Sangat Sadan Co-Operative Housing Society vs Guinea Global Next Llp

CNR No : HCBM020310942026

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AGK
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM ARBITRATION PETITION (L) NO.31093 OF 2026
Sangat Sadan Cooperative Housing
… Petitioner
Vs.
ATUL
GANESH
KULKARNI
1. Guinea Global Next LLP
2. Kuber Realty LLP
… Respondents
Digitally signed by
ATUL GANESH
KULKARNI
Date: 2026.10.16
15:51:27 +0530
Mr. Amrut Joshi with Mr. Harsh Choksi, and Ms.
Vishakha Dhaygude i/by Kanga & Company for the
Petitioner.
Mr. Ashok Dawar i/by Mr. Laxman R. Shahapur for the
Respondents.
CORAM : AMIT BORKAR, J.
RESERVED ON : OCTOBER 14, 2026.
PRONOUNCED ON : OCTOBER 16, 2026
JUDGMENT:
1. The present Petition is filed by the Petitioner under Section 9
of the Arbitration and Conciliation Act, 1996. By filing this
Petition, the Petitioner is seeking certain interim reliefs so that it
can continue and complete the redevelopment of its property.
According to the Petitioner, the redevelopment work has stopped
since December 2023.
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2. According to the Petitioner, the facts which led to the filing
of the present Petition are as follows. The property bearing Survey
No. 142, Plot No. C, Nos. 1 and 4, CTS No. 580B, situated at
Village Nahur, Taluka Kurla, Mumbai Suburban District,
admeasures 1089 square yards, that is, 908 square metres. There is
one building on the said property consisting of two wings, namely,
A and B, having a total of 20 members. On 8 March 2017, the
Petitioner Society issued a public notice inviting tenders for
redevelopment of the said property. On 14 February 2020,
Respondent No. 1 submitted its offer for redevelopment under
Section 79(A) of the Maharashtra Co-operative Societies Act,
1960. Thereafter, in the General Body Meeting held on 15 March
2020, Respondent No. 1 was appointed as the Developer for
carrying out the redevelopment of the said property. In July 2020,
Respondent No. 1 was incorporated as a Limited Liability
Partnership under the Limited Liability Partnership Act, 2008, and
is represented by its Designated Partners. On 30 September 2020,
the Petitioner and Respondent No. 1 entered into a Development
Agreement. Under the said Agreement, the development rights
were given to Respondent No. 1 for carrying out and completing
the redevelopment project in the manner and within the time
provided in the Agreement. The main terms of the Agreement
were that the members of the Petitioner Society were required to
vacate their premises and hand over possession of the property to
Respondent No. 1 within 30 days from the receipt of the
Intimation of Disapproval (IOD), for the purpose of
redevelopment. Respondent No. 1 was required to pay brokerage,
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shifting and transportation charges for transit accommodation,
along with an interest-free security deposit. Respondent No. 1 was
required to pay hardship compensation at the rate of Rs. 800/- per
square foot in two instalments. An amount calculated at the rate of
Rs. 400/- per square foot was payable at the time of vacating the
premises, and the remaining amount of Rs. 400/- per square foot
was payable at the time of handing over possession. Respondent
No. 1 was required to obtain the IOD within six months from the
date of execution of the Development Agreement. It was required
to obtain the Commencement Certificate (CC) within two months
from the date on which the Petitioner Society handed over
possession of the property. The Agreement provided that time was
an important condition for completion of the project. Respondent
No. 1 was required to complete construction of the proposed new
building within 30 months from the date of obtaining the
Commencement Certificate, with a grace period of six months.
Thus, the total period allowed for completion was 36 months.
Respondent No. 1 was required to obtain the consent of the
Petitioner Society before submitting the building plans to the
Municipal Corporation of Greater Mumbai (MCGM). It was the
responsibility of Respondent No. 1 to pay all the outgoings relating
to the property, including municipal taxes, property taxes, fees,
penalties and utility charges. Respondent No. 1 was required to
pay relocation compensation until possession was handed over,
apart from the hardship compensation agreed to be paid to the
members. The Agreement provided for payment of liquidated
damages if Respondent No. 1 failed to hand over possession within
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36 months. It contained clauses relating to termination of the
Agreement and resolution of disputes through arbitration.
3. On 30 September 2020, the Petitioner executed a Power of
Attorney in favour of Respondent No. 1. On 3 December 2020,
Respondent No. 1 applied for the first Commencement Certificate.
On 6 September 2021, the Municipal Corporation of Greater
Mumbai issued the Intimation of Disapproval. Immediately after
receiving the same, the members vacated their premises and
handed over possession to Respondent No. 1. On 2 May 2022, the
first Commencement Certificate was issued, permitting
construction up to the plinth level. Thereafter, the construction
work commenced. In July 2022, Respondent No. 1 completed
excavation and construction up to the plinth level. On 6 August
2022, the project was registered with MahaRERA under
Registration No. P51800046500 in the name of “ShubhAarambh”.
On 31 March 2023, a Commencement Certificate was issued,
permitting construction of the ground floor for shops and the first
to third upper floors. According to the Petitioner, the members of
the Society addressed letters dated 27 December 2023 and 16
January 2025 to Respondent No. 1, expressing their concerns
regarding the redevelopment work. By December 2023,
construction of the ground floor and three slabs had been
completed. However, after that, the construction work stopped. In
February 2025, Respondent No. 1 stopped paying relocation
compensation. One of the partners of Respondent No. 1 stated
through WhatsApp that the work had stopped due to lack of funds.
On 15 May 2025, the MCGM issued a notice to Respondent No. 1
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regarding payment of outstanding dues. Thereafter, in October
2025, Respondent No. 2 entered into a Memorandum of
Understanding with Respondent No. 1. On 5 October 2025, the
Petitioner Society passed a resolution to issue a termination notice
to Respondent No. 1 in accordance with Clause 52 of the
Development Agreement. Accordingly, on 10 October 2025, the
Petitioner issued a termination notice to Respondent No. 1. In the
said notice, the Petitioner pointed out the breaches committed by
Respondent No. 1 under the Development Agreement, particularly
its failure to complete the redevelopment within the agreed time.
On 16 October 2025, Respondent No. 1 issued a conditional No-
Objection Certificate stating that it had no objection to the
Development Agreement being executed, or proposed to be
executed, between the Petitioner Society and Respondent No. 2.
On 24 May 2026, the Petitioner Society held a Special General
Body Meeting and passed a resolution by which the earlier
resolution dated 5 October 2025 was partly withdrawn or
cancelled. Thereafter, on 1 June 2026, the Petitioner, through its
Advocate, issued a notice to Respondent No. 1, calling upon it to
hand over possession of the property and to execute the necessary
Deed of Cancellation and Revocation Deed. On 29 June 2026,
Pankaj Mhatre, one of the partners of Respondent No. 1, sent a
reply through his Advocate, seeking time to resolve the issues.
Subsequently, on 27 July 2026, Pankaj Mhatre sent a reply through
his Advocate. In the said reply, he stated that the delay had
occurred due to personal difficulties and informed the Petitioner
that he would visit the members of the Society to work out a
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concrete solution within ten days from 5 August 2026. According
to the Petitioner, the redevelopment work has nevertheless
remained stalled and the issues have not been resolved. In these
circumstances, the Petitioner has filed the present Petition seeking
interim reliefs under Section 9 of the Arbitration and Conciliation
Act, 1996.
4. Mr. Joshi, learned Advocate appearing for the Petitioner,
submits that interim and ad-interim reliefs are necessary to protect
the members of the Petitioner Society because of the conduct of
Respondent No. 1. According to him, Respondent No. 1 has failed
to take effective steps to carry out the redevelopment of the
property, and the construction work at the site has stopped since
September 2023. This is despite the fact that the Development
Agreement provides that time is an important condition and fixes a
schedule for completing the construction. He submits that
Respondent No. 1 has not paid the monthly relocation
compensation from February 2025 till date. According to the
Petitioner, Respondent No. 1 has not acquired any right which
would prevent the Petitioner from terminating the Development
Agreement. In these circumstances, Respondent No. 1 cannot claim
to be aggrieved by such termination. Mr. Joshi submits that
Respondent No. 1 has committed serious breaches of the
Development Agreement and is not entitled to claim any rights or
benefits under it. He submits that Respondent No. 1 was not, and
is still not, ready, willing or financially capable of performing its
obligations under the Development Agreement.
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5. Mr. Joshi submits that, in a WhatsApp message dated 5
February 2025, one of the partners of Respondent No. 1 LLP
admitted that the LLP was facing financial difficulties and was
unable to make payments within time. He submits that Respondent
No. 1 compelled the Petitioner Society to consider appointing
another developer to assist in completing the project. Under the
proposed arrangement, the partners of Respondent No. 1 LLP
would receive a few premises in the redeveloped building.
According to Mr. Joshi, these circumstances show that Respondent
No. 1 is unable to perform its obligations under the Development
Agreement. He submits that, in the absence of any subsisting
binding contract in favour of Respondent No. 1, particularly after
termination of its appointment, Kuber Realty LLP has no right or
claim over the property. Mr. Joshi submits that Respondent No. 1
LLP does not have the financial resources required to complete the
project. After the existing building was demolished in September
2021, the construction work proceeded very slowly and stopped in
September 2023. Respondent No. 1 has constructed only the
ground floor and three slabs and has thereafter abandoned the
work at the site. The members of the Petitioner Society have been
living in rented premises since 2021. As Respondent No. 1 has
failed to pay the relocation compensation, many members have
been forced to shift to cheaper rented accommodation situated far
away from the property. Several members are senior citizens. They
have faced serious difficulties, mental stress and hardship in
finding rental accommodation and shifting from one rented
premises to another every year. Mr. Joshi submits that most
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members have been deprived of their own homes and are facing
financial difficulties because of the failure of Respondent No. 1 to
make the agreed payments. He submits that Respondent No. 1 has
breached its obligations under the Development Agreement. Mr.
Joshi submits that the Petitioner is not aware whether Respondent
No. 1 LLP has created any mortgage or other charge over the
property. He relies upon Clause 20 read with Clause 37(p) and
Clause 47 of the Development Agreement. According to him, these
clauses permit Respondent No. 1 LLP to create a mortgage only
over the flats and shops forming part of the Developer's share. The
said clauses do not permit Respondent No. 1 to raise funds by
creating a mortgage over the entire plot or over the flats allotted to
the members of the Petitioner Society. Therefore, if Respondent
No. 1 has created any mortgage over the plot or the flats allotted
to the members, such mortgage would not be binding upon the
Petitioner Society and its members.
6. Mr. Joshi submits that, under the Development Agreement,
Respondent No. 1 LLP has no independent right, title or interest in
the property or in the Floor Space Index (FSI) attached to it.
Respondent No. 1 was permitted to enter upon the property only
as a licensee and only for the purpose of carrying out the
redevelopment work. According to the Petitioner, legal possession
of the property always remained with the Society. Mr. Joshi
submits that the Petitioner has terminated the Development
Agreement by issuing a termination notice. Therefore, Respondent
No. 1 is no longer entitled to enter upon the property or to carry
out any construction or other activity thereon. He submits that
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Respondent No. 1 LLP has no subsisting right, title or interest of
any nature in the property. The Petitioner seeks an order of this
Court restraining Respondent No. 1 from creating any third-party
rights in respect of the property, entering upon the property,
carrying out construction or undertaking any other activity
thereon.
7. Mr. Joshi submits that, as of July 2026, an amount of Rs.
41,83,753/- was outstanding and payable by Respondent No. 1
towards property taxes, municipal taxes, water charges and other
taxes and charges. He relies upon the bill-wise outstanding report
issued by the MCGM in support of this submission. He points out
that the cheques issued by Respondent No. 1 towards payment of
property tax were dishonoured on the ground of insufficient funds.
Mr. Joshi submits that, under Clause 21 read with Clause 25,
Clause 36, Clause 37(w) and Clause 39 of the Development
Agreement, Respondent No. 1 was required to pay the outstanding
amounts due to the MCGM and bear the utility charges. According
to him, Respondent No. 1 has failed and neglected to fulfil these
obligations. The Petitioner seeks an order directing Respondent
No. 1, pending the hearing and final disposal of the present
Petition, to pay the outstanding amount of Rs. 41,83,753/-
towards property taxes, municipal taxes, water charges and other
taxes and charges as on the date of termination of the
Development Agreement, together with interest and penalties
payable under the Agreement. The Petitioner submits that
Respondent No. 1 should be directed to pay the taxes and charges
becoming due from the date of termination until it vacates the
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property, hands over possession to the Petitioner Society and
removes all its movable articles lying on the property. According to
the Petitioner, Respondent No. 1 cannot avoid its contractual
responsibility to pay these amounts merely because the
Development Agreement has been terminated.
8. Mr. Joshi submits that, after termination of the appointment
of Respondent No. 1 as the Developer, an amount of Rs.
86,23,383/- collected from individual members of the Petitioner
Society towards the additional area proposed to be provided to
them must be returned. According to him, the agreement for
purchase of additional area was dependent upon successful
completion of the redevelopment project. Since the Development
Agreement has been terminated and the project has not been
completed, the event upon which the agreement for additional
area depended can no longer take place. He submits that the
agreement relating to the purchase of additional area has become
ineffective and the amount collected from the members must be
refunded. Mr. Joshi submits that Respondent No. 1 has not
answered the specific allegations regarding breaches of the
Development Agreement made in the Petition. According to him,
Respondent No. 1 has mainly given general and evasive denials.
He submits that the Affidavit in Reply filed on behalf of
Respondent Nos. 1 and 2 proceeds mainly on the following
grounds. First, it is alleged that the Petitioner suppressed the
Memorandum of Understanding stated to have been executed
between Respondent Nos. 1 and 2 in October 2025, to which the
Petitioner was not a party. Secondly, it is contended that the
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termination of the Development Agreement dated 30 September
2020 was not because of any breach committed by Respondent No.
1, but was an agreed step taken under the said Memorandum of
Understanding, thereby resulting in novation of the contract.
Thirdly, it is alleged that the termination was not in accordance
with Clause 52 of the Development Agreement. Fourthly, it is
contended that the reliefs sought by the Petitioner cannot be
granted in a Petition filed under Section 9 of the Arbitration and
Conciliation Act, 1996. Mr. Joshi denies all these contentions and
submits that none of them provides a valid ground to refuse the
reliefs sought by the Petitioner.
9. Mr. Joshi submits that the fact that two members of the
Petitioner Society signed the Memorandum of Understanding as
witnesses does not make the Society a party to it or bind the
Society by its terms. He relies upon Clause 31 of the said
Memorandum of Understanding, which expressly records that the
witnesses signed it “only in the capacity of witnesses” and “shall
not be responsible for any obligations arising out of this MOU.” He
submits that the Memorandum of Understanding is neither
registered nor dated. According to him, a reading of the document
shows that it was entered into between Respondent Nos. 1 and 2
because Respondent No. 1 had failed to complete the
redevelopment within the agreed time and was facing defaults in
compliance, lack of funds and legal disputes. It was proposed that
Respondent No. 1 would leave the project and Respondent No. 2
would take it over. In support of this submission, Mr. Joshi relies
upon the following portion of the Memorandum of Understanding:
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“D. That the party of the first part has failed to complete the
redevelopment as promised within the timelines and due to
various defaults in compliances, lack of funds and legal
disputes the Party of the First part shall be quitting the
redevelopment of the said project and so the Party of the first
part and the Society has agreed to mutually settle the matter
and Party of the first part agree to exit from the project.”
10. Mr. Joshi submits that the Petitioner Society was not a party
to the Memorandum of Understanding. Therefore, according to
him, there is no basis to contend that the termination of
Respondent No. 1 was carried out as a step towards implementing
the said Memorandum of Understanding. He reiterates that the
resolution for terminating Respondent No. 1 and appointing
Respondent No. 2 as the new Developer was passed only because
the members of the Society had been deprived of their homes since
September 2021 and there had been no meaningful progress in the
redevelopment work since December 2023. The Society was left
with no practical choice but to explore the possibility of continuing
the redevelopment through another developer. The Petitioner
denies that these steps resulted in novation of the Development
Agreement. Mr. Joshi submits that, at the instance of Respondent
No. 1, a draft Development Agreement was exchanged between
the Petitioner Society and Respondent No. 2. However, the draft
was never finalised, executed or registered because the parties
could not agree upon its terms and conditions. He submits that the
discussions with Respondent Nos. 1 and 2 regarding the takeover
of the stalled redevelopment project did not restore the confidence
of the members of the Society. The members had lost confidence in
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Respondent No. 2 because it had been recommended by
Respondent No. 1, which had continuously failed to perform its
obligations under the Development Agreement. Mr. Joshi submits
that even if it is assumed that the members of the Society knew
about the Memorandum of Understanding, such knowledge cannot
be treated as consent to its terms. The Petitioner Society is not
bound by the said document. He clarifies that Respondent No. 2
has been joined as a party to the present Petition only as a
precaution, so that it cannot claim any right or interest in the
property of the Petitioner Society without the matter being
considered by this Court.
11. Mr. Joshi denies the contention that the reliefs sought by the
Petitioner cannot be granted under Section 9 of the Arbitration
and Conciliation Act, 1996. He submits that the reliefs sought are
interim measures intended to protect the Society and its members
and to enable the Society to proceed with the redevelopment of its
property. According to him, the conduct of Respondent No. 1 and
its failure to perform the Development Agreement have made it
necessary for the Petitioner to approach this Court. Mr. Joshi
submits that the members of the Petitioner Society have lost faith
and confidence in Respondent No. 1 as the Developer. The General
Body of the Society has decided to proceed with the
redevelopment by appointing another suitable and financially
capable developer. At the same time, the Society intends to pursue
its claims against Respondent No. 1 for damages arising from its
failure to perform the obligations under the Development
Agreement. The amount of damages would be determined in
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accordance with the claims made and the loss suffered by the
Society.
12. In support of his submissions, Mr. Joshi relied upon the
judgments in Cox and Kings India Limited vs. Indian Railways
Catering and Tourism Corporation Limited & Anr., (2012) 7 SCC
587; Chaurangi Builders & Developers Pvt. Ltd. vs. Maharashtra
Airport Development Co. Ltd., 2013 SCC OnLine Bom 1530; Gopi
Gorwani vs. Ideal CHS Ltd. & Lrs., 2013 SCC OnLine Bom 1967;
Heritage Lifestyle & Developers Ltd. vs. Cool Breeze CHS Ltd. &
Ors., 2014 (3) Mh.L.J. 376; The New Aarti CHSL vs. Estate &
Investment Consultants, 2015 SCC OnLine Bom 5929; The Jal
Ratan Deep CHSL vs. Kumar Builders Mumbai Realty Pvt. Ltd.,
2015 SCC OnLine Bom 5928; Goregaon Sukhnivas CHSL vs.
Sukushal Builders & Developers & Ors., 2016 SCC OnLine Bom
3366; SSD Escatics Pvt. Ltd. vs. Goregaon Pearl CHSL, Commercial
Arbitration Petition (L) No. 1072 of 2018, decided on 14 December
2018; Karan Group Builders & Developers & Ors. vs. Dindoshi
Vrindavan CHS Ltd., 2019 (4) ABR 673; Solaris Developers Pvt.
Ltd. vs. Eversmile CHSL, 2019 SCC OnLine Bom 13335; Asha Sonu
Samjiskar & Ors. vs. Sadguru Enterprises, Commercial Arbitration
Petition (L) No. 674 of 2019, decided on 24 September 2019;
Rajawadi Arunodaya CHSL vs. Value Projects Pvt. Ltd., 2021 SCC
OnLine Bom 9572; Swashray CHSL vs. Shanti Enterprises,
2023:BIC-OS:13075; Ison Builders LLP vs. Om Sai Ram CHSL,
2026 SCC OnLine Bom 319; Vishwakiran CHSL vs. Super
Construction Co., Arbitration Petition No. 156 of 2025, decided on
17 March 2026; Jaycee Homes Private Limited vs. Kurla Moon
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Rock Municipal Employee CHSL, Arbitration Petition No. 106 of
2026, decided on 2 July 2026; Sadguru Realcon Pvt. Ltd. vs.
Chogledham CHSL, Commercial Arbitration Petition No. 369 of
2024, decided on 26 February 2026; Chandrakant Dagdu Vanne &
Ors. vs. Heritage Lifestyle & Developers Pvt. Ltd.; and Mishal
Constructions Pvt. Ltd. vs. Krishin CHSL, Arbitration Petition (L)
No. 12390 of 2026, decided on 9 July 2026.
13. Mr. Dawar, learned Advocate appearing for the Respondents,
submits that Respondent Nos. 1 and 2 executed a Memorandum of
Understanding in October 2025, which was notarised on 9 October
2025 . The said MOU was witnessed by Mr. Jatin Ganatra,
Secretary of the Petitioner Society, and Mr. Hemant Jayantilal
Manek, a member of the Society. Clause 31 of the MOU describes
them as “Witnesses (Society Committee Members)”. Both of them
have signed Annexures 1 and 2 to the MOU. Mr. Dawar submits
that both these persons attended the Special General Body Meeting
of the Petitioner Society held on 5 October 2025 and signed the
minutes of the meeting, in which a resolution was passed to
terminate the appointment of Respondent No. 1 and appoint
Respondent No. 2 as the Developer. According to him, the MOU
records an arrangement which had been agreed upon between the
Petitioner Society and Respondent Nos. 1 and 2. The important
terms of the said MOU are as follows. (a) Recital H provides that
Respondent No. 2 would act as the new Developer and continue
the project in its existing condition, on an “as is where is” basis.
For this purpose, the Petitioner Society would formally issue a
termination letter, which Respondent No. 1 had agreed to accept,
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and thereafter hand over the project to Respondent No. 2. (b)
Clause 1 provides that, after termination of the Development
Agreement, Respondent No. 2 would step in as the new Developer,
which would include execution and registration of a fresh
Development Agreement directly with the Petitioner Society. (c)
Clause 9 provides that the Petitioner Society and Respondent No. 1
would give their consent and authority to Respondent No. 2 to
enter upon the project site.
14. Mr. Dawar submits that the above arrangement was made
because the Petitioner Society had requested Respondent No. 1 to
introduce another Developer who could assist in completing the
project. According to him, in or around May 2025, the Petitioner
Society had decided to explore the appointment of another
Developer, namely, Aarambh Developers, which, according to the
Respondents, was contrary to the terms of the Development
Agreement. However, after examining the project and coming to
the conclusion that Respondent No. 1 was a bona fide Developer,
Aarambh Developers decided not to proceed with the project.
Thereafter, the Petitioner Society requested Respondent No. 1 to
introduce another person who could assist Respondent No. 1 in
continuing and completing the redevelopment of the Society's
property.
15. Mr. Dawar submits that, under the arrangement recorded in
the MOU, Respondent No. 2 was substituted in place of
Respondent No. 1 as the Developer of the Petitioner's property.
According to him, the Petitioner Society agreed to this
arrangement by passing the resolution dated 5 October 2025 and
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acted upon it by issuing the termination letter dated 10 October
2025. Respondent No. 1 accepted the arrangement by executing
the MOU and issuing the No-Objection Certificate. Mr. Dawar
submits that the arrangement resulted in novation of the original
contract, meaning that the earlier contractual arrangement was
replaced by a new one. According to him, the only remaining step
was the formal execution and registration of the Development
Agreement between the Petitioner Society and Respondent No. 2.
16. Mr. Dawar submits that Respondent No. 2 acted upon the
arrangement recorded in the MOU in several ways. First,
Respondent No. 2 dealt with the allottees to whom Respondent
No. 1 had issued allotment letters and made payments to them. By
way of example, copies of letters dated 3 November 2025,
addressed by Respondent No. 2 to two such allottees and bearing
their acknowledgements, have been relied upon. Secondly, by a
letter dated 5 November 2025, Respondent No. 2 forwarded a
draft Development Agreement to the Petitioner Society. The
Society's committee members received the draft on 8 November
2025, as recorded by their endorsement on the letter. Thirdly, on
18 November 2025, Respondent No. 2 issued a public notice in the
newspaper Navakal regarding the redevelopment rights in respect
of the Petitioner's property. According to Mr. Dawar, the Petitioner
Society did not raise any objection to the said public notice.
Fourthly, Respondent No. 2 repeatedly called upon the Petitioner
Society to execute the Development Agreement and Power of
Attorney. These requests were made through the WhatsApp group
shared with the members of the Society and through letters dated
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8 March 2026 and 28 March 2026.
REASONS AND FINDINGS:
17. The dispute arises out of the Development Agreement dated
30 September 2020 executed between the Petitioner Society and
the Respondents for redevelopment of the Society's property. The
Society seeks interim protection in view of the delay in the
redevelopment work, stoppage of transit rent and the amounts
which, according to the Society, have become payable by the
Respondents under the Development Agreement. The
Development Agreement was executed on 30 September 2020.
The Intimation of Disapproval was obtained and the members
vacated their premises in or around September 2021. The first
Commencement Certificate was obtained on 2 May 2022 and a
Commencement Certificate was obtained on 31 March 2023. It is
stated that construction at the property has remained stalled since
December 2023 and that transit rent stopped being paid from
February 2025. These dates are material. The members vacated
their premises in the expectation that the redevelopment would be
completed within the time agreed between the parties. They have
remained away from their original premises, while the
redevelopment work has not progressed as expected. The
agreement cannot be treated as a mere paper arrangement when it
concerns the homes of the Society's members and the financial
arrangements made for their stay elsewhere.
18. The Society's case is that, under the Development
Agreement, the Respondents were required to complete the
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construction within 36 months from the date on which the
Commencement Certificate was issued. Out of these 36 months, 30
months were given for completing the construction and another six
months were given as grace period. According to the Society, the
said period expired in April 2025. Even after the expiry of this
period, the construction was not completed and according to the
Society, the Development Agreement came to be terminated in
October 2025. The Society has accordingly worked out the
amounts which, according to it, became payable up to the date of
termination of the agreement. At this stage, however, the case
stated by the Society cannot be taken as the final decision
regarding the rights and liabilities of the parties. The Respondents
may have their own defence regarding the time taken for obtaining
permissions, the progress of construction, the reasons for delay
and whether the termination of the agreement was proper. All
these matters will have to be considered by looking at the
Development Agreement and the documents produced by both
sides. But, when the members have vacated their homes for
redevelopment, the developer is required to perform the
obligations which it has accepted under the agreement. The
members cannot be expected to remain without their permanent
homes, or without receiving the agreed amount for staying
somewhere else, for an unlimited period only because a dispute
has arisen between the Society and the developer. The dispute
between the parties is one matter, but the difficulty faced by the
members while waiting for their homes is another matter. Both
these aspects have to be kept in mind while deciding whether
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interim protection is required.
19. Before considering the different amounts claimed by the
Society, it is necessary to understand the nature of the power
available to this Court under Section 9 of the Arbitration and
Conciliation Act, 1996. The present proceedings are not for
deciding all the disputes between the parties. Those disputes are to
be decided in arbitration by considering the agreement and the
material which may be produced before the Arbitral Tribunal.
However, Section 9 gives power to this Court to grant interim
protection wherever it is necessary, so that the rights of a party do
not remain only on paper while arbitration is still going on. If a
party shows that some protection is required at this stage, it
cannot always be asked to wait till the arbitration is completed and
the final award is passed. At the same time, Section 9 does not
mean that every amount mentioned in the statement or calculation
submitted by a party has to be accepted without checking it. The
party asking for interim relief must show, at least prima facie, that
there is a contractual or legal basis for claiming such relief. The
Court must consider what may happen if the relief is refused and
what effect may be caused to the other side if it is granted. The
purpose is to protect the rights which appear to require protection
at this stage, and not to decide the final monetary claim in
advance without proper examination of the matter.
20. The Supreme Court in Essar House Private Limited v.
Arcellor Mittal Nippon Steel India Limited , (2022) 20 SCC 178,
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has explained that the power under Section 9 is wide enough to
grant proper protection where the circumstances of the case
require it. The Court has to see whether a prima facie case is made
out, where the balance of convenience lies and what may happen
if protection is refused and the applicant succeeds. Where the
material supports the need for protection, the power should not be
denied only on technical grounds. However, the relief granted
must be connected with the purpose for which it is sought and
must be fair to both sides. Therefore, the amounts claimed by the
Society towards transit rent, liquidated damages and municipal
taxes cannot be considered as if all these amounts are of the same
nature. Transit rent is connected with the arrangement under
which the members have to stay at another place while
redevelopment of their homes is going on. Liquidated damages
depend upon the relevant clause of the Development Agreement,
the circumstances in which the amount becomes payable and the
period for which it can be claimed. Municipal taxes have to be
considered by examining the actual liability, the period for which
the amount is claimed and the documents supporting it. If one
claim is found to be made out prima facie, it does not mean that
the other claims are established. Each amount has to be considered
separately, keeping in mind the purpose of Section 9 and the fact
that the final decision regarding disputed amounts will be taken by
the Arbitral Tribunal.
21. The claim for transit rent requires separate consideration
because the members have vacated their premises for
redevelopment and have to arrange another place to stay until
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they can return to their homes. In Rakesh Shriram Chaudhari @
Dhobi v. Saikaushal Buildcon, Commercial Arbitration Petition (L)
No. 5458 of 2026, decided on 9 July 2026, this Court considered a
claim for interim deposit of transit rent where the old premises
had been vacated and possession of the new premises had not
been given. The Court considered that the dispute regarding delay
or the exact amount payable could be decided in arbitration, but
the existence of such a dispute did not mean that interim
protection was not required. The Court directed deposit of the
amount claimed and permitted withdrawal upon the petitioner
giving an undertaking to redeposit any amount which might be
found not payable. This approach shows that an interim
arrangement can be made to give immediate protection to a party
while keeping the defence of the other side open. It does not mean
that every transit rent claim must be allowed in full. The obligation
under the contract, the period of default and the documents
supporting the calculation must still be examined in each case. The
judgments placed before this Court show that, in redevelopment
disputes, the rights of the developer and the rights of the Society's
members have to be considered by looking at the circumstances in
which the dispute has arisen. The developer may have entered into
the project with the expectation of earning profit from the sale
component and may say that a considerable amount has been
spent. If the developer believes that the Society has wrongly
terminated the agreement, it may claim compensation or other
relief in accordance with law. These matters cannot be ignored
merely because the Society wants to take steps for redevelopment.
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But the members of the Society have their own important interest
in the matter. They have to vacate their homes, arrange another
place to stay and wait for the permanent accommodation which
was promised to them. Their expectation is not merely that some
construction work will take place at the site. They expect that the
redevelopment will be completed within the agreed period and
that the developer will make the agreed payments during the
period for which they have to stay away from their homes. If
construction is delayed and transit rent is not paid, the members
have to face both difficulties together. Their expenses for staying
somewhere else do not stop merely because the Society and the
developer are involved in a dispute. A developer entering into a
redevelopment arrangement knows that the work involves removal
or demolition of the existing premises, construction of a new
building and handing over possession to the members. The
possibility of commercial difficulties or reduction in profit cannot
be considered separately from the obligations which the developer
has accepted under the agreement. Equally, the Society cannot say
that every delay is the fault of the developer or that every amount
claimed by it must be paid without proof. The proper course is to
examine the agreement, the conduct of both sides, the progress of
the work, the reasons given for delay and the documents
supporting the monetary claims. The Court has to balance these
matters on the basis of the material available. The commercial
interest of the developer cannot be treated as the only interest
requiring protection, and the Society's claim cannot be treated as
proved only because its members are facing hardship.
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22. In Heritage Lifestyle and Developers Ltd , this Court
considered a dispute in which the Society had terminated the
Memorandum of Understanding and had taken steps to proceed
with another developer. In paragraph 45, the Court considered that
termination had taken place, that the Society had passed
resolutions to proceed with another developer and that the
proposed new developer was not a party to the arbitration
between the earlier parties. The Court considered the effect which
an interim order could have on the Society and the other societies
forming part of the proposed joint development. In paragraph 46,
the Court observed:
“In my prima facie view, the respondent No. 1 has rightly
terminated the said MOU which is subject-matter of
arbitration proceedings filed by the petitioner. No stay of
such termination can be ordered by this Court. In the event
the petitioner succeeds in arbitration proceedings, petitioner
would be compensated in terms of money.”
23. The reasoning in this judgment is important because it shows
that the claim of the earlier developer and the need of the Society
to proceed with redevelopment are not always the same issue. The
developer may say that the termination was wrong and that it has
suffered loss because of it. Such a claim can be considered in
arbitration. But, merely because the developer has raised a
dispute, it does not follow that the Society must always be
prevented from taking steps for redevelopment until every dispute
between the parties is decided. However, this judgment cannot be
understood to mean that termination of every development
agreement is valid or that a Society can ignore the procedure
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agreed under the contract. The observations in Heritage Lifestyle
were made in the circumstances of that case. In the present matter,
the validity of termination will have to be considered by looking at
the agreement, the notices issued, the defaults alleged and the
material placed before this Court. The judgment is relevant to the
extent that, where termination has taken place and is not stayed
by a competent court, the earlier developer's monetary claim may
be decided in arbitration without requiring the Society to keep the
redevelopment project stopped for an unlimited period. Paragraph
47 of Heritage Lifestyle refers to the fact that the members had lost
confidence in the developer because there was no proper progress
in the work. The Court considered whether the members could be
compelled to continue with the same developer merely because the
developer was claiming rights under the earlier arrangement. The
concern was that redevelopment should not remain without
meaningful progress for an unlimited period only because the
dispute between the parties has not yet been decided.
24. This principle has to be applied carefully in the present case.
Loss of confidence cannot be treated as proof of breach in every
matter. The Court must see whether there is a reasonable basis for
such loss of confidence in the conduct of the developer and
whether the agreement and the record support the complaint
made by the Society. It may happen that the developer has a
genuine explanation for delay, such as the time taken for obtaining
permissions or other matters which were not within its control. If
such a defence is supported by documents, it has to be considered.
But, on the other hand, a general statement that there were
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difficulties in the project cannot answer every allegation of
prolonged delay or non-payment. In the present matter, the Society
states that its members vacated their premises in or around
September 2021, that construction remained stopped from
December 2023 and that transit rent stopped from February 2025.
The Society states that the contractual period for completing the
project expired in April 2025 and that the Development Agreement
was terminated in October 2025. If these dates are supported by
the material on record, the matter cannot be treated as a small
delay in completing some remaining work. The members have
been away from their premises for a substantial period, while
completion of the project and payment of transit rent have both
become disputed issues. However, these dates alone cannot decide
who is responsible for the delay. The Commencement Certificate,
the relevant clauses of the Development Agreement, the
correspondence between the parties, the work completed and the
reasons given by the Respondents will have to be examined. If the
Respondents have produced material to show that the delay was
caused by the Society or by circumstances for which they are not
responsible under the agreement, that defence will have to be
considered. But, unless a sufficient explanation is shown at this
stage, the mere pendency of disputes cannot be accepted as a
reason for leaving the members without interim protection. The
Society has a substantial basis to seek interim relief, subject to
separate examination of the amounts claimed and the documents
supporting them.
25. A similar approach can be seen in the New Aarti Co-
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operative Housing Society Limited . In that matter, the Court
considered the steps taken by the Society after termination,
including inviting tenders, appointing a project management
consultant and entering into a fresh development arrangement.
The Court considered that the earlier developer had not obtained
an order preventing the Society from proceeding with
redevelopment through another developer. In paragraph 64, the
Court observed that the members of the Society could not be
restrained from proceeding with redevelopment through another
developer merely because the earlier developer continued to raise
its claims in arbitration. The importance of this observation is that
a claim under an earlier development agreement does not, in every
case, give the earlier developer an automatic right to stop all work
or activity on the property. The question is whether the earlier
developer has shown a legal basis for seeking such restraint and
whether the restraint is necessary for protecting its rights. The
dispute about the validity of termination and the need to move
forward with redevelopment are connected, but they do not
always have to wait together until the final award is passed. Where
the agreement has been terminated and such termination has not
been stayed by a competent court, the earlier developer may
pursue its claim in arbitration. Depending upon the facts, the
Court can protect the monetary or other enforceable interest of the
earlier developer without stopping the Society from taking steps
required to complete redevelopment. This principle is important
because an order stopping redevelopment may affect not only the
Society and the earlier developer, but every member who is
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waiting for possession of a permanent home. If a wide restraint is
granted without considering the effect on the members, the
practical result may be that the project remains pending for years
while arbitration continues. However, the Society cannot rely upon
this principle to avoid its own contractual responsibilities or to
make the earlier developer's enforceable rights meaningless
without considering them. Any interim order must be made by
looking at the actual situation and the rights which require
protection.
26. In Jal Ratan Deep Co-operative Housing Society Limited , the
Court considered allegations of breach and substantial delay by the
developer in a redevelopment project. In paragraph 30, the Court
recorded a prima facie view that the developer had committed
breaches and that there was gross delay. The Court considered
that, even after earlier extensions and opportunities, the work
required under the development arrangement had not progressed
in the expected manner. Paragraph 31 states:
“This Court has taken a consistent view, including in the
judgments referred to and relied by Mr. Cama, learned
counsel for the petitioner, that if a society has lost confidence
in the developer, the society cannot be forced to continue the
contract with such developer.”
27. In paragraph 32, the Court considered the condition of the
buildings and the difficulties faced by the Society's members. It
permitted the Society to take steps to appoint another developer
and proceed with redevelopment, while allowing the earlier
developer to pursue its claim for compensation in arbitration. This
decision does not mean that the same result must follow in every
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redevelopment dispute. The facts of Jal Ratan Deep have to be
distinguished from the present matter wherever the circumstances
are different. In particular, the material presently available in this
case does not state that the existing buildings are in a dilapidated
condition. Therefore, that circumstance cannot be treated as
existing in the present matter. The relevant principle is that, where
the material shows serious delay and failure to perform the agreed
obligations, the earlier developer's claim for money does not mean
that the Society must continue with an arrangement which, prima
facie, is not progressing as agreed. The Court must still examine
whether the delay is attributable to the developer, whether the
Society has followed the agreed procedure and whether
termination has taken place in accordance with the agreement.
But, where the material supports a prima facie finding of
prolonged default, the possibility that the developer may later
obtain compensation can be kept open for arbitration. That
possibility does not always require the Society and its members to
remain with the earlier arrangement for an unlimited period.
28. In Solaris Developers Pvt. Ltd , this Court considered the
effect of the developer's financial difficulties and its inability to
take the redevelopment project forward. In paragraph 19, the
Court considered that the liabilities of the developer towards third
parties were not a reason preventing the Society from taking a
decision to terminate the development agreement. In paragraph
20, the Court considered that the developer was trying to bring in
another investor or developer because it was unable to undertake
the construction. Paragraph 21 refers to arrears of transit rent and
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the uncertainty faced by the Society's members. Paragraph 24
records that, if the developer believed that the Society's action had
caused it loss, it could pursue a claim for damages in arbitration.
Paragraph 25 emphasises that the redevelopment project should
not be brought to a complete stop until all litigation comes to an
end, where the agreement had been terminated and the developer
was unable to perform its obligations. The relevance of this
decision is that the Court has to examine the actual ability and
conduct of the developer and not only the fact that a development
agreement exists. The agreement is important, but it has been
entered into for the purpose of carrying out redevelopment within
the agreed arrangement. If the project remains incomplete for a
substantial period, transit rent is not paid and the members
continue to wait for their permanent premises, the Court has to
consider what may happen if the situation is allowed to continue
without any protection. The fact that the developer is facing
financial difficulty, or is trying to obtain assistance from another
person, does not prove that the termination is valid. The
explanation given by the developer must still be examined.
However, such difficulties cannot by themselves make the Society
responsible for bearing the hardship for an unlimited period.
Where the agreement has been terminated and the termination is
not stayed, the developer's claim for loss or damages can be
considered in arbitration, while the Society's need to take steps for
redevelopment can be considered separately. The same reasoning
is relevant to the claim for transit rent. The Respondents' defence
can remain open, but where the contractual basis for payment is
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shown prima facie and the members continue to remain away from
their homes, the Court has to consider whether some interim
arrangement is required.
29. In SSD Escatics Pvt. Ltd , the Court considered an order
passed by the Arbitral Tribunal after termination of the
development agreement. Paragraphs 31 to 34 deal with the alleged
breaches, the conduct of the parties, the Society's loss of
confidence, the possibility of damages and the protection which
could be given while arbitration was going on. The judgment
shows that the Court has to consider the overall situation before
deciding what interim relief should be granted. The result should
not depend only on one party saying that the agreement has been
terminated or on the other party saying that it has contractual
rights which must be protected. The Court should consider
whether the relief sought is wider than what is required to protect
the applicant. If the developer's interest can be protected by
deposit of money, security or by keeping its monetary claim open
for decision in arbitration, it may not always be necessary to
restrain the Society from taking every step towards redevelopment.
On the other hand, if the material shows that a serious legal right
may be irreversibly affected by the proposed action, that
circumstance must be considered before granting relief to the
Society. This approach is important in the present matter because
the Society has claimed different amounts under different heads.
The Court is not required to accept the entire calculation only
because it has been submitted. Nor is it necessary to reject every
request for interim protection merely because the Respondents
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dispute the figures. The proper course is to identify which
obligations are supported prima facie by the agreement and the
documents, which parts of the calculation require examination and
what protection can fairly be granted at this stage. If a disputed
amount can be secured by a suitable arrangement without
deciding the claim, the Court may consider such an arrangement
according to the facts of the case. The final liability of either side
must remain open for decision by the Arbitral Tribunal.
30. The more recent decision in ISON Builders LLP , considers
delayed redevelopment and the balance between the rights of the
Society's members and those of the developer. In that matter, the
developer had approached the Court seeking interim protection
against termination of the development agreement and against the
Society taking steps to appoint another developer. The Court
considered the observations of the Division Bench in Huges Real
Estate Developers LLP v. Khernagar Adarsh Co-operative Housing
Society Limited , 2025 SCC OnLine Bom 2921, regarding the need
to balance the members' right to alternate accommodation with
the developer's interest in the redevelopment contract. The
Division Bench's observations reproduced in paragraph 36 include
the following:
“However, what must be borne in mind is the fundamental
principle that the rights of a developer to earn profits
through redevelopment contracts would always remain
subservient to the rights of the society to have its building
reconstructed.”
31. The Division Bench observed:
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“This is because developer's loss of opportunity to earn
profits can always be made good by awarding monetary
decree in his favour. However, if redevelopment project of
buildings is halted till decision of suit filed by the developer,
the loss caused to the residents of the building cannot be
undone.”
32. These observations show the difference between the interests
of the two sides. A developer enters into a redevelopment
arrangement for a commercial purpose and may expect to earn
profit from the project. If it is found that the termination was
illegal and that the developer suffered loss because of it, the claim
may be considered for monetary relief in the appropriate
proceedings. But, where the residents are waiting for their
permanent homes and the redevelopment has remained held up
for a long period, the loss caused to them because of continued
delay may not be fully removed by giving them money at a later
stage. The Court is not saying that the developer has no rights or
that its investment and contractual interests have no value. The
point is that these rights have to be considered along with the
purpose of the redevelopment agreement. The agreement is not
meant only to give the developer an opportunity to earn profit. It
provides the basis on which the members expect their homes to be
reconstructed and possession to be given to them. In a proper case
the Court may protect the developer's monetary claim without
allowing redevelopment to remain stopped merely because the
developer has challenged the termination. It must be kept in mind
that these observations were made in circumstances where the
condition of the existing structures and the members' need for
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alternate accommodation were relevant considerations. The
present case has to be decided on its own facts and documents.
Even so, the broader principle remains relevant. The Court has to
consider the practical harm which may follow if redevelopment
remains stopped, and the matter cannot be decided only by
looking at the commercial interest of the developer. Paragraph 37
of ISON Builders applies these principles to the facts of that case.
The Court observed that the Society's members were waiting for
redevelopment and that the developer's interest was mainly
connected with earning profit from the project. It considered that,
if the termination was found to be invalid, the developer could
pursue a claim for damages. Paragraph 38 refers to Swashray
CHSL v. Shanti Enterprises , Borivali Anamika Niwas CHSL v.
Aditya Developers , 2019 SCC OnLine Bom 10718, and Rajawadi
Arundaya CHSL v. Value Project Pvt. Ltd. , 2021 SCC OnLine Bom
9572. These decisions deal with the difficulties faced by members
when redevelopment remains delayed for a long period and the
Society is unable to make proper progress through the developer
appointed.
33. The principle which follows from these decisions is that a
Society cannot be kept dependent on a developer for an unlimited
period where the material shows repeated defaults and no
reasonable progress towards completion. The question cannot be
decided only by counting the number of months of delay. The
Court has to consider the obligations accepted under the
agreement, the progress made, the reasons given for delay and the
hardship caused to the members. If the developer has a genuine
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defence and the delay is shown to have occurred for reasons for
which it is not responsible, those matters must be considered. But,
if the material shows that the project has not progressed as agreed
and the members continue to suffer, the existence of a monetary or
contractual claim by the earlier developer does not require the
Court to stop all redevelopment activity. I agree with the broad
principle that redevelopment should not ordinarily be stopped only
because a dispute about termination is pending, where the earlier
developer's maintainable claims can be considered and protected
through monetary relief or some other suitable arrangement.
However, these judgments do not give an right to every Society to
terminate its agreement and appoint another developer without
following the agreed procedure. The legality of termination has to
be considered from the documents and the terms of the particular
agreement. It must be seen whether any order passed by a
competent court has stayed the termination or placed any
restriction on steps.
34. In the present case, the Society relies upon the expiry of the
contractual period in April 2025, the alleged lack of progress and
the termination in October 2025. These matters have to be
considered along with the explanation of the Respondents and the
actual record. If the Society's case of serious delay and non-
performance is supported prima facie and the termination remains
operative, the Court need not compel the members to continue
with the earlier developer for an unlimited period merely because
arbitration is pending. At the same time, any order allowing steps
towards redevelopment must not be treated as a final finding that
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the termination is valid. The final rights and claims of both sides
will remain subject to the appropriate proceedings.
35. One possible argument against the Society's request is that, if
the Society is allowed to appoint another developer, the earlier
developer's claim for specific performance of the Development
Agreement may be affected. A similar concern was raised in
paragraph 19 of The Jal Ratan Deep Co-operative Housing Society
Limited . The developer in that case submitted that, if the Society
was permitted to proceed as requested, its claim for specific
performance would become infructuous. Reliance was placed on
N. Srinivasa v. Kuttukaran Machine Tools Limited , (2009) 5 SCC
182. This submission cannot be ignored. If an agreement is still in
force and a party has a genuine and maintainable claim for specific
performance, the Court should not pass an interim order which
destroys that right without considering the legal and factual
position. The Court has to examine whether the agreement has
been terminated, whether the termination has been stayed, what
progress has been made by the developer, what obligations remain
unperformed and what effect the proposed interim relief may
have. It must consider whether the developer's interest can be
protected through a narrower order or whether allowing the
Society to proceed may cause prejudice which cannot be addressed
later. However, the possibility of a claim for specific performance
does not mean that the Society must be restrained from taking
steps for redevelopment in every case. The judgments discussed
above show that the contractual right claimed by the developer has
to be balanced against the actual position of the members who are
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waiting for their homes. If the termination has taken effect, has
not been stayed by a competent court and is supported prima facie
by material showing serious delay or default, the Society's need to
proceed with redevelopment cannot be ignored merely because the
earlier developer has invoked arbitration. The developer may
pursue its claim in accordance with law, and the Arbitral Tribunal
may decide whether the termination was valid and what
consequences follow from it. The order under Section 9 must be
limited to what is necessary at this stage. If the validity of
termination or the claim for specific performance requires a final
decision in arbitration, this Court should not decide those issues in
the present proceedings. Equally, it should not assume that the
earlier developer's claim requires the Society to stop
redevelopment altogether. The final validity of termination, if
disputed, will remain open for decision in the appropriate
proceedings. Ultimately, the approach has to be to protect those
rights which require immediate protection without deciding the
final dispute in advance. The Society's members should not be left
without any remedy merely because the Respondents dispute the
claim. The Court has to examine the material supporting each
head of claim, consider the explanation given for delay and non-
payment and pass an order which is fair in the circumstances. Any
direction for deposit, payment, or security will operate as an
interim arrangement and will not decide the final liability of the
parties. The claims and defences of both sides, including the
validity of termination and the exact amounts payable, will remain
open for decision by the Arbitral Tribunal.
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36. I now consider the claim of the Petitioner Society regarding
payment of transit rent. It prima facie appears that payment of
transit rent has stopped from February 2025. The Society states
that the unpaid transit rent from March 2025 till the date of the
statement is Rs.1,30,60,400.16/-. However, the Society has given a
separate calculation by considering the period only till termination
of the Development Agreement, which is stated to have taken
place in October 2025. According to this calculation, the unpaid
transit rent till termination comes to Rs.53,92,556.16/-. Thus, both
amounts relate to different periods and cannot be considered as
amounts payable for the same period. At this stage, the Court is
required to consider the claim only till the stated date of
termination, without deciding whether transit rent is payable for
any period thereafter.
37. Transit rent has an important place in a redevelopment
project. The members of the Society are required to vacate their
existing premises so that the old building can be demolished and a
new building can be constructed. After vacating their premises, the
members and their family members have to arrange another place
for their stay. For this purpose, they have to pay rent and meet
other expenses every month. Under the redevelopment
arrangement, the developer agrees to pay transit rent so that the
members can meet these expenses till they receive possession of
their new premises. Therefore, payment of transit rent is not a
voluntary payment made by the developer out of generosity. It is
an obligation which forms part of the redevelopment arrangement.
The members have agreed to vacate their homes on the
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understanding that the developer will perform the obligations
accepted by it under the agreement. The obligation to pay transit
rent has to be considered in this background. A member who has
vacated his home cannot be expected to arrange another place for
staying without the agreed financial support, particularly when the
developer has obtained vacant possession for redevelopment. If
transit rent is not paid for a long period, the member has to spend
money from his own pocket for alternate accommodation, though
the need for such accommodation has arisen because of the
redevelopment project. This causes actual financial difficulty to the
members. Such difficulty continues for every month during which
the agreed amount remains unpaid. The loss cannot be treated as
imaginary or as something which may arise only in future, merely
because the member may be able to claim the amount in
arbitration.
38. In the present case, the Society states that its members
vacated their premises in or around September 2021 and that
payment of transit rent stopped from February 2025. It is stated
that construction at the property has remained stopped since
December 2023. If these facts are supported by the documents
placed on record, it would show that the members have remained
away from their original premises for a considerable period and
have been required to bear the expenses of alternate
accommodation without receiving the agreed transit rent. The
obligation of the developer cannot be considered only by looking
at the total amount claimed by the Society. The Court must
consider the purpose for which the payment was agreed and the
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difficulty which is caused to the members when the payment is not
made after they have handed over possession of their homes. In
this regard, reference can be made to the decision of this Court in
Chandrakant Dagdu Vanne and Others . In that case, the Court
considered the claim for unpaid transit rent in proceedings filed
under Section 9 of the Arbitration and Conciliation Act, 1996. The
Court explained the purpose of transit rent in paragraph 15 as
follows:
“Transit rent is therefore not an additional benefit. It is the
agreed consideration to enable the members to stay
elsewhere till they receive possession of their permanent
flats.”
39. The above observation is relevant for considering the
obligation in the present case. Transit rent is agreed to be paid
because the members are required to stay elsewhere during
redevelopment. It is not a separate benefit which the members can
be expected to give up whenever a dispute arises between the
Society and the developer. If the developer has agreed under the
Development Agreement to pay transit rent, its obligation has to
be considered with reference to the terms of the agreement and
the circumstances in which the members vacated their premises. In
paragraph 17 of Chandrakant Dagdu Vanne , this Court observed
that the purpose of exercising jurisdiction under Section 9 is to
ensure that one party does not continue to suffer because the other
party has failed to perform its contractual obligation, while the
final dispute remains pending. In paragraph 18, the Court
considered the contractual obligation, the long delay in
redevelopment, the statement showing the outstanding dues and
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the fact that no reply had been filed disputing the calculation.
After considering all these circumstances together, the Court held
that a strong prima facie case for interim protection was made out.
The Court accordingly directed payment of Rs.42,17,076/- towards
unpaid transit rent, subject to the final outcome of the arbitration
proceedings. The importance of the above decision is not only that
a direction for payment of a particular amount was passed. It
shows that, while exercising jurisdiction under Section 9, the Court
can consider whether the obligation to pay transit rent is admitted
or is prima facie established and whether such obligation requires
interim protection. Merely because arbitration is pending, it does
not mean that the members must remain without payment till the
final award is passed. If such an approach is adopted, the members
who have vacated their homes may have to bear the entire cost of
alternate accommodation throughout the arbitration proceedings,
even though the payment was agreed to meet that very expense.
40. A similar approach can be seen in Rakesh Shriram Chaudhari
@ Dhobi . In that case, the developer opposed the claim for transit
rent by relying upon allegations regarding the conduct of the
petitioner and the delay which was said to have been caused by
him. The Court did not decide those disputed allegations in the
proceedings under Section 9. The Court considered that such
disputes could be decided by the arbitral tribunal, but their
existence alone did not require rejection of the entire claim for
transit rent at the interim stage. The Court directed deposit of the
claimed amount and permitted withdrawal upon the petitioner
furnishing an undertaking to redeposit any amount which the
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arbitral tribunal found was not payable. The rights and contentions
of both parties were kept open. The above decision is relevant
because it shows the difference between granting interim
protection to a claim and deciding whether the amount is payable.
If the developer disputes the amount or raises a factual defence,
the Court is not required to decide all such questions immediately
as if it is conducting the arbitration. The Court can consider
whether the contractual documents show a prima facie obligation
and whether the claim requires protection till the dispute is
decided. Depending upon the nature of the dispute and the
material placed before it, the Court may direct payment of the
amount or direct deposit of the amount, with suitable conditions to
protect the interests of both sides.
41. The principles laid down by the Supreme Court in Essar
House Private Limited are relevant. The Supreme Court has
explained that Section 9 gives the Court power to grant interim
measures of protection, including measures for securing an
amount which is in dispute. This power is wide, but it has to be
exercised judicially and not in an arbitrary manner. The Court has
to consider whether a prima facie case is made out and weigh the
effect of granting relief against the effect of refusing it. The
procedural requirements applicable to ordinary civil proceedings
cannot be applied so rigidly that the Court becomes unable to
protect the interests of the parties even when the facts justify
interim relief.
42. Applying these principles, the Court has to consider what
would happen if no protection is granted in respect of transit rent
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at this stage. The members would have to continue arranging
alternate accommodation from their own money, even though the
developer had agreed to pay transit rent under the redevelopment
arrangement. If the Society succeeds in arbitration, the members
would still have suffered the financial burden during the entire
period taken by the arbitration. A later award of money may
compensate them for the amount found due, but it would not
remove the immediate difficulty caused by non-payment of the
agreed monthly amount. On the other hand, if a direction is made
in respect of the amount which has accrued till the stated date of
termination, the rights of the developer can still be protected by
making the direction subject to the final award and keeping open
the question whether any part of the amount was not payable. The
objection that the Society's claim must wait till the final decision in
arbitration cannot be a sufficient reason to refuse interim
protection. At this stage, the Court is not required to declare every
contractual claim as proved or to grant a final decree for all
amounts which may become payable in future. The limited
question is whether the claim for unpaid transit rent for a
particular period, supported by the statement placed on record,
should receive interim protection. If the Development Agreement
provides for payment of transit rent, the members have vacated
their premises under the redevelopment arrangement and the
documents support the calculation, the Court can grant
appropriate interim relief without deciding the entire dispute.
43. At the same time, the material on record shows that transit
rent stopped from February 2025, whereas the amount of
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Rs.1,30,60,400.16/- is described as the amount payable from
March 2025 till the date of the statement. Therefore, it has to be
verified how the month of February 2025 has been considered
under the contractual payment schedule and in the statement of
account. No amount which is not due and unpaid can be included
in the calculation. Equally, an amount which has become due
under the agreement cannot be left out merely because the period
has not been correctly described in the statement. Any payment
made by the developer for the relevant period will have to be
given credit. These issues do not require the entire claim to be
rejected. They require the Court to identify the period for which
interim relief is being considered and ensure that the amount
directed to be paid is supported by the agreement and the
documents. The difference between the two calculations cannot be
ignored. However, it cannot become a reason to reject the entire
claim when the amount for a shorter period is separately stated
and can be verified from the record.
44. The balance of convenience is required to be considered. The
members of the Society have vacated their homes and require
money to meet the expenses of alternate accommodation. The
developer, on the other hand, can raise its objections before the
arbitral tribunal and seek adjustment if it establishes that any
amount claimed was not payable. The direction concerning transit
rent which has accrued till termination can expressly remain
subject to the final outcome of arbitration. In this manner, the
members are not left without interim protection, while the
developer continues to have the right to dispute its final liability. It
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is necessary to examine Exhibit J along with the Development
Agreement and the individual amounts payable to the members. If
the documents support the sum of Rs.53,92,556.16/- as unpaid
transit rent till the stated date of termination in October 2025, and
there is no reliable material showing that the amount has been
paid or that there is a material error in its calculation, the Society
would have made out a prima facie case for interim relief. In such
circumstances, the amount cannot be kept unpaid merely because
the arbitral tribunal has not yet decided the final rights of the
parties. The direction would only be an interim arrangement to
protect the members from continued hardship. It would not mean
that every part of the claim has been established.
45. The amount of Rs.53,92,556.16/- is stated to be the unpaid
transit rent calculated till the date of termination in October 2025.
The higher amount of Rs.1,30,60,400.16/- relates to the period
extending beyond that date, till the date covered by the later
statement. The Society has shown the two amounts separately and
has used the lower amount while calculating its total claim of
Rs.1,17,16,309.16/- towards transit rent, liquidated damages and
municipal taxes till termination. Therefore, for deciding the
present claim for interim relief, the Court is not required to decide
the entire transit rent amount calculated till the later date. It is
sufficient to consider the shorter period and the amount stated for
that period. There is a difference between the claim for transit rent
till termination and the claim for the period after termination. The
first relates to the amount which, according to the Society, had
become due while the Development Agreement was in force. The
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second may require consideration of the effect of termination, the
terms governing transit rent and the rights and liabilities which
may continue even after termination. The Court cannot combine
both periods without first examining the contractual basis for each
claim. Therefore, the question whether transit rent is payable after
October 2025, including the difference between the two amounts
mentioned in the statement, is kept open for the arbitral tribunal
to decide in accordance with the Development Agreement and the
evidence produced by the parties. The interim direction in respect
of Rs.53,92,556.16 will remain subject to adjustment of any
amount which the Respondents establish has been paid for the
same period. The Society cannot receive payment twice for the
same contractual dues. Equally, the Respondents cannot avoid the
obligation merely by raising a general dispute, without showing
what payments were made, which months are disputed or how the
calculation is said to be wrong. The statement of outstanding dues
has to be considered along with the contractual rate, the period for
which each member was entitled to receive transit rent and the
payment records maintained by the parties. The Court is not
deciding whether the Society is entitled to the higher amount of
Rs.1,30,60,400.16/-. The Court is not deciding what effect the
termination has upon the claim for transit rent for the later period.
These are separate questions from the claim for the amount which
had become due till the stated date of termination. By limiting the
present consideration to the shorter period, the Court avoids
deciding the claim for a later period in advance, while at the same
time considering the immediate financial difficulty said to have
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arisen because of non-payment. Having regard to the nature of
transit rent, the fact that the members have vacated their premises
for redevelopment, the period for which payment is stated to have
remained outstanding and the principles considered in
Chandrakant Dagdu Vanne and Rakesh Shriram Chaudhari @
Dhobi , I am of the view that the claim for transit rent till the stated
date of termination deserves interim protection, provided the
amount is supported by the Development Agreement and the
corresponding statement of dues. Such protection is required so
that the members are not left to bear the entire expense of
alternate accommodation while arbitration is pending. The amount
of Rs.53,92,556.16/- may be directed to be paid as an interim
arrangement, subject to adjustment of any payment which is
proved to have been made and subject to the final outcome of the
arbitration proceedings. All questions relating to transit rent for
the later period and the final liability of the parties shall remain
open for decision by the arbitral tribunal.
46. The next claim is for liquidated damages. As stated in the
Society's note, under the Development Agreement, if the developer
fails to hand over possession within 36 months, he is required to
pay liquidated damages at the rate of Rs.10,000/- per day. The
Society has calculated this amount for the period from April 2025
to October 2025, which is stated to be 214 days, and has claimed
Rs.21,40,000/-. However, the dates mentioned in the note are not
the same. Paragraph 5 states that the period of 36 months ended
in April 2025, whereas paragraph 8 states that it ended in April
2026. It is mentioned that the first Commencement Certificate was
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issued on 2 May 2022 and the Commencement Certificate was
issued on 31 March 2023. From which date the period of 36
months is to be counted will depend upon the terms of the
Development Agreement and whether the later Commencement
Certificate has any effect on the calculation. The calculation in the
note alone does not make this position clear. The Court cannot
ignore the difference between April 2025 and April 2026, as both
dates cannot be treated as one and the same. The amount of
liquidated damages will have to be calculated from the correct
date as provided in the agreement. Therefore, the claim of
Rs.21,40,000/- is not being decided by this order. However, the
Society has raised a specific claim under the agreement and has
stated the rate as well as the period for which the amount is
claimed. If the agreement and the supporting documents support
this claim, it would be proper to protect the amount so that the
claim does not become ineffective only because the arbitration
proceedings take time. In these circumstances, the amount of
Rs.21,40,000/- shall be secured during the arbitration
proceedings. However, the amount shall not be released to the
Society at this stage. Whether the amount is payable and the
period for which it is to be calculated are left open for the arbitral
tribunal to decide finally.
47. The Society has claimed Rs.41,83,753/- towards municipal
taxes, which are stated to have become due up to May 2025. For
this claim, the Society has relied upon Exhibit K at page 358 of the
Petition. Whether the Respondents are liable to pay these taxes
and how much they are required to pay will depend upon the
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relevant terms of the Development Agreement and the municipal
tax documents. The Court will have to examine whether the
agreement makes the Respondents responsible for these taxes and
whether the amount claimed has been paid or reimbursed. The
short note refers to Exhibit K as the basis for calculating the
municipal taxes. If the said exhibit in the Petition supports the
amount claimed and the relevant clause of the agreement makes
the Respondents responsible for paying these taxes, the Society has
made out a prima facie claim. However, from the material
presently summarised, the Court cannot decide the liability in
respect of each tax entry or whether the entire amount is payable
to the Society at this stage. Therefore, the amount of
Rs.41,83,753/- shall be secured during the arbitration
proceedings. By directing that this amount be secured, the Court is
only protecting the amount claimed by the Society. It does not
mean that the Court has decided that the entire amount is payable
to the Society. The arbitral tribunal will decide the liability after
considering the agreement, the tax documents and any objections
raised regarding the calculation.
48. The three amounts mentioned in the short note are as
follows:
(i) Transit rent up to termination in October 2025:
Rs.53,92,556.16/-;
(ii) Liquidated damages calculated by the Society:
Rs.21,40,000/-;
(iii) Municipal taxes stated to have become due up to May
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2025: Rs.41,83,753/-.
49. The total of these three amounts comes to
Rs.1,17,16,309.16/-. The addition is correct according to the
figures mentioned in the note. However, merely because the total
has been correctly calculated does not mean that the entire
amount is proved to be payable in law. As stated above, an interim
direction for payment of transit rent can be made if the calculation
is supported by the documents and there is no material to show
that the amount has been paid. As regards liquidated damages and
municipal taxes, certain questions still remain to be considered.
Therefore, these amounts are required to be secured during the
arbitration proceedings until the liability is decided.
50. In view of the above discussion, and after considering the
material referred to, the Petition deserves to be partly allowed. The
directions which follow are interim arrangements and shall remain
subject to the final outcome of the arbitration proceedings.
(i) The Petition is partly allowed;
(ii) The Respondent liable under the Development
Agreement shall pay to the Petitioner Society a sum of
Rs.53,92,556.16/- towards unpaid transit rent calculated up
to the stated date of termination in October 2025, within
four weeks from the date of this order. Any amount proved
to have been paid towards transit rent for the same period
shall be adjusted;
(iii) The claim of Rs.21,40,000/- towards liquidated
damages and the claim of Rs.41,83,753/- towards municipal
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taxes shall be secured by the Respondent liable under the
Development Agreement, by depositing the said amounts in
this Court or by furnishing an unconditional bank guarantee
of a nationalised bank, within four weeks from the date of
this order. Such security shall remain subject to further
orders of this Court or the arbitral tribunal. The said
amounts shall not be released to the Petitioner Society
merely on the basis of this order;
(iv) It is clarified that the amounts directed to be secured
under clause (iii) above are not finally adjudicated amounts.
The correct date for commencement of the period for
calculating liquidated damages, the period for which such
damages are payable and the liability of the Respondents
towards municipal taxes shall remain open for determination
in the arbitration proceedings;
(v) The claim for transit rent for any period after the stated
date of termination, including the difference between
Rs.53,92,556.16/- and Rs.1,30,60,400.16/-, is not decided
by this order. The Petitioner Society shall be at liberty to
pursue the said claim in accordance with law and the terms
of the applicable agreement.
(vi) In terms of prayer clause (d), Respondent No.1 LLP
shall vacate and hand over possession of the property in
question to the Petitioner Society and shall remove its
movables and machinery lying on the said property, within
four weeks from the date of this order;
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(vii) In terms of prayer clause (h), Respondent No.1 LLP
and its partners, their servants and agents are restrained by
an order of injunction from in any manner interfering with
or obstructing the redevelopment of the property of the
Petitioner Society by the Petitioner Society or its agents.
They are further restrained from creating any third-party
rights in respect of the said property or the free sale FSI
generated therefrom, or from selling, transferring, disposing
of or otherwise dealing with the said property or the free
sale FSI generated therefrom, pending the arbitration
proceedings and until implementation of the arbitral award,
subject to further orders passed by the competent Court or
the arbitral tribunal;
(viii) The Petitioner Society is permitted to take necessary
steps for redevelopment of the property through another
developer, subject to the terms of this order and any order
passed by a competent Court. The rights and contentions of
the parties regarding the validity of termination, specific
performance, damages and other contractual claims are kept
open for adjudication in the appropriate proceedings;
(ix) The directions contained in clauses (vi) to (viii) above
are interim measures for protecting the property and
enabling redevelopment. They shall not be treated as a final
determination of the validity of termination or of the
contractual rights and liabilities of the parties;
(x) The observations made in this order are prima facie
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and are confined to consideration of interim measures under
Section 9 of the Arbitration and Conciliation Act, 1996. The
arbitral tribunal shall decide the disputes on their own
merits, uninfluenced by any observation made herein;
(xi) The Petition is disposed of in the above terms. Costs
shall be costs in the arbitration.
(AMIT BORKAR, J.)
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