1742
(paragraphs 18, 20 and 21), Mr.Chagla submits
that the law is settled and time cannot be of
essence when the contract is of sale of immovable
property. He invites our attention to clause 15
of the agreement and contends that no notice
contemplated by the terms of contract, has been
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issued or any letter addressed in that behalf by
the appellant.
55. Assuming without admitting that time can be
of essence even then period between 17th December
2004 (after noon) till 20th December 2004 is not
a reasonable period for complying with the
obligations when the provision in the contract is
of 30 days.
56. Before making time the essence of the
contract, the appellant should have complied with
all it’s obligations. There should not to be any
default on the part of appellant. Primary
obligations were required to be complied with by
the appellant. For example, No Objection
Certificate/Clearance from second respondent
including of Hanumesh Realities. Mr.Chagla
invites our attention to the letters on this
issue and contends that there is no compliance by
the appellant of the obligations under the
contract as well as requisitions forwarded by the
petitioner. Hence, assuming that time is essence
of the contract, once the appellant is in
default, then the petitioner must succeed at
least prima facie. He invites our attention to
para 3.24(g) of the petition and the affidavit in
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reply containing denial on this aspect.
Mr.Chagla submits that denial is patently false.
57. For all the aforesaid reasons, Mr.Chagla
submits that there is strong prima facie case
made out by the petitioner. Balance of
convenience is also in favour of the petitioner.
Instead of calling upon the petitioner to deposit
any amount, to protect further injury and
prejudice, interim order should be made in favour
of the petitioner. He submits that this is a fit
case where it is just and convenient to appoint
Court Receiver with the powers as conferred by
the learned Judge or in any event lesser power to
take physical possession. Reason for this is
that the agreement between the petitioner and the
appellant is prior in point of time. There is a
mortgage in favour of Infrastructure Leasing and
Finance Services Limited (ICFS), which is
subordinate to the rights of the petitioner.
Once the agreement for sale over-rides the
mortgage and the mortgagor has recognized this
aspect, then this is a fit case for appointment
of Court Receiver and affording proper
protection.
58. It is pertinent to note that both, Mr.Bobde
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and Mr.Chagla made alternate pleas. Mr.Bobde
submits that without prejudice to the contentions
raised by the appellant on setting aside the
entire order of the learned Single Judge, if this
Court feels that any protection is necessary or
appropriate interim measures need to be adopted,
then all that can be granted is temporary
injunction to protect the rights of the
petitioner only insofar as property covered by
the agreement and rights flowing therefrom.
59. Mr.Chagla without prejudice to his
contention that it is just and convenient to
appoint Court Receiver, submits that in the event
we are inclined to set aside the order of learned
Single Judge in this behalf, then at least
temporary injunction in terms granted by the
learned Single Judge, be continued till the
dispute is resolved by the Arbitral Tribunal.
60. With the assistance of Mr.Bobde and
Mr.Chagla we have perused the arbitration
petition, the annexures, the reply and rejoinders
thereto. We have perused the relevant clauses of
MOU as well as Addendum. Since reliance was
placed before the learned Single Judge as well as
before us on some letters and documents, we have
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perused them for a limited purpose. In our view,
considering the object and purpose of Section 9
of the Act, the limited issue that falls for our
consideration, is whether the learned Single
Judge was justified in passing the order
reproduced above.
61. Our answer to the aforesaid issue is that
the learned Single Judge was in error in
appointing Court Receiver of the suit property
and further permitting development thereon by
petitioner as an agent of the Court Receiver. In
our view, considering the facts and circumstances
as well as ambit and scope of the powers
conferred on the Court while appointing Receiver,
the learned Judge should not have granted the
prayer in this behalf. The order of learned
Single Judge would have to be set aside to this
extent. So also, the temporary injunction
granted by the learned Single Judge will have to
be confined and restricted as indicated by us
hereinafter.
62. Our reasons for the aforesaid conclusions
are set out hereinbelow.
63. At the outset, we wish to make it clear that
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all that is observed by the learned Single Judge
as well as by us in the present order, is
restricted and limited for the purposes of the
petition filed under section 9 of the Act and
shall not in any manner be construed as a final
expression on the merits of the controversy. The
Arbitral Tribunal shall proceed in the matter
uninfluenced by the observations as they are
prima facie in nature.
64. Section 9 of the Act reads thus :-
"9. Interim measures etc. by court - A
party may, before or during arbitral
proceedings or at any time after the
making of the arbitral award but before
it is enforced in accordance with Section
36, apply to a court -
(i) for the appointment of a guardian for
a minor or a person of unsound mind for
the purposes of arbitral proceedings; or
(ii) for an interim measure of protection
in respect of any of the following
matters, namely -
(a) the preservation, interim
custody or sale of any goods
which are the subject matter of
the arbitration agreement;
(b) securing the amount in
dispute in the arbitration;
(c) the detention, preservation
or inspection of any property or
thing which is the subject matter
of the dispute in arbitration, or
as to which any question may
arise therein and authorizing for
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any of the aforesaid purposes any
person to enter upon any land or
building in the possession of any
party, or authorizing any samples
to be taken or any observation to
be made, or experiment to be
tried, which may be necessary or
expedient for the purposes of
obtaining full information or
evidence;
(d) interim injunction or the
appointment of a receiver;
(e) such other interim measure of
protection as may appear to the
court to be just and convenient,
and the court shall have the same power
for making orders as it has for the
purpose of, and in relation to, any
proceedings before it."
65. In the case of Firm Ashok Traders Vs.
Gurumukhdas reported in 2004(3)-SCC-155, the
Supreme Court observed thus :-
"15. The most basic principle governing
the discretion of the court in appointing
a receiver is whether it is "just and
convenient" to do so."
"17. ... ... ... The purpose of
enacting Section 9, read in the light of
the Model Law and UNCITRAL Rules is to
provide "interim measures of protection".
The order passed by the court should fall
within the meaning of the expression "an
interim measure of protection" as
distinguished from an all time or
permanent protection."
Applying the above mentioned principle as also
the settled tests in considering an application
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for interlocutory reliefs, to the facts and
circumstances of the present case, it will not be
possible to uphold the contentions of Mr.Chagla
insofar as prayer for appointment of Court
Receiver is concerned. We see much substance in
the contentions of Mr.Bobde on this aspect. He
has rightly contended that the learned Single
Judge exceeded the mandate of this provision.
However, Mr.Bobde’s other submissions cover much
wider feild and it is not necessary to consider
them. Once this conclusion is reached, then
naturally the further authority granted to the
Court Receiver does not survive.
66. We fail to appreciate the necessity of
passing such a drastic order at this stage. The
impugned order does not indicate as to why the
arrangement arrived at by parties cannot continue
pending the decision of the Arbitral Tribunal.
The composition of the Arbitral Tribunal surely
cannot be a ground to pass an order of Receiver
and injunction as well. That too, with sweeping
powers. In this behalf, it is pertinent to note
that in the arbitration petition, the petitioner
prayed that Court Receiver be appointed as
Receiver of the property described in Exhibit A-1
and bounded in Blue Colour on the plan annexed as
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Exhibit-T and all the areas on the remaining part
of the larger property delineated in Orange,
Pink, Green and Black Colours on the plan
(Exhibit-T) and description in Exhibit A-2. A
perusal of the said exhibits to the arbitration
petition would make it clear that as far as
Exhibit A-1 is concerned, it is the description
of the said property. The petitioner describes
the said property distinctly from the larger
property. The said property is admeasuring in
aggregating 20,955.40 sq.mtrs. situate at
G.M.Bhosale Marg, Mumbai. Exhibit A-2 admittedly
is description of the areas reserved by Municipal
Corpn. of Greater Bombay and MHADA under
Regulation 58 of the Development Control Rules.
Exhibit-A is the description of the larger
property.
67. It is pertinent to note that in the MOU the
larger property is described in Clause-1. It is
admittedly admeasuring 68,537.01 sq.mtrs. or
thereabout together with several buildings and
structures standing thereon. It is described
elaborately in First Schedule to the MOU.
However, it is clear from reading of Clause-II of
the MOU that what is granted to the petitioner is
consumption of total net Floor Space Index (FSI)
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of 3,00,000 sq. fts. excluding areas deductable
under Regulation No.35(2)(c) of Development
Control Regulations, 1991 by utilising
correspondingly land area admeasuring 20,955.40
sq. mtrs.. It is also clear from a perusal of
this clause that an area of 19,055.40 sq.mtrs.
is freehold land and area admeasuring 1,900 sq.
mtrs. is Municipal Perpetual Leasehold Land. It
has been determined on the basis of FSI ratio of
1:33. The portion, thus, carved out for
development is described more particularly in
second schedule to the MOU and is bounded in Blue
Colour on the plan annexed to the MOU..
68. The MOU records that on the terms and
conditions stipulated therein parties have agreed
and consented to grant, assign or convey to the
petitioner (developer therein), the developable
land with the exclusive right and authority to
develop and utilise at it’s own costs, charges
and expenses in all respects, the aforesaid total
net FSI initially for a consideration of Rs.86.30
crores and subsequently enhanced at Rs.105.30
crores. The owner’s obligations along with
second respondent are set out in clause-2.
Parties also agreed vide clause-4 that
simultaneously with the payment, as provided in
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clause 5(iv) and two guarantees provided in
proviso to clause 5(v) and (vi), the owner shall
comply and second respondent herein shall cause
the owner to comply with the matters enlisted
therein. Clause-5 dealing with payment insofar
as relevant for our purpose, is reproduced
hereinbelow :-
"(v) Rs.28.75 Crores to be paid within 7
1/2 months from the date of payment made
(iv) above; and
(vi) Rs.28.75 Crores to be paid within 7
1/2 months from payment of (v) above.
Provided, however, that the Developer
shall furnish unconditional and
irrevocable guarantees by the Developer’s
Bank/s /Financial Institution/s
acceptable to the Owner/VIT, guaranteeing
the payments under sub-paras 5(v) and
(vi) above on their respective due dates
and these guarantees shall be such that
the same should enable the Owner/VIT
and/or its/their assignees to encash them
immediately after they are issued."
69. A bare perusal of the same would indicate
that the bank guarantees would be such so as to
enable the appellant and second respondent as
well as their assignees to encash them
immediately after they are issued. The
obligation of the developer is to furnish such
unconditional and irrevocable guarantees. They
have to be in terms of the draft guarantees
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acceptable to the appellant and the second
respondent. They must guarantee payments under
the abovementioned sub-clauses of clause 5 on
their respective due dates and their nature
should be as aforestated.
70. The real issue, therefore, was that apart
from making payment of Rs.30.00 crores and
complying with other aspects noted by the learned
Single Judge, the petitioner had also fulfilled
the obligation with regard to the bank
guarantees. In this behalf, before proceeding
further, it is pertinent to note that in the
arbitration petition the petitioner contended
thus :-
"3.21 The Petitioners have taken all
necessary steps for completing the
transfer of the said property and to
complete the transaction. The
Petitioners have furnished to the
Respondents the draft of the Deeds of
Bank Guarantees in favour of the
Respondents to secure the payment of
Rs.57.5 Crores as provided in the
agreement. The Respondents initially
suggested alterations in the wordings of
the said Guarantees, some of which were
not acceptable to Petitioners’ Bank as
set out in the Bank’s letter dated 2nd
November, 2004 (copy annexed as Exhibit
"P" hereto) which was forwarded to the
Respondents. Subsequently, on or about
22nd December, 2004, the Respondents’
Mr.V.K.Jain (Group financial Controller)
informed the Petitioners that the Bank
Guarantee format should contain an
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"assignment clause" as per the specimen
faxed to the Petitioners i.e. that the
guarantee could be assigned subject to
the regulations, if any, stipulated by
the Reserve Bank of India. Mr.Parag
Munot of the Petitioners confirmed to the
said Mr.V.K.Jain on 24th December, 2004
that the said "assignment clause" was
acceptable to the Petitioners.
3.22 By their letter dated 14th January,
2005 to the Respondents’ Advocates, the
Petitioners’ Advocates’ inter alia,
recorded these facts and reconfirmed that
the said "assignment clause" in the bank
guarantees was in order. By the said
letter, the Petitioners called upon the
Respondents Advocates to fix a meeting to
finalise the last draft of the Deed of
Conveyance and Assignment. Hereto
annexed as "Exhibit "O" is a copy of the
said letter dated 14th January 2005.
There has been no reply to the said
letter. However, there was one more
meeting between the Petitioners’ and
Respondents’ representatives on or about
17th January 2005 when the Responents
repeated their demand for an increase in
the amount payable. The Petitioners are
and have at all material times been ready
and willing to provide the said Bank
Guarantees as required and to make
payment of the amounts as required under
the said agreement. The Petitioners made
all arrangements for the same, and are
and have at all material times been ready
and willing to complete the said
transaction as per the agreed terms, even
though the Respondents had and have not
fully complied with their obligations
under the said agreement."
71. Perusal of these averments would demonstrate
that the petitioner has raised pleas which are
some what inconsistent and contradictory. If the
assertion is that they have taken all steps for
transfer of the property and the transaction,
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then there was no necessity of urging further
that draft of the deeds of bank guarantees in
favour of the appellant to secure payment of
Rs.57.5 crores were forwarded. This plea
proceeds on the basis that forwarding drafts was
the only obligation on the part of the
petitioner. Further, if that be the position and
appellant suggested alterations to the wordings
of the guarantee which according to the
petitioner necessitated approaching their
bankers, then we fail to understand as to why
reference should be made to confirmation of the
"assignment clause" "assignment clause" and it’s acceptability as far "assignment clause"
as petitioner. The parties have understood their
respective obligations. Moreso, from a reading
of the averments it is clear that the petitioners
were aware that the bank guarantees have to be
assignable and immediately encashable. That they
are aware of such a fact, is clear from reading
paragraph 3.21 reproduced above. However, a
reading of paragraph 3.22 makes it clear that
what the petitioner records in its letter dated
14th January 2005 addressed to the respondents’
advocate, is reconfirmation that the assignment
clause in the bank guarantee was in order.
72. If the letter of 14th January 2005 is strong
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prima facie proof of readiness and willingness on
the part of the petitioner, then there was no
need to raise pleas as reproduced above. The
petitioner has averred that they are and they
have at all material times been ready and willing
to provide bank guarantees as required and to
make payments of the amounts under the agreement.
However, in the very next sentence it is
contended that the petitioners have made all
arrangements for the same and are have at all
material times been ready and willing to complete
the transaction as per the agreed terms even
though the respondents have failed to carry out
their obligations. This was totally unnecessary
and uncalled for pleading. That, this is the
interpretation of the letter dated 14th January
2005 is thus clear to the petitioners themselves.
73. With the assistance of learned senior
counsel appearing for both sides, we have perused
this letter. In paragraph 4 of the said letter,
far from the assertions reproduced above, all
that is stated is that petitioners’ confirm and
accept the clause suggested by the appellants
vide their fax dated 22nd December 2004 addressed
to the petitioner’s representative Mr.Narendra
Lodha. It is nothing but an acceptance of the
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term of the bank guarantee purportedly suggested
by the appellants herein. It is then contended
in paragraph 4 of this letter that draft of this
guarantee was otherwise approved and accepted by
the appellants in all other respects.
74. The learned Single Judge, in our view, was
in clear error in concluding that the averments
reproduced above as well as contents of this
letter demonstrates that the petitioner is ready
and willing and was at all material times ready
and willing to comply with the obligations under
the MOU and the Addendum thereto. This
conclusion could not have drawn by the learned
Single Judge on a bare reading of the petition as
well as letter in question.
75. We hasten to add that it is not necessary
for us to conclusively decide as to whether the
assertions in the petition as well as letter
demonstrates readiness and willingness on the
part of the petitioner, as that aspect is subject
matter of inquiry and adjudication by the
Arbitral Tribunal. Today, the proceedings before
it have yet to commence. We have no doubt that
on a fuller and complete opportunity being given
to both sides, the Arbitral Tribunal will decide
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this issue conclusively. However, for the
purposes of appointing a Court Receiver, as
prayed by the petitioner, the averments in the
arbitration petition and letter dated 14th
January 2005 are of little assistance.
76. All contentions based on the said letter and
more particularly the averments in the
arbitration petition have been dealt with and
denied by the appellants before us. Even
assuming that there is no reply to the letter
dated 14th January 2005, yet, by itself it is of
no assistance in holding prima facie that the
petitioner is and was at all material times ready
and willing to fulfil it’s obligations.
77. The admitted position emerging from the
record and noted by the learned Single Judge thus
cannot be the basis for considering and granting
the relief of appointment of Court Receiver.
78. A perusal of paragraph 10 of the impugned
order demonstrates that the learned Judge was
aware that the contract contemplated bank
guarantee of a particular nature. Moreso, the
same should be capable of being encashed
immediately. However, despite noticing this
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aspect, the learned Judge in para 12 proceeds on
the basis that the agreement being not terminated
and being subsisting and letter dated 14th
January 2005 demonstrating readiness and
willingness, the prayer for appointment of
Receiver could be considered.
79. The learned Judge has referred to settled
principles of law pertaining to time being of
essence in such contracts. Further, the learned
Judge has noted that the Addendum was entered
into in which, according to him, no time limit is
fixed for transfer of the property. Thus,
according to him, the compliance with regard to
execution of the conveyance/transfer deed, will
have to be within a reasonable time and it
depends from case to case.
80. The learned Judge holds that the respondents
have unilaterally fixed the dates for execution
of the transfer deed. But by that time they had
not complied with all the requirements necessary
for executing the deed of transfer. He holds
that the contract had not been terminated by the
respondents (appellants before us) for non
furnishing of the bank guarantee. Since the
contract is not terminated and petitioner has
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offered monies and bank guarantee within 30 days
from 24th December 2004, then there is substance
in the contention of the petitioner that
appellants are trying to wriggle out of their
obligations under the contract because they want
higher price.
81. Once the clauses in the agreement together
with the averments in the arbitration petition
are taken into consideration, then it is not
possible to sustain such observations and
findings. Moreso, when materials produced at
this stage do not conclusively establish that
petitioner has fulfilled it’s obligations. It is
risky to conclude that there is readiness and
willingness on the part of the petitioner and the
appellant had failed to honor it’s commitment.
That aspect will have to be gone into in greater
details before the Arbitral Tribunal.
82. We have referred to the averments in the
petition as also reproduced the clauses with a
view to test the correctness of the aforesaid
prima facie finding and conclusion. Since, we
are of the view that the facts and circumstances
relied upon at this stage do not show that all
the obligations of the petitioner under the
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agreement have been complied with, then it is not
just and convenient to appoint a Receiver of the
property. Once this conclusion is reached, then
that part of the order where the learned Judge
has proceeded to appoint the Receiver and confer
upon him powers to develop the property of the
petitioner, needs to be interfered with. The
order and direction in that behalf is patently
unsustainable being vitiated by obvious error as
aforesaid.
83. However, we are of the view that since the
Arbitral Tribunal is yet to go into the claim of
the petitioner and consider the pleas raised for
claiming specific performance of the agreement in
question, it will be fit and proper and in
interest of justice that the subject matter of
the dispute namely portion of the property
available for development by the petitioner is
not alienated, encumbered, transferred or parted
with possession by the appellants herein. It is
necessary to protect rights of petitioner
considering the fact that a sum of Rs.30.00
crores has been paid and the claim is yet to be
adjudicated. Since an opportunity will have to
be granted to both sides to prove the rival
contentions, the subject matter of the claim must
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be protected. In that regard, prima facie case
is made out by the petitioner. Balance of
convenience is also in its favour as substantial
amount has been parted with. If petitioner
ultimately succeeds, grave loss, irreparable harm
and injury will be caused. Therefore, injunction
in these terms needs to be granted in the facts
and circumstances of present case. We have
carefully considered the submissions of Mr.Bobde
on this aspect. However, whether the petitioner
will be entitled to specific performance of the
agreement, cannot be decided finally at this
stage. His submissions on the nature of the
right conferred, readiness and willingness of the
petitioner and fulfilment of obligations have to
be considered by the Tribunal after all materials
are placed before it. At this stage,
straightaway no conclusions can be drawn.
Therefore, injunction in the terms set out
hereinafter would meet ends of justice. The
prayer for injunction cannot be refused merely
because the appellants have expressed their
willingness to refund the amounts paid to them.
84. In the light of what is observed above, it
is not necessary for us to go into the aspects
such as time being essence of the contract,
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alleged repudiation thereof by the petitioner and
whether the petitioner would be entitled to
specific performance of the same or not. In our
view, submissions of Mr.Bobde on the last aspect
noted above, are really for the Arbitral Tribunal
to go into and decide finally. Neither it will
be fair nor proper to say anything on this aspect
one way or the other. We have set out rival
contentions in some what details only to
emphasise the fact that arguable questions are
raised. At this stage it is not necessary for
the petitioner to prove his case on merits. Once
it is demonstrated that there is a contract for
sale of immovable property for a consideration of
Rs.105.30 crores and a sum of Rs.30.00 crores has
already been parted with and further the
petitioner asserts that despite fulfilling all
obligations the transaction is not completed,
then, till the Arbitral Tribunal goes into the
matter in elaborate details, it will not be
proper to permit and allow the appellant to
alienate the property. The claim of the
petitioner for specific performance cannot be
rendered infructuous. At the same time, the
injunction as granted by the learned Single Judge
being too wide, the relief in that behalf needs
to be moulded and modified. Today, as has been
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rightly objected to by Mr.Bobde, the injunction
is in such terms that the appellant’s rights in
the larger property are also affected. The
nature of rights conferred by the MOU and the
Addendum being noticed above, the injunction
order ought to be in consonance therewith.
Ultimately, it is that agreement/contract which
is sought to be specifically enforced. The
obligations thereunder are required to be
performed. Therefore, anything which is not
falling within the purview of the same, cannot be
covered by the order of injunction.
85. We are of the view that the order passed at
the first hearing of the arbitration petition and
reproduced by us above, with some modifications,
can continue and is thus substituted in place of
the order of injunction granted by learned Single
Judge.
86. In the view that we have taken, it is not
necessary to consider all the decisions brought
to our notice. These decisions have been
rendered after hearing of the suit and in some
cases appeals by the concerned High Courts. It
is at that stage that the question and issues
raised therein fell for consideration of the
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Hon’ble Supreme Court.
87. Save and except Constitution Bench decision,
which according to Mr.Bobde has been considered
in subsequent decisions by Hon’ble Supreme Court,
we need not advert to any of the decisions. The
Constitution Bench decision too in para 24
observes thus :-
"24. From an analysis of the above case
law it is clear that in the case of sale
of immovable property there is no
presumption as to time being the essence
of the contract. Even if it is not of
the essence of the contract the Court may
infer that it is to be performed in a
reasonable time if the conditions are :
1. from the express terms of the
contract;
2. from the nature of the property; and
3. from the surrounding circumstances,
for example : the object of making the
contract."
88. The principles laid down, therefore, have to
be applied to the facts and circumstances of each
case. It will be unfair if we say anything more
as the matter is pending before the Arbitral
Tribunal.
89. We have considered the rival contentions
only for the limited purposes namely decision on
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a petition u/s 9 of the Act. The rival
contentions on merits of the controversy are kept
open for being agitated before the Arbitral
Tribunal.
90. In the result, the appeal succeeds. The
order passed by learned Single Judge appointing
Court Receiver is set aside. All further
directions in that regard also stand set aside.
91. As far as order of injunction granted by
learned Single Judge in terms of prayer in the
petition is concerned, the same stands
substituted by the following order :-
A) Pending hearing and final disposal of
the claim before the Arbitral Tribunal :-
I) The appellant (original respondent
no.1) shall maintain status-quo in
respect of Plot No.5A which is shown on
the relocation plan annexed hereto, a
copy of which is made available to the
respondents and is also shown on the Plan
Exhibit ‘T’ to the petition in blue
bounded line. It is, however, clarified
that the demolition of the building
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‘Avadh’, partly situated on the said Plot
No.5A shall continue, without prejudice
to the rights and contentions of parties.
II) The appellant (original respondent
no.1) shall also maintain status-quo with
regard to Plot No.3(MP), Plot No.4 (PG),
Plot No.6(RG) and Plot No.8(MHADA) shown
on the said relocation plan as well as
Plot Nos.4A and 3A also shown on the plan
annexed hereto where the proposed
relocation of ‘MP and PG’ areas is to be
done.
III) It is, however, clarified that the
statement of status-quo will not prevent
the appellant (original respondent no.1)
from carrying out the relocation of Plot
Nos.3 and 4 (MP and PG) respectively, in
the event of the BMC permitting the
relocation of the said Plot Nos.3 and 4
(MP and PG). In that event the appellant
(original respondent no.1) will hand over
the said Plot Nos.3A and 4A respectively
to MCGM in accordance with the DC
Regulations.
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IV) It is further clarified that the
appellant (original respondent no.1)
shall keep the areas required for the
purpose of providing the accesses to Plot
No.5A as shown in black colour on the
plan Exhibit-T to the petition.
V) It is also further clarified that the
statement of status-quo with regard to
Plot Nos.6(RG) and 8(MHADA) will not
prevent the appellant (original
respondent no.1) from taking such steps
as may be necessary to surrender the said
Plots to BMC and MHADA as provided in MOU
(Exhibit-B to the petition).
VI) The appellant (original respondent
no.1) shall not create any third party
rights nor alienate or transfer or
encumber with any of the aforesaid plots
and areas save and except as disclosed in
the correspondence and documents
furnished to the respondents.
92. This was the arrangement arrived at during
the hearing of the Arbitration Petition and this
Appeal. We are of the view that no prejudice
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will be caused if the same is continued further.
(DR.S.RADHAKRISHNAN, J.)
(S.C.DHARMADHIKARI, J.)
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