Bombay High Court holds MOU for TDR inherently determinable, quashes interim injunction against developer

Justice Aarti Sathe of the Bombay High Court set aside a trial court’s interim injunction in a Transferable Development Rights (TDR) purchase dispute, ruling that a Memorandum of Understanding (MOU) which is inherently determinable cannot be specifically enforced. The decision quashes the injunction that had restrained the developer from dealing with the TDR pending suit, sending the matter back for expedited disposal.

The TDR Deal That Fell Through

The dispute arose from an MOU dated 13 July 2022 between M/s Sada Anand Developers (the appellant) and Shree Balaji Realty (the respondent). The developer had proposed to sell 5,200 sq. mtrs. of TDR from a slum rehabilitation project on final plot no.57 at Mangalwar Peth, Pune, for a total consideration of ₹8.23 crore. The respondent paid ₹4 crore in instalments – ₹2.47 crore on 6 July 2022 and ₹1.48 crore on 25 August 2022.

Under the MOU, the developer was to obtain a Development Rights Certificate (DRC) from the Competent Authority by 13 October 2022. When technical difficulties prevented this, the developer issued a cancellation notice on 18 October 2023, offering to refund the amount. The respondent refused the refund and instead filed Special Civil Suit No.387 of 2024 in February 2024, seeking specific performance of the MOU and a temporary injunction to prevent the developer from alienating the TDR.

The trial court granted the injunction on 14 February 2025, citing the large sum paid and the risk of irreparable loss. The developer appealed.

Appellant: MOU Is Determinable, Specific Performance Barred

Senior Advocate Sanjeev Kadam, appearing for the developer, argued that the trial court had failed to consider the true nature of the MOU. He contended that Clauses 4A and 4B of the MOU made it determinable at will – the parties could cancel it ‘due to any reason whatsoever’ – and therefore specific performance was barred under Section 14(d) of the Specific Relief Act, 1963. He relied on the decision in Narendra Hirawat and Company vs. Sholay Media Entertainment Pvt. Ltd. (2020(5)-Mh.L.J.-173), which held that a contract that is inherently determinable cannot be specifically enforced.

Kadam further submitted that the developer had issued post-dated cheques for the entire amount and given an irrevocable consent for their encashment. “The respondent’s refusal to accept the refund and insistence on specific performance is erroneous,” he argued.

Respondent: Right to Terminate Lies With Us

Counsel Jaydeep Deo, for the respondent, maintained that Clause 4B gave the purchaser – and only the purchaser – the option to terminate the MOU. The developer’s unilateral cancellation was therefore invalid. He argued that the developer, having accepted ₹4 crore, was likely to create third-party rights in the TDR once the DRC was obtained, causing irreparable loss to the respondent.

Court’s Analysis: Both Clauses Must Be Read Holistically

Justice Sathe reproduced Clauses 4A and 4B and observed that they cannot be read in isolation. “On a plain reading of the aforesaid clauses, it is clear that both the clauses have to be given a holistic interpretation and cannot be read in isolation with each other.” Clause 4A stated that the agreement could be cancelled “due to any reason whatsoever or due to lapse of time period agreed herein to procure the proposed DRC.” In that event, the developer would issue security cheques. Clause 4B gave the purchaser the option to claim interest or terminate, but the overarching scheme was that the MOU was terminable without assigning cause.

“Therefore, on a reading of the aforesaid two clauses, it is clear that the MOU is of such a nature that the same is determinable, inasmuch as, the same would be inherently determinable as the parties do not have to assign any reason to terminate the same and the terms of termination are envisaged in the contract itself.”

Once that finding was reached, the court held that Section 14(d) of the Specific Relief Act barred its specific performance. The trial court had erred by granting an injunction under Order XXXIX Rule 1 of the CPC without first deciding whether the MOU was enforceable.

Key Observations

The court made the following notable observations:

“The Trial Court has not rendered any finding in respect thereof and has proceeded to straight away grant injunction under the provisions of Order XXXIX, Rule 1 of CPC which to my mind is an incorrect approach adopted by the Trial Court.”

“Non granting of injunction in respect of the property which is not in existence, would not cause any harm or loss to the Respondent (Original Plaintiff) and balance of convenience therefore is in favour of the Appellant (Original Defendant).”

“In the facts of the present case, there is no existence of the property or a threat of dispossessing the Respondent (Original Plaintiff) from any property and hence question of exercising the jurisdiction under Order XXXIX, Rule 1 of CPC by the Trial Court without first giving its prima facie view on the issue of enforceability of the MOU dated 13th July 2022, is an incorrect approach adopted by the Trial Court.”

Decision: Injunction Quashed, Suit to Proceed Expeditiously

The High Court allowed the appeal, quashing the trial court’s order dated 14 February 2025. It directed the 5th Joint Civil Judge, Senior Division, Pune to decide the suit as expeditiously as possible and in accordance with law. No costs were awarded.

The ruling reinforces the principle that an interim injunction cannot protect a contract that is by its very nature determinable. Parties who agree to a termination clause that requires no reason will find their remedies limited to damages or refund, and not specific performance.