Bombay High Court Rejects Developer's 18-Year-Late Injunction Plea in Specific Performance Suit

Mumbai: In a significant ruling emphasizing the principle of prompt action in seeking equitable remedies, the Bombay High Court has rejected an interim application for injunction filed by Sea Star Habitat Private Limited in a specific performance suit pending since 2006. Justice R.I.Chagla held that the 18-year delay in seeking the injunction, coupled with the creation of substantial intervening third-party rights and development activities by the assignee, disentitled the applicant to the relief.

The case revolves around a leasehold property at 47, Nair Road, Agripada, Mumbai Central, known as the North Wing. Sea Star Habitat Private Limited (Original Plaintiff No.1) had entered into a Memorandum of Understanding (MoU) in October 2005 with the original owners, Jean Genevieve alias Jean Vinay Kalgutkar and another (Defendant Nos. 1 & 2), for the sale of this property for Rs. 10.68 Crores. An advance of Rs. 85 Lakhs was paid. The MoU stipulated conditions, including obtaining a renewed lease from MCGM and a marketable title certificate.

Disputes arose regarding the title certificate, particularly concerning a claim by Dukanwala Estates Private Limited (an assignee of the South Wing property) to a 50% undivided interest in the larger land. The Plaintiffs contended that the title certificate provided by Defendant Nos. 1 & 2's solicitor was defective as it merely dismissed Dukanwala 's claim without proper examination, thus failing to establish a clear and marketable title as required by the MoU and law. They argued this justified their non-payment of the balance consideration.

Defendant Nos. 1 & 2, however, asserted that the title certificate was issued as per the MoU terms, which included a clause for "deemed acceptance" of title upon issuance. They argued that the Plaintiffs were obligated to pay the balance consideration within 30 days of receiving notice, making time of the essence. Upon the Plaintiffs' failure to pay, Defendant Nos. 1 & 2 terminated the MoU in June 2006, explicitly stating they were free to deal with the property.

The Plaintiffs filed the suit for specific performance in May 2006, even before the termination notice was issued. They registered a lis pendens. However, they did not initially seek any interim injunction to restrain the Defendants from alienating the property, despite averring in the plaint that the Defendants intended to sell to a third party.

In August 2023, Defendant Nos. 1 & 2 assigned their rights in the North Wing property to Defendant No. 3 via a registered Deed of Assignment for Rs. 13 Crores. Defendant No. 3 paid the consideration, stamp duty, registration fees, obtained transfer of the lease from MCGM after paying substantial charges and arrears, secured approvals for sub-division and redevelopment, vacated tenants, demolished the existing structure, and commenced redevelopment.

Learning of this assignment in October 2024, the Plaintiffs filed an application to amend the plaint to implead Defendant No. 3 and, subsequently, filed the present Interim Application in December 2024 seeking to restrain Defendant No. 3 from acting on the Assignment Deed and carrying out construction.

Arguments centered heavily on the Plaintiffs' delay. Mr. Virag Tulzapurkar, Senior Counsel for the Plaintiffs, argued that delay in seeking interim relief was justified as there were no overt acts of alienation for 17 years, and the creation of rights in favor of Defendant No. 3 constituted a change in circumstances warranting urgent relief now. He also argued that Defendant No. 3 was not a bona fide purchaser, having notice of the suit and lis pendens, and could not claim equity based on actions taken with such knowledge. He further submitted that under the amended Specific Relief Act, specific performance was mandatory, strengthening their case for interim relief.

Conversely, Mr. Navroz Seervai and Mr. Darius Khambata, Senior Counsel for Defendant Nos. 1 & 2, and Mr. Aspi Chinoi, Senior Counsel for Defendant No. 3, vehemently opposed the application on grounds of gross delay and laches. They pointed out that the Plaintiffs were aware of the potential for third-party sale since 2006 (stated in termination notices and the plaint itself) but consciously chose not to seek interim relief for 18 years. They highlighted the Plaintiffs' failure to challenge the termination notice for years and the withdrawal of a previous chamber summons without filing an independent suit. They argued the Plaintiffs lacked readiness and willingness as their offer to pay was conditional. Defendant No. 3's counsel emphasized the substantial investment and irreversible steps taken in the 16 months since acquiring the property, arguing it would be inequitable to grant an injunction now.

Justice Chagla , after considering the arguments, found prima facie merit in the Defendants' submissions regarding delay. The Court noted:

• The Plaintiffs' conscious decision not to seek interim relief in 2006 despite knowing of the Defendants' intent to sell.
• The failure to challenge the explicit termination notice for 18 years in the suit.
• The gross delay of 18 years in filing the present application, and specifically 16 months after becoming aware of Defendant No. 3's acquisition and commencement of redevelopment activities (evidenced by the board on the property).

The Court held that the Plaintiffs' explanation for the delay was unsatisfactory. While acknowledging that the issue of termination validity was framed in the suit, this did not excuse the failure to seek interlocutory protection earlier.

Regarding the title dispute, the Court sided prima facie with the Defendants' interpretation of the MoU, finding that Clause 8 provided for "deemed acceptance" of title upon issuance of the certificate, irrespective of independent proof of marketability. Furthermore, the Court noted that the Plaintiffs were aware of Dukanwala 's claim and its limited scope (pertaining to the South Wing) from the City Civil Suit papers shared under the MoU.

Crucially, the Court found that the Plaintiffs' long inaction and delay led to the accrual of substantial third-party rights in favor of Defendant No. 3. Citing the Supreme Court judgment in Ambalal Maganlal Patel & Anr. v. Indumati Narayan Mohile & Ors. , the Court held that such gross delay, coupled with intervening rights and prejudice caused by significant investment and development, was fatal to the application for interim relief.

The Court concluded that the balance of convenience was overwhelmingly against the Plaintiffs. By standing by for 16 months while Defendant No. 3 proceeded with redevelopment activities, the Plaintiffs were now precluded from seeking to stop the development. The Court also observed that the Plaintiffs had, prima facie, abandoned their right to seek interim relief through their prolonged inaction.

Consequently, the Interim Application was rejected, allowing Defendant No. 3 to continue with the redevelopment, although the specific performance suit filed by Sea Star Habitat against Defendant Nos. 1, 2, and now 3, will proceed to trial to determine the validity of the termination, the Plaintiffs' entitlement to specific performance, and other issues. The ruling serves as a stark reminder that diligence in pursuing interlocutory remedies is crucial in property disputes, even when the main suit is pending and a lis pendens is registered.