B.E. BILLIMORIA AND CO.LTD. vs. MAHINDRA BEBANCO DEVELOPOERS LTD. AND MAHINDRA LIFESPACE DEVELOPOERS LTD.

2017:BHC-OS:5222
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN IT'S COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (LDG.) NO.29 OF 2017
B.E. Billimoria & Company Limited )
a Company incorporated and existing )
under the provisions of Companies Act, )
1956 and having its registered office at )
nd
Shivsagar Estate, A Block, 2 Floor, )
Dr.Annie Besant Road, Worli, )
Mumbai – 400 018 ) ...Petitioner
….Versus....
1. Mahindra Bebanco Developers Ltd. )
a company incorporated and existing )
under the provisions of Companies )
Act, 1956 and having its registered )
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office at Mahindra Towers, 5 Floor, )
Worli, Mumbai – 400 018. )
)
2. Mahindra Lifespace Developers Ltd. )
a company incorporated and existing )
under the provisions of Companies )
Act, 1956 and having its registered )
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office at Mahindra Towers, 5 Floor, )
Worli, Mumbai – 400 018. ) ...Respondents
Mr.Janak Dwarkadas, Senior Counsel with Mr.Zal Andhyarujina,
Mr.Kunal Dwarkadas, Mr.Amit Vyas and Mr.Rohan Mathur i/b
Vertices Partners for the Petitioner.
Mr.Pravin Samdhani, Senior Counsel with Ms.Disha Kunder i/b
Lodha Legal for the Respondent No.1.
Mr.Simil Purohit with Mr.Dhaval Mehta, Mr.Manish Vora, Mr.Swapnil
Khatri and Mr.Akash Lodha i/b Wadia Ghandy & Co. for the
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Respondent No.2.
CORAM : R.D. DHANUKA, J.
RESERVED ON : 19TH APRIL, 2017
PRONOUNCED ON : 2ND MAY, 2017
JUDGMENT :-
1. By this petition filed under section 9 of the Arbitration &
Conciliation Act, 1996 (for short “Arbitration Act”), the petitioner seeks
an injunction against the respondent no.1 from taking any steps
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pursuant to their letters dated 5 January, 2017 and 13 January,
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2017 and from in any manner breaching the agreement dated 28
September, 2011. The petitioner also seeks an order of status-quo
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with respect to the agreement dated 28 September, 2011 and seeks
an injunction against the respondent no.2 from creating any third
party rights / allotting any contract to carry out any construction / any
development on the site and seeks other reliefs. Some of the relevant
facts for the purpose of deciding this petition are as under :
2. In the month of March, 2008, Maharashtra Airport
Development Company Limited (for short “MADC”) invited the
proposals for developing a residential township on an area of
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approximately 25.252 acres of land in Nagpur district. On 24 March,
2008, the petitioner and the respondent no.2 executed a
Memorandum of Understanding to form a consortium to bid for the
project and to jointly promote a company for the purpose of
developing the residential township if the bid of the respondent no.2
was successful to jointly promote a special purpose vehicle for
implementing the project.
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3. On 18 April, 2008, the MADC accepted the proposals
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submitted by the said consortium and issued a Letter of Intent to
consortium for executing the said project.
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4. On 14 September, 2010, the petitioner and the
respondent no.2 executed a Term Sheet for award of the marketing
contact to the respondent no.1 and construction contract to the
petitioner for residential project. It was provided in the said Term
Sheet that the said Terms Sheet will form part of the Shareholders
Agreement between the respondent no.2 and the petitioner and will
come into force on the date of signing of the Shareholders Agreement
by the respondent no.2 and the petitioner. Both the parties signed the
said Term Sheet. It is the case of the petitioner that it was always the
understanding between the parties that the petitioner would be
awarded the work of construction of the said project.
5. It is the case of the petitioner that pursuant to the said
understanding between the parties, the respondent no.1 company
was incorporated as a Special Purpose Vehicle of which 70% of the
equity share capital is owned by the respondent no.2 and remaining
30% of the equity share capital is owned by the petitioner.
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6. On 13 October, 2010, the MADC entered into a
development agreement with the respondent no.1 granting the
development rights for construction of the project.
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7. On 27 May, 2011, the petitioner, the respondent no.1 and
respondent no.2 entered into a Shareholders Agreement recording
the rights and obligations of the petitioner and the respondent no.2
with regard to the management and operation of the respondent no.1.
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It is the case of the petitioner that the said Term Sheet dated 14
September, 2010 formed an integral part of the Shareholders
Agreement and was annexed thereto. Under the said Shareholders
Agreement, it was agreed that the construction contract shall be
awarded to the petitioner. Various terms and conditions were agreed
upon by and between the parties to the said Shareholders
Agreement, including their right to appoint the directors, deadlock
procedures, affirmative voting rights etc.
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8. On 28 September, 2011, the petitioner and the
respondent no.1 entered into an agreement pursuant to which the
respondent no.1 awarded the work of execution and construction of
works to the petitioner on the terms and conditions recorded therein.
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The commencement date for construction was 18 October, 2011
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under the said agreement and completion date was 10 January,
2017. The work was to be carried out by the petitioner in four phases.
The petitioner was responsible for mobilizing workers, machinery and
subcontractors, procuring materials and completing the project within
the prescribed time period. The respondent no.1 was responsible for
providing the drawings, designs, plans and specifications for
construction of the project. The petitioner provided performance bank
guarantees as well as other bank guarantees towards interest free
mobilization advances and retention money aggregating to
Rs.14,10,46,948/- and renewed those bank guarantees from time to
time as required by the respondent no.1.
9. It is the case of the petitioner that the respondent no.1
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had expressly recorded in the letter dated 7 September, 2015 that
the respondent no.1 had adopted the practice of making payments
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directly to the vendors and subcontractors of the petitioner instead of
paying R.A. Bills of the petitioner from time to time. It is the case of
the petitioner that it was thus the responsibility of the respondent no.1
to make payments to the vendors and suppliers of the petitioner.
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10. The petitioner in its letter dated 11 September, 2015 has
alleged to have explained the causes for delay in completion of the
project and alleged that the delay was not attributable to the
petitioner.
11. It is the case of the petitioner that in the meeting of the
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parties held on 24 October, 2015, the parties agreed that the
completion date under the construction agreement be modified and
extended till December, 2018 and all payments to the vendors and
labour would be made by the respondent no.1. It is the case of the
petitioner that the said decision was recorded in the minutes of
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meeting dated 24 October, 2015 which were forwarded by the
respondent no.1 to the petitioner.
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12. It is the case of the petitioner that on 4 November, 2015,
the petitioner forwarded a corrected draft of the minutes of the
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meeting dated 24 October, 2015. The petitioner however, did not
change the proposed date of completion of the construction as
December, 2018 and also did not change the decision about the
liability of the respondent no.1 to pay the vendors and suppliers
directly however only with a rider that the petitioner would have to
certify the bills first.
13. It is the case of the petitioner that during the period
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between 28 September, 2012 to 27 September, 2015, due to
various delays and disruptions attributable to the respondents, the
petitioner could carry out actual work worth only Rs.51.71 crores as
against the scheduled work of Rs.169.26 crores.
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14. On 4 October, 2016, the petitioner addressed a notice to
the respondent no.1 providing details of the delays and disruptions
alleged to have been caused by the respondent no.1 and claimed
compensation for the loss alleged to have been sustained by the
petitioner on account of such delays. The respondent no.1 in
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response to the said letter dated 4 October, 2016 vide its letter dated
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21 December, 2016 denied the claims made by the petitioner and
conveyed its counter claims. The respondent no.1 made various
allegations of breaches of construction agreement on the part of the
petitioner in the said letter. The petitioner denied the counter claims
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made by the respondent no.1 in the said letter dated 21 December,
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2016 by a letter dated 29 December, 2016.
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15. On 4 January, 2017, the respondent no.1 invoked the
performance bank guarantee as well as bank guarantees for
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mobilization advances. On 5 January, 2017, the petitioner
addressed a letter to the respondent no.1 calling upon it to refund and
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return the encashed amount of Rs.14,10,46,948/-. On 5 January,
2017, the respondent no.1 sent a letter to the petitioner claiming that
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the Construction Agreement shall come to an end on 10 January,
2017 and calling upon the petitioner to remove itself and its
subcontractors, workers, materials and machinery from the project
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site on or before 19 January, 2017.
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16. The petitioner vide its letter dated 6 January, 2017
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alleged that at a meeting held on 24 October, 2015, completion date
had been already modified upto the end of December, 2018. By a
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letter dated 9 January, 2017, the petitioner called upon the
respondent no.1 to pay its R.A. Bills which included the alleged
outstanding dues of the vendors and suppliers of the petitioner of
Rs.1,28,54,501/-. The respondent no.1 however, neither made any
payment to the petitioner nor cleared the dues of the suppliers and
vendors of the petitioner.
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17. The respondent no.1 vide its letter dated 13 January,
2017 denied that any extension of time for completion of the project
had been accepted by it and once again called upon the petitioner to
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demobilize by 19 January, 2017. On 14 January, 2017, the
respondent no.1 pasted the notice on the project site warning all the
workers and subcontractors that the respondent no.1 would not be
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responsible for the payment of their salaries and wages after 10
January, 2017.
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18. On 17 January, 2017, the petitioner filed this arbitration
petition inter-alia praying for various interim measures under section
9 of the Arbitration Act.
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19. On 20 January, 2017, this Court granted ad-interim relief
in favour of the petitioner in terms of prayer clauses (a) and (c) i.e. an
injunction against the respondent no.1 from taking any steps in
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pursuance to their letters dated 5 January, 2017 and 13 January,
2017 and passed an order of status-quo with respect to the
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Agreement dated 28 September, 2011. The said ad-interim order
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has been continued until 5 May, 2017. The respondent nos.1 and 2
have filed two separate affidavits in reply opposing the interim
measures sought by the petitioner. The petitioner has filed rejoinder
to the affidavit in reply filed by the respondent no.1.
20. Mr.Dwarkadas, learned senior counsel appearing for the
petitioner invited my attention to the various provisions of the
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Memorandum of Understanding dated 24 March, 2008,
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Shareholders Agreement dated 27 May, 2011, Term Sheet dated
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14 September, 2010, Development Agreement dated 13th October,
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2010 and Agreement dated 28 September, 2011. He submits that
under the Share Purchase Agreement, 70% of the equity share
capital in the respondent no.1 is owned by the respondent no.2 and
remaining 30% of the equity share capital is owned by the petitioner.
The petitioner has only two directors on the Board of Directors of the
respondent no.1 and has no control over the affairs of the respondent
no.1 though the respondent no.1 is being run by the other directors
according to the whims and fancies and at the behest of the
respondent no.2 owning 70% equity share capital of the respondent
no.1.
21. It is submitted that there was gross delay on the part of the
respondent no.1 at site due to several reasons attributable solely to
the respondent no.1. There was gross delay in providing foundation
designs which were not even ready at the time of excavation. The
RCC drawings for the foundation were issued about one month after
completion of excavation work. The execution work in respect of
some of the buildings and row houses were adversely affected and
greatly hindered due to delay in shifting / relocating HT power line.
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The petitioner was thus prevented from executing such construction
work at the contract rate of progress and could carry out the work
worth only Rs.51.11 crores for Phase I, II and IV against Rs.169.26
crores. The petitioner has suffered tremendous loss in view of the
alleged delay on the part of the respondents. He submits that the
petitioner has to recover substantial amount from the respondents
towards the loss incurred by the petitioner. He submits that HT power
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line was shifted as late as on 2 June, 2014.

particular on paragraph 3 and would submit that respondent no.1 had
agreed to provide Provisional Rate @1825 per square feet w.e.f. from

rate was decided. He also placed reliance on clause 3(h)(2) of the
said Minutes and would submit that it was agreed that all efforts shall
be made to complete project by end December, 2018 to meet the
requirements of the MADC. He submits that at least these two
conditions recorded in the said Minutes of the meeting were not
disputed by the petitioner.

was extended till end of December, 2018 in conformity with the
extension granted by the MADC. He submits that till the matter is
decided in the arbitral proceedings, the petitioner is ready and willing

to the outcome of the arbitral proceedings and is willing to pay 30% of
the expenses incurred by respondent no.1 for construction and if the
balance 70% is born by respondent no.2. He also invited my attention
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to the changes suggested by the petitioner in the said Minutes of the

equipment of the petitioner today are at the site, respondent no.2
cannot appoint any new contractor without approval of the petitioner
under the provisions of the Shareholders Agreement (SPA). In
support of his submission, the learned senior counsel placed reliance
on clauses 7.1 and 7.3.1. and 7.12 of the Shareholder’s Agreement

Shareholders Agreement. Learned Senior Counsel placed reliance
on clause 10 of the Shareholders Agreement and submits that
contract entered into between the petitioner and respondent no.1 is
linked with the obligation of the respondent no.2 in the contract
between respondent no. 2 and the MADC for the implementation of
the project as per Development Agreement. He submits that both
these contracts are interlinked and interwoven.

thought the contract provides that the time was essence of the
contract, the same is subject to the compliance of the reciprocal
obligation of respondent no.2 and cannot be read in isolation. He

September, 2011 entered into between the petitioner and respondent
no.1 which provides for commencement and completion of work
phase wise. Cause 7.2 provides for extension of time for completion.
He submits that the said provision provides that disagreement
between the parties on any matter arising under that clause has to be
referred to Independent Quantity Surveyor whose decision shall be
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final subject to any reference that may be made to the Arbitration
under clause 18.4.

since the petitioner has interest in the project, the judgment of this

He placed reliance on paragraphs 25, 27, 28 and 30 of the said
Judgment.

particular paragraphs 25, 27, 28, 30, 34 and 37. He submits that
since both the agreements entered into between the petitioner and
respondent no.1 and Shareholders Agreement are interwoven, the
disputes between all the three parties can be referred to arbitration to
the same arbitrator.

and 57 in support of his submission that since Shareholders
Agreement and the Construction Agreement are interwoven the
matter can be referred to arbitration against both the respondents
with the petitioner.

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73 in support of his submission that a developer also can maintain a
proceedings for an enforcement of his right against the owner.

on the other hand submits that the petitioner cannot claim any interest
in the assets of the respondent no.2 as a shareholder. The
respondent no.1 has development rights and is responsible in all
respect to the said MADC. The petitioner is merely a construction
contractor. He submits that the said Shareholders Agreement does
not create any interest in favour of the shareholders. The said
construction contract was awarded to the petitioner at arm's length

the said MADC. For the default, if any, committed by the petitioner,
Respondent no.1 would be responsible for such default to the MADC.

2011 and the Shareholders Agreement are not the documents
executed contemporaneously, simultaneously or on the same day. No
part of this Shareholder Agreement is incorporated by any specific
reference into the construction contract.

the petitioner and respondent no.2 are also parties. He submits that
in so far as the reliance placed on clause 7.12 of the Shareholders
Agreement by the petitioner is concerned, no board meeting has
been called admittedly for fixing net present value in access of a sum
to be stipulated by the board. Neither any agenda is fixed in any
meeting nor any notice is issued by the company for any such
meeting. He submits that there is no such grievance made in the
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petition by the petitioner.

Agreement in support of his submission that respondent no.1 shall be
responsible to MADC for implementation of the project as per the

of the project completion as defined in the Development Agreement
and to comply with the all the conditions precedent mentioned in the
said Development Agreement. Under clause 10.3.3 respondent no.1
company has to obtain all requisite permission, release and sanction
relating to said land and the project and also for building plans etc.
Reliance is placed on clause 10.4 in support of his submission that in
the Shareholder Agreement, it was clearly provided that the
construction contract would be granted to the petitioner on
competitive arm's length basis. He submits that Annexure-4 to the
said Shareholders Agreement was only a Terms Sheet recording
broad terms.

contract entered into between the petitioner and respondent no.1 was
pure and simple construction contract. The said contract provides for
termination of contract in the event of the petitioner committing
default. Under clause 10.11, respondent no.1 was given rights to
sell/dispose of/ lease/assign/transfer all the tenements, apartments,
flats, parking spaces, shops etc. The respondent no.1 had agreed to
perform obligations under the Development Agreement and was
liable to the customers / Unit holders against the claim, if any, for
breach of terms. Clause 15 of the said Agreement provided for the
rights and obligation of the parties in case of deadlock. In the said
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contract, a provision is made for exercising call option. The petitioner
as a shareholder may receive his money. Clause 20.2.1 provides for
arbitration in case of a dispute between the parties.

a list of documents which have to be read as part of the construction
contract which list does not include the Shareholder Agreement. He
submits that recital of the construction contract are irrelevant for the
purpose of incorporating the document as it only provides historical
background and cannot be read to incorporate the document. In
support of his submission, the learned senior counsel placed reliance

be resolved by an Independent Quantity Surveyor or Technical
Referee.

modification of the construction contract as the said Minutes of the
Meeting are not agreed upon by and between the parties. None of the
parties have accepted the said Minutes of the Meeting as originally
drawn. In support of his submission, the learned senior counsel for
respondent no.1 placed reliance on the Minutes of the Meeting sent
by the petitioner to respondent no.1 with several addition / deletions
and suggestions. He placed reliance on clause 6 of the construction
contract which provides that any modification and alteration or
amendment to the terms of the construction contract could only be
made by way of execution of supplemental written agreement and by
no other means or amendment. It is submitted that the said
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construction contract would not be varied in any event by any such
Minutes of the Meeting which are not even agreed upon and finalized
or concluded.

reliance on clause 7.1 of the construction contract which provides for
commencement and completion of works phase wise. He submits
that even the last Phase i.e. Phase IV was to be completed by the

expired. The petitioner did not give any notice for extension of time
for completion as contemplated under Clause 7.2 of the construction
contract. He submits that the said contract for construction entered
into between the petitioner and respondent no.1 has expired by efflux
of time. The petitioner has repudiated the contract which repudiation
has been accepted by respondent no.1.

no.1 raising a demand for Rs.40,59,48,882/- in respect of Time
Related Costs Components and a further claim of Rs.12,90,58,871/-

petitioner. He also invited my attention to the reply given by

2016 denying the said claim made by the petitioner and making a
counter claim of Rs.77,64,01,508/- against the petitioner.

to the averments made by the petitioner in paragraphs 2.12 and 2.13
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of the Arbitration Petition and would submit that the petitioner has not
made any statement in the petition that the Minutes of the Meeting

the same were accepted by respondent nos.1 and 2.

during the pendency of this petition calling upon the petitioner to
confirm within 48 hours from the date of receipt of the said letter
without prejudice to the rights and contentions of respondent no.1 as
to whether the petitioner would be completing the pending works in
accordance with the provisions of the construction agreement.
Respondent no.1 also conveyed that it was ready and willing to pay
@ Rs.1825 per square feet upon the terms as per the construction
agreement. Respondent no.1 made it clear that in the event the
petitioner is not willing to proceed and complete the scope of work in
accordance with the said letter, respondent no.1 was ready and
willing to complete the scope of work in the mode and manner stated
in the said letter by engaging necessary and required contractors /
sub contractors with the leave of this Court. The petitioner vide its

raised by the petitioner till date and to return the amount of
Rs.14,10,46,948/- which was encashed by respondent no.1 by
invoking eight bank guarantees provided by the petitioner.

respondent no.1 has denied specifically that it was agreed by and
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between the parties for extension of completion date of project till
December, 2018. He submits that the said Minutes was initially
forwarded by respondent no.1 to the petitioner with various
stipulations. He submits that since none of the parties agreed to the
terms and conditions stipulated in the said Minutes of the Meeting, no
reliance thereon can be placed or no enforcement thereof can be
sought by the petitioner. He submits that several portion of the
Minutes forwarded to respondent no.1 were deleted and struck off or
corrected by the petitioner. It is submitted that petitioner cannot
select any particular clause of the said Minutes of the Meeting and
cannot seek performance thereof against respondent no.1

construction contract which was entered into between the petitioner
and respondent no.1 is even otherwise not specifically enforceable
under section 14 of the Specific Relief Act, 1963. In support of his
submission, learned senior counsel placed reliance on judgment of

to 75. He submits that since the compensation in terms of money is
an adequate relief in this case and since the performance of the
contract runs into Minute or numerous details, specific performance
cannot be granted by the arbitrator. It is submitted that the contract
even otherwise is determinable and the performance of the contract
would involve the performance of the continuous duties which the
Court cannot supervise. He submits that such construction contract
cannot be specifically enforced and thus no interim measure can be
granted by this Court under Section 9 of the Arbitration and
Conciliation Act, 1996.
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Specific Relief Act, 1963 cannot be invoked by the petitioner since
none of the conditions prescribed therein which are required to be
fulfilled are not satisfied by the petitioner. He submits that petitioner
has only completed the work of Phase I. In respect of Phase IV plans
are also not finalized till date. The interest of the petitioner is only its
mark-up under the construction contract. It is submitted that
construction contract can be enforced only at the instance of the
owner and not the contractor under Section 14(3) (c) (iii) of the
Specific Relief Act, 1963. In support of his submission that the
shareholders have no interest in the Assets and properties of the
company, learned senior counsel placed reliance on the judgment of

paragraphs 7 to 9. In support of his submission that the contract of
the construction itself is determinable and the remedy of the petitioner
thus would be only in damages, learned Counsel for respondent no.1
placed reliance on the following judgments :-

paragraph 10.

and Tourism Corporation Limited, (2012) 7 Supreme Court

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contract awarded to the petitioner has public interest element within it.
The land belongs to Maharashtra Airport Development Corporation
Limited. The plot has been given for construction of residential
colony. The petitioner is appointed as construction contractor by the
developer. If any injunction is granted by this Court as prayed, it
would affect the public interest. He submits that the petitioner has not

made out, the balance of convenience does not lie in favour of the
petitioner. In support of this submission, learned senior counsel
placed reliance on the following judgments :

West Bengal vs. Dunlop India Limited & Ors, (1985) 1 SCC

no.1 to continue the contract. If any injunction is granted by this Court
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as prayed, it would amount to grant of specific performance of the
contract at the stage of interim measure which is not permissible in

work. In these circumstances, there is no balance of convenience in

Court, respondent no.1 may face litigations from MADC and others.

the learned senior counsel for respondent nos.1 that the said
judgment has been dealt with by the learned Single Judge of this

construction contract is not specifically enforceable as it falls within
ambit of sub section (a) and (d) of section 14(1) of the Specific Relief
Act 1963 because non performance of such contract is compensable
in terms of money. A performance of the suit contract would involve
the continuous duties which the Court cannot supervise. This Court
also held that clause 14(3)(c) specifically implies that the suit is filed
by the owner against the defendant who has obtained possession of
all or part of the land to develop it and even owner can sue for
specific performance of the contract and have land developed by the
contractor.

the submissions made by Mr.Samdhani, learned senior counsel for
respondent no.1 and would submit that no breach of any provisions of
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the Shareholder Agreement is alleged by the petitioner against
respondent no.2 in the Arbitration petition. No resolution has been
passed, no meetings are held, nor any notices are issued for holding
any meeting for affirmative vote. He submits that the Shareholder
Agreement clearly provides for mechanism in case of deadlock. He
submits that the petitioner has not alleged any deadlock in the
Arbitration petition.

re-joinder submits that both the agreements are interlinked. Both the
agreements were executed contemporaneously. He submits that the
agreements are not independent or separate agreements but are
interwoven.

and particular in paragraphs 1, 2, 42 to 44, 49 to 51 & 57 and

submitted that the agreement will have to be read as a whole. It is
submitted that the nature of contract and the relation between the
petitioner and respondent nos.1 and 2 is in the nature of glorified
partnership in the ratio of 30% and 70% respectively. There is
equitable understanding between the parties.

section 14(3)(c) of the Specific Relief Act, 1963. He submits that the
petitioner has substantial interest in the performance of the contract.
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He submits that all the three requirements set out in the said
provisions are satisfied by the petitioner. He submits that the

Housing Development Corporation vs. Bibijan Shaikh Farid &

2015 are concerned, it submitted that the said document was sent
along with email by respondent no.1 to the petitioner with signature of
respondent no.1. The said meeting was a high level meeting attended
by the top level officers of both the parties. He submits that even in

pay to the petitioner @ Rs.1825 per square feet with effect from
October, 2015. He submits that it is not alleged by respondent no.1 in
the affidavit in reply that the Minutes of the said Meeting dated 24
October, 2015 were not in accordance with the clause 6 of the
construction contract.

ground that the facts are totally different in those judgments. There

Infrastructure Private Limited vs. Aanant Developers Private

Kings India Limited vs. Indian Railways Catering and Tourism
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question before the Supreme Court was in respect of the right to
operate manage and run the train. There was no dispute in respect
of any immovable property and that termination of contract had
already taken place.

judgment is contrary to the view taken by the division Bench of this

construction work does not require any supervision of the Court.

ground that the balance of convenience is in favour of the petitioner.

of Central Excise, Chandan Nagar West Bengal vs. Dunlop India

is already at site. Phase I is already completed. Phase II can be
completed shortly. He submits that if the injunction is not granted, the
entire joint venture project would be jeopardized.

submits that there is no averment in the Arbitration Petition that there
was a glorified partnership between the parties. He submits that the

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Westbourane Galleries Ltd. (1973) AC 360 (supra) , has been

Overseas Private Limited vs. Raghunath Prasad Jhunjhunwala

that in any event only in the case of deadlock situation provisions of
glorified partnership can be invoked, which is not the case of the
petitioner. It is submitted that it is also not the case of the petitioner
that the contract of construction entered into between the petitioner
and respondent no.1 is a development agreement. It is the case of
the petitioner throughout that the said contract is a construction
contract. He submits even shareholders agreement does not create
any interest in favour of the petitioner.

the documents forming part of the contract which does not include
Shareholder Agreement. In so far as the reliance placed on terms
sheets by the petitioner is concerned it is submitted that the said
terms sheet records the pre-contract negotiation and no reliance
thereon can be placed after execution of the agreement itself. He
submits that in any event the said terms sheets only recorded broad
terms and not all the terms.

judgment of the full bench of the Calcutta High Court. He also
distinguishes the judgment of the division Bench of this Court in case

petitioner that as a construction contractor, the petitioner is entitled to
sell any flat.
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REASONS AND CONCLUSIONS :
56. It is not in dispute that the MADC had invited proposals for
developing a residential township on an area of approximately 25.252
acres of land in Nagpur district. The said MADC had awarded the
said contract to the respondent no.1. The petitioner, the respondent
no.1 and the respondent no.2 had executed a shareholders
agreement and terms and conditions were recorded in the said
agreement. There was a separate construction contract between the
th
petitioner and the respondent no.1 entered into on 28 September,
2011. It is not in dispute that under the said agreement entered into
between the respondent no.1 and MADC, the time to complete the
construction was extended upto December 2018.
57. The petitioner has heavily placed reliance on the minutes
th
of the meeting dated 24 October, 2015 which was sent by the
respondent no.1 to the petitioner. The petitioner in turn had made
various suggestions by way of addition and deletion in the said
th
minutes of the meeting dated 24 October, 2015. The fact remains
that the said minutes of the meeting were not finalized by both the
parties and no supplementary agreement was executed between the
petitioner and the respondent no.1 incorporating the alleged agreed
th
terms recorded in the minutes of the meeting dated 24 October,
2015. The petitioner is now seeking reliance on few clauses of the
th
said minutes of the meeting dated 24 October, 2015 in isolation in
support of the submission that the parties had already agreed that the
contract period was extended till December 2018 and that the
respondent no.1 had agreed to pay to the petitioner at the rate of
1825 per square feet w.e.f. October 2015. This Court has thus
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perused the said draft minutes of the meeting dated 24 October,
2015 forwarded by the respondent no.1 to the petitioner and the
corrections made by the petitioner to the said minutes of the meeting
and forwarded to the respondent no.1 for approval. A perusal of the
th
draft minutes of the meeting dated 24 October, 2015 and corrections
suggested by the petitioner clearly indicates that the petitioner had
made several additions/deletions in the draft minutes of the meeting
sent to the respondent no.1 by the petitioner. It is thus clear beyond
th
reasonable doubt that the said minutes of the meeting dated 24
October, 2015 were not finalized by and between the petitioner and
the respondent no.1. In my view the petitioner thus cannot pick and
choose few clauses of the said draft minutes of the meeting and to
contend that the same are binding on both the parties and seek
specific performance of such alleged terms. It is not in dispute that
the respondent no.1 did not agree to the additions/suggestions made
th
by the petitioner to the said draft minutes of the meeting dated 24
October, 2015.
58. Be that as it may, a perusal of clause 6 of the said
construction contract entered into between the petitioner and the
respondent no.1 clearly indicates that the amendment to the said
agreement could be done only by a supplementary agreement to be
entered into in writing which is admittedly not done in this case.
59. A perusal of the said construction contract indicates that
the contract awarded to the petitioner was to be completed in four
phases in the sum of Rs.169.26 crores. It is the case of the petitioner
itself that the petitioner however could carry out the work of only
Rs.51.11 crores. A perusal of the record prima-facie indicates that
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the petitioner never applied for extension of time by issuing any notice
under clause 7.2 of the construction agreement. Clause 7.1 of the
construction contract provides for commencement and completion of
work phase wise. The last Phase i.e. Phase IV was to be completed
th
by the petitioner on or before 10 January, 2017 which period has
already expired. The petitioner has only completed the work of
Phase I. The plans in respect of Phases 4 are admittedly not even
finalized till date.
60. Though this Court has granted ad-interim relief in favour of
th
the petitioner by an order dated 20 January, 2017 in terms of the
prayer clauses (a) and (c) thereby restraining the respondent no.1
th
from taking any steps in pursuance of their letter dated 5 January,
th
2017 and 13 January, 2017 and has granted status quo with respect
th
to the agreement dated 28 September, 2011. It is an admitted
position that the petitioner has not done any further progress since
the date of granting ad-interim order passed by this Court in favour of
the petitioner. It is not in dispute that the construction work which
was awarded to the petitioner was for construction of residential
colony.
61. It is not in dispute that the petitioner as well as the
respondent no.2 are the shareholders in the respondent no.1 in the
ratio 30% and 70% respectively. The respondent no.1 has been
granted development rights by the MADC and is responsible in all
respect to the MADC with the contract awarded to the respondent
no.1 by MADC. The respondent no.1 in turn has awarded
construction contract to the petitioner on the terms and conditions
recorded therein. In my view the said shareholders agreement does
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not create any interest in the assets and the properties in favour of
the shareholders. The said construction contract was awarded to the
petitioner at arms length competitive basis. A perusal of the contract
entered into between the parties clearly indicates that the respondent
no.1 would be responsible for defect if any, or in case of delay of the
project to the MADC. A perusal of the record further indicates that the
th
construction agreement dated 28 September, 2011 and the
shareholders agreement were not executed contemporaneously,
simultaneously or on the same day.
62. Insofar as reliance placed on clause 7.12 of the
shareholders agreement by the learned senior counsel for the
petitioner is concerned, it is not in dispute that no board meeting has
been called for fixing the net present value for exercising any such
alleged rights by the petitioner.
63. Division Bench of this Court in case of Chheda Housing
Development Corporation (supra) has considered an issue as to
whether the suit at the instance of a developer is not maintainable in
view of section 14(3)(c) of the Specific Relief Act. This Court held
that a suit at the instance of the developer where the developer is
non-owner party to a development agreement is not prohibited under
the provisions of section 14(3)(c) of the Specific Relief Act, 1963. It is
held that in the case of the development agreement, the right to seek
specific performance of the agreement is neither expressly nor by
necessary implication prohibited by the Specific Relief Act, 1963. It is
held that the question as to whether or not specific performance is to
be granted and as to whether or not any interlocutory order in aid of
the ultimate relief of specific performance shall be granted or not will
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depend, inter-alia , on the nature of the agreement, the conduct of the
parties, the surrounding circumstances and other relevant
considerations.
64. Insofar as the judgment of the learned single Judge of this
Court in case of Arun P. Goradia (supra) is concerned, the said
th
judgment is set aside by the Division Bench of this Court on 19 July,
2010 in Appeal No.57 of 2009 by consent of parties in view of the
settlement arrived at between the parties before the Appeal Court. In
my view Mr.Samdhani, learned senior counsel for the respondent
no.1 is right in his submission that in this matter, the development
contract was awarded to the respondent no.1 by MADC and the
respondent no.1 thereafter had awarded the contraction contract in
favour of the petitioner. In my prima-facie view the construction
contractor thus cannot maintain a suit for specific performance in view
of section 14(3) (iii) of the Specific Relief Act.
65. This Court in case of Nirmal Infrastructure Private
Limited (supra) after advertising to the judgment of this Court in case
of Shapoorji Pollonji & Co. Ltd. vs. Jignesh Shah (supra) and in
case of Chheda Housing Development Corporation (supra) has
held that whether an agreement is capable of specific performance or
not, the same has to be conclusively decided at the time of hearing of
the arbitral proceedings. This Court held that the owner could not
have waited indefinitely for the petitioner to commence the
development in the suit lands. Before granting any interim measures
under section 17 of the Arbitration and conciliation Act read with
Order 39 of the Code of Civil Procedure, the applicant has to make
out a prima-facie case and to show that the balance of convenience
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was in favour of the applicant and not the respondent. The applicant
also has to prove that irreparable loss suffered by the applicant, if
any, cannot be compensated in terms of money.
66. This Court also adverted to the judgment of this Court in
case of Chaurangi Builders & Developers Pvt. Ltd. Vs
.Maharashtra Airport Development Co. Ltd. in its judgment dated
th
29 November, 2013 in Arbitration Petition (Lodging) No.1999 of 2013
and the judgment of the Supreme Court in case of Cox & Kings
India Limited Vs. Indian Railways Catering & Tourism
Corporation Limited, (2012) 7 SCC 587 and the judgment of this
Court in Maytas Infra Limited Vs. Utility Energytech & Engineers
Pvt. Ltd. & Ors. 2009(4) Bom. C.R. 143 and several other judgments
and held that though a party had invested a large sum of money in
the project, that cannot entitle it to pray for a mandatory order to
operate the contract once it is noted that the remedy of the petitioner
would be if any in action for damages against the respondent for
breach of any of the terms and conditions of the contract.
67. This Court in that judgment refused to grant stay of
termination of the agreement. This Court also considered the
judgment of Supreme Court in case of Indian Oil Corporation vs.
Amritsar Gas Services, 1991(1) SCC 533 . In the said judgment this
Court held that even if the petitioner succeeds in the arbitral
proceedings and even if it is proved that the respondent had failed to
comply with its part of obligation under the development agreement or
that the termination of the development agreement by the respondent
was bad and illegal, the petitioner would be compensated in terms of
money. Special Leave Petition against the said judgment of this Court
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in case of Nirmal Infrastructure Private Limited (supra) is
dismissed. In my view the principles laid down by this Court in the
said judgment would squarely applies to the facts of this case. I am
respectfully bound by the said judgment.
68. Division Bench of this Court in case of Oil and Natural
Gas Corporation Ltd., Mumbai vs. M/s.Streamline Shipping Co.
Pvt. Ltd. has held that the contract in question before the Division
Bench of this Court was determinable and accordingly held that under
section 41(1)(c) of the Specific Relief Act, a contract which is in its
nature determinable cannot be specifically enforced. It is held that
under section 14(e) of the Specific Relief Act, no injunction can be
granted to prevent breach of contract, performance of which cannot
be specifically enforced. It is held that once it is found that the
contract cannot be specifically enforced because it is covered by
section 14(1)(c) of the Specific Relief Act, no injunction can be
granted to prevent breach of the said contract. This Court held that in
that case, the respondent under the guise of interim injunction wanted
specific performance of the contract which is not permissible in view
of the provisions of section 14(1)(c) read with section 41 of the
Specific Relief Act. In my view, the judgment of Division Bench of this
Court in case of Oil and Natural Gas Corporation Ltd., Mumbai vs.
M/s.Streamline Shipping Co. Pvt. Ltd. squarely applies to the facts
of this case.
69. In the facts of this case, the original contractual period has
th
already expired on 10 January, 2017. Out of four Phases, the
petitioner has not even commenced any work in respect of Phase IV.
there is no progress in respect of Phases II and III. The minutes of
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th
the meeting held on 24 October, 2015 are not finalized. The parties
have not extended the said contract till the end of December 2018 as
canvassed by the learned senior counsel for the petitioner. In my
view, reliefs as sought by the petitioner in this petition i.e. any status-
quo as prayed by the petitioner in respect of the agreement in
question or restraining the respondent from taking any action under
those contract is not permissible under section 14(1)(c) read with
section 41(e) of the Specific Relief Act. In my view if such injunction
as prayed by the petitioner is granted, it will amount to grant of
specific performance of the agreement in question at the stage of
considering interim measures under section 9 of the Arbitration and
Conciliation Act, 1996 which is not permissible.
70. Under Section 14(1)(a) of the Specific Relief Act, a
contract, the non-performance of which, the compensation in terms of
money is an adequate relief, then such contract cannot be specifically
enforced. In my prima-facie view, the consideration for construction
work has been agreed to be paid under the said construction
agreement. If ultimately, the petitioner proves that the respondent
was responsible for any breaches or had not granted extension of
time to carry out work, the petitioner in that event would be entitled to
be awarded compensation, if any proved. The petitioner has already
quantified such claim in the notices of demand raised upon the
respondent. In my prima-facie view, the petitioner cannot seek
specific performance of the said contract itself and thus no interim
measures can be granted in favour of the petitioner under section 9 of
the Arbitration and Conciliation Act, 1996.
71. Section 14(1)(b) of the Specific Relief Act, 1963 provides
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that a contract cannot be specifically enforced if the contract runs into
such minute or numerous details or which is so dependent on the
personal qualifications or volition of the parties or otherwise from its
nature is such that the Court cannot enforce specific performance of
its material terms. A perusal of the contract agreement entered into
between the parties clearly indicates that both the parties were under
obligation to comply with their various respective obligations provided
under the said agreement. It is an admitted position that the plans in
respect of the Phase IV are not even sanctioned. Even in respect of
the other Phases also except Phase I there was any progress.
72. The Court or an arbitrator is not expected to supervise
whether the parties to the agreement have complied with their
respective obligations, whether the Municipal Corporation had
sanctioned those plans or not, whether payments to the workers and
suppliers are made by the parties or not, whether the work is carried
out by the contractor in accordance with the specification and
drawings supplied by the employers or not and within the time
prescribed in the contract or not. Upon considering the terms and
conditions of the contract construction agreement, I am of the prima-
facie view that the nature of the contract is such that it runs into
minute and numerous details and thus in my prima-facie view cannot
be enforced, specifically. The contract is even otherwise determinable
and thus in view of section 14(1)(c) of the construction agreement
entered into between the parties even otherwise in my prima-facie
view the contract cannot be specifically enforced. Section 14(1)(d)
provides that a contract the performance of which involves the
performance of a continuous duty which the Court cannot supervise,
no such contract can be specifically enforced.
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73. Insofar as reliance placed by Mr.Dwarkadas, learned
senior counsel for the petitioner on section 14(3)(c) of the Specific
Relief Act, 1963 is concerned, all the three conditions prescribed
under section 14(3)(c)(i), (ii) and (iii) are required to be fulfilled for
seeking enforcement of a contract for the construction of any building
or execution of any other work or land. In this case the petitioner is
entitled to recover the consideration for carrying out the construction
but has not been granted any right to sell any property. In my view,
the petitioner can be compensated in terms of money for non-
performance of the contract which is an adequate relief. In this case
the possession was granted to the petitioner for the purposes of
carrying out a construction as a licencee and no right of any nature
whatsoever either in the land or in the structure in favour of the
petitioner has been created. In my prima-facie view, none of those
conditions set out in section 14(3)(c) are satisfied by the petitioner for
seeking enforcement of the construction contract.
74. The Supreme Court in case of Cox & Kings India Limited
(supra) has considered similar reliefs and has held that even if the
petitioner had invested large sums of money in the project, that
cannot entitle it to pray for a mandatory order of injunction to operate
the train once the lease agreement / arrangement had been
terminated. The Supreme Court held that the remedy of the petitioner
if any, would lie in an action for damages against the respondent for
breach of any of the terms and conditions of the joint venture
agreement and the memorandum of understanding. In my view by
granting relief as claimed by the petitioner in this petition, it would
amount to grant of mandatory order of injunction to carry out the
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construction of the buildings and would amount to grant of decree for
specific performance during the pendency of the arbitration
proceedings in this petition filed under section 9 which cannot be
granted. The principles laid down by the Supreme Court in case of
Cox & Kings India Limited (supra) would squarely apply to the facts
of this case. I am respectfully bound by the said judgment.
75. The Supreme Court in case of Assistant Collector of
Central Excise, Chandan Nagar, West Bengal (supra) has held that
cases where denial of interim relief may lead to public mischief, grave
irreparable private injury or shake a citizen's faith in the impartiality of
public administration, a Court may well be justified in granting interim
relief against public authority. But since the law presumes that public
authorities function properly and bonafide with due regard to the
public interest, a Court must be circumspect in granting interim orders
of far reaching dimensions or orders causing administrative,
burdensome inconvenience or orders preventing collection of public
revenue for no better reason than that the parties have come to the
Court alleging prejudice, inconvenience or harm and that a prima-
facie case has been shown. In this matter the tenements which were
to be constructed by the petitioner were for residential colony. A
perusal of the record prima-facie indicates that the petition itself was
responsible of gross delay in carrying out the work within the time
prescribed under the agreement and thus if any interim measure as
prayed by the petitioner is granted, it would affect not only the
respondent but also a large number of third parties. The principles
laid down by the Supreme Court in case of Assistant Collector of
Central Excise, Chandan Nagar, West Bengal (supra) can be
extended to the facts of this case.
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76. Division Bench of this Court in case of Shantilal J. Shah
and Others vs. Jitendra Sanghavi & Others, 2014(1) Mh.L.J. 193
has held that a suit for specific performance is in the nature of an
equitable remedy and the Court would not grant injunctive relief
remedy because a prima-facie case is made out. The balance of
convenience is against the grant of relief. This Court held that it was
in the interest of the owners, occupants and tenants that a dilapidated
cessed building should be redeveloped. In my view Mr.Samdhani,
learned senior counsel for the respondent no.1 is right in his
submission that even if the petitioner has made out a prima-facie
case, the balance of convenience is against the grant of relief in
favour of the petitioner and the balance of convenience is in favour of
the respondent. The principles of law laid down by this Court in case
of Shantilal J. Shah and Others (supra) applies to the facts of this
case.
77. This Court in case of Maytas Infra Limited vs. Utility
Energytech & Engineers Pvt. Ltd. and Ors., (2009) 4 Bom.C.R.
143 has held that the Court cannot compel the respondent to
continue with the contract. It is difficult for the Court even to
supervise such performance of contract, based upon such type of
public project. This Court accordingly refused to grant any relief
under section 9 of the Arbitration and Conciliation Act, 1996 in favour
of the petitioner. The said judgment would apply to the facts of this
case. I am respectfully bound by the said judgment.
78. The issue raised by the petitioner whether the respondent
no.2 can appoint a new contractor without approval of the petitioner
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based on the various provisions of the shareholders agreement or not
need not be considered at this sage. The respondent no.2 has not
appointed any new contractor so far in place of the petitioner.
79. Insofar as submission of the learned senior counsel for the
petitioner that the two agreements i.e. shareholders agreement and
the construction contract are interlinked and interwoven are
concerned, a perusal of the construction contract itself indicates that
the said contract was awarded to the petitioner by the respondent
no.1 at arm's length and on competitive basis. Shareholders
agreement itself provides that the contract would be awarded to the
petitioner at arm's length and on competitive basis. It is not in
dispute that the construction contract was not awarded to the
petitioner simultaneously or on the same day or contemporaneously
when the shareholders agreement was executed. In my prima-facie
view, there is no substance in the submission of the learned senior
counsel for the petitioner that both the agreements were interlinked
and interwoven. In my view, the petitioner thus could not seek relief
against both the respondents together in this arbitration petition
relying upon two different arbitration agreements on the ground that
both the agreements were interlinked and interwoven.
80. A perusal of the construction contract clearly indicates that
no part of the shareholders agreement is incorporated by any specific
reference into the construction contract. The recital of the
construction contract cannot be read to incorporate the shareholders
agreement into the construction contract. In my view Mr.Samdhani,
learned senior counsel for the respondent no.1 has rightly placed
reliance on the “ODGERS' CONSTRUCTION OF DEEDS AND
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STATUES” which is useful to support the proposition canvased by
the learned senior counsel for the respondent no.1. The recital in a
document provides only a historical background and cannot be
construed as terms and conditions of the contract recording any
obligation on the part of the parties to the contract.
81. Insofar as judgment of Division Bench of this Court in case
of Chheda Housing Development Corporation (supra) relied upon
by the learned senior counsel for the petitioner is concerned, the said
judgment would not forward the case of the petitioner. The
development agreement was entered into between the MADC and
the respondent no.1 whereas the construction contract was entered
into between the petitioner and the respondent no.1. Under the
construction agreement, the petitioner was only allowed to carry out
the construction on payment of consideration amount and was not
granted rights to sell any of the tenements or any part thereof.
82. Insofar as reliance placed on the judgment of Supreme
Court in case of Olympus Superstructures Pvt. Ltd. (supra) is
concerned, since this Court is of the prima-facie view that both the
agreements were not interlinked and interwoven, the said judgment of
Supreme Court would not assist the case of the petitioner. Similarly
the judgment of this Court in case of Rashmi Mehra & Ors. (supra)
also would not assist the case of the petitioner on the similar grounds.
83. The judgment of Calcutta High Court in case of Ashok
Kumar Jaiswal (supra) would not assist the case of the petitioner in
view of the fact that the petitioner herein cannot be construed as a
developer under the said construction contract. Be that as it may, the
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fact before the Calcutta High Court in the said judgment of Ashok
Kumar Jaiswal (supra) are clearly distinguishable with the facts of
this case.
84. A perusal of the shareholders agreement clearly indicates
that the respondent no.1 had agreed to perform obligation under the
development agreement entered into between the respondent no.1
and MADC and was liable to the customers and the unit-holders
against the claims if any, for breach of any terms. It is not the case of
the petitioner that there is any deadlock between the parties. Clause
15 of the agreement clearly provides for a mechanism for resolution
in case of deadlock.
85. A perusal of the construction contract clearly provides that
in the list of documents which forms part of the construction contract,
shareholders agreement is not included. In my prima-facie view, there
is substance in the submission of the learned senior counsel for the
respondent no.1 that the petitioner not having applied for extension of
time under clause 7.2 of the construction contract and the respondent
no.1 not having granted any such extension, the contract awarded to
th
the petitioner has expired by efflux of time on 10 January, 2017 and
that the petitioner has repudiated the contract which has been
accepted by the respondent no.1.
th
86. A perusal of the notice dated 4 October, 2016 issued by
the petitioner to the respondent no.1 clearly indicates that the
petitioner has already made a demand for huge compensation in
respect of the alleged time related costs components and also in
th th
respect of the financial loss from 28 September, 2012 to 27
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September, 2016 alleged to have been incurred by the petitioner.
The respondent no.1 also has made a counter demand of
Rs.77,64,01,508/- against the petitioner. Both the claims in terms of
money made by the parties against each other can be decided by the
learned arbitrator if any appointed by the parties or by this Court at
the later stage.
th
87. A perusal of the letter dated 9 February, 2017 addressed
by the respondent no.1 to the petitioner during the pendency of the
petition also indicates that the respondent no.1 had made a without
prejudice offer to the petitioner calling upon the petitioner to complete
the pending work in accordance with the provisions of the arbitration
agreement on payment of Rs.1825 per sq.ft. subject to certain
th
conditions. The petitioner in turn vide its letter dated 13 February,
2017 raised various counter conditions. Mr.Dwarkadas, learned
senior counsel for the petitioner does not dispute that large amount
of dues to the workers and suppliers are yet to be cleared and that
the petitioner did not carry out any progress on the plot inspite of the
ad-interim order passed by this Court.
88. The Supreme Court in case of Bacha F. Guzdar, Bombay
(supra) has held that the shareholders of the company has no right in
the assets of the company. In my view though the petitioner is
admittedly a shareholder holding 30% shares, it cannot claim any
right, title or interest whatsoever nature in the assets of the
respondent no.1 company.
89. A perusal of the documents relied upon by both the parties
in the aforesaid arbitration and on perusal of the provisions of the
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contract entered into between the parties, I am of the view that the
petitioner has not made out a prima-facie case for grant of any interim
measures nor the balance of convenience is in favour of the
petitioner. If the reliefs as prayed by the petitioner are granted in this
petition filed under section 9 of the Arbitration and Conciliation Act,
1996, it would seriously prejudice the rights of not only the
respondents but also the parties who would be occupying the
premises after construction.
90. The petition is devoid of merits. I, therefore, pass the
following order :-
a). The Commercial Arbitration Petition (Lodging) No.29 of
2017 is dismissed.
b). No order as to costs.
(R.D. DHANUKA, J.)
91. Learned counsel appearing for the petitioner seeks
th
continuation of the ad-interim order passed by this Court on 20
January, 2017 which is vehemently opposed by Mr.Samdhani,
learned senior counsel for the respondent no.1. Considering the facts
of this case, I am not inclined to continue the ad-interim order passed
by this Court. The application for continuation of ad-interim order is
rejected.

(R.D. DHANUKA, J.)
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