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Bombay High Court
S. J. KATHAWALLA, J.
Shantilal J. Shah & Ors
Vs
Shantilal J. Shah & Ors
Decided on : 19/11/2012
SPECIFIC PERFORMANCE - DEVELOPMENT AGREEMENT - VALIDITY - ENFORCEABILITY - CONDUCT OF THE PARTIES - BALANCE OF CONVENIENCE - INTERIM RELIEF - DISMISSAL OF SUIT: 1. A development agreement that grants development rights to a developer and includes the right to execute/enter into agreements with tenants/occupants, seek surrender of tenancies and/or other rights, sign and execute the transfer deed/conveyance/assignment to and in favor of the Society/Condominium as well as its registration, is capable of being specifically enforced. 2. The conduct of the parties, including the developer's failure to take any steps for more than 4 years to work out an agreement with any of the tenants/occupants as agreed in the development agreement, may disentitle the developer from seeking specific performance of the agreement. 3. The balance of convenience must be considered when determining whether to grant interim relief, and in this case, it favors the defendants as the developer has failed to carry out its obligations under the agreement. 4. An interim relief application seeking appointment of Court Receiver and injunction against alienation of the suit property is dismissed due to the developer's failure to establish a prima facie case for specific performance of the development agreement.
Fact of the Case:
The Plaintiffs, developers, entered into a development agreement with the Defendant Nos. 1 to 3, owners of the suit property, to demolish the existing building and construct a new one. The agreement included provisions for the Plaintiffs to negotiate with tenants, provide them with alternate accommodation, and execute necessary agreements. The Plaintiffs failed to take any steps for more than 4 years, and after the Defendant Nos. 1 to 3 terminated the agreement, the Plaintiffs filed a suit for specific performance and interim reliefs, including the appointment of a Court Receiver and an injunction against alienation of the suit property.
Finding of the Court:
The Court held that the development agreement was capable of being specifically enforced, but the Plaintiffs' conduct disentitled them from seeking specific performance. The Court considered the balance of convenience and found it favored the defendants. The Court dismissed the interim relief application and the suit.
Issues: 1. Whether the development agreement was valid and enforceable. 2. Whether the Plaintiffs' conduct disentitled them from seeking specific performance of the agreement. 3. Whether the balance of convenience favored the grant of interim relief.
Ratio Decidendi: 1. A development agreement that grants development rights to a developer and includes the right to execute/enter into agreements with tenants/occupants, seek surrender of tenancies and/or other rights, sign and execute the transfer deed/conveyance/assignment to and in favor of the Society/Condominium as well as its registration, is capable of being specifically enforced. 2. The conduct of the parties, including the developer's failure to take any steps for more than 4 years to work out an agreement with any of the tenants/occupants as agreed in the development agreement, may disentitle the developer from seeking specific performance of the agreement. 3. The balance of convenience must be considered when determining whether to grant interim relief, and in this case, it favors the defendants as the developer has failed to carry out its obligations under the agreement.
Final Decision: The interim relief application seeking appointment of Court Receiver and injunction against alienation of the suit property is dismissed due to the developer's failure to establish a prima facie case for specific performance of the development agreement.
1. The above suit is filed by the Plaintiffs for, a declaration that the Development Agreement dated 25th September 2007 (Exhibit A to the Plaint) (the said Agreement) entered into between the Plaintiffs and Defendant Nos. 1 to 3 and the Irrevocable Power of Attorney dated 25th October 2007 (Exhibit B to the Plaint) (the said POA) are valid, subsisting and binding on the Plaintiffs and Defendant Nos. 1 to 3 and also a declaration that the purported letter of termination dated 4th 1 of 40 October 2011 (Exhibit E to the Plaint), terminating the said Agreement and the said POA, is illegal, wrongful, null and void, for possession from Defendant Nos. 1 to 4 of the immovable property situated at Plot No. 270, Deodhar Road, Matunga, bearing New Survey No. 885 and Cadastral Survey No. 205/10 of Dadar Matunga Division, Mumbai400 019 along with the building known as Padmavati Sadan thereon consisting of ground plus 3 floors comprising of 19 tenements (the suit property) and ordering and directing the Defendant Nos. 1 to 4 to do all such acts, deeds and things and execute and sign all documents and papers as are necessary for effectively acting upon, performing and implementing the said Agreement. The Plaintiffs have also taken out the above Notice of Motion seeking interim reliefs, that is, appointment of Court Receiver of the suit property and to restrain the Defendants by an order and injunction from in any manner alienating, encumbering, selling, transferring and/or creating any third party right, title and/or interest in respect of the suit property or any part thereof.
2. The facts are briefly are set out hereunder:
3. The Defendant Nos. 1 to 3 are the owners of the suit property. The building on the suit property by the name Padmavati Sadan is a MHADA cessed property which is an old and dilapidated structure constructed prior to 1940. Out of 19 tenements, 6 tenements being Nos. 4, 5, 7, 8, 9 and 11 are occupied by the family members of Defendant Nos. 1 to 3 and 13 tenements are occupied by tenants. 4.. Pursuant to the negotiations between the Defendant Nos. 1 to 3 and the Plaintiffs, the said Agreement came to be entered into between the Defendant Nos. 1 to 3 and the Plaintiffs, whereunder Defendant Nos. 1 to 3 granted development rights in favour of the Plaintiffs on the terms and conditions more particularly set out therein. The said Agreement has been duly registered with the Sub-Registrar of Assurances under the provisions of the Indian Registration Act, 1908. Some of the relevant recitals and the terms and conditions of the said Agreement are reproduced hereunder for ready reference: B. The said Plot along with the said Old Building shall hereinafter collectively be referred to as the said Property. G. The said property is a cessed building and is fully occupied by the tenants/occupants. The said building is in a dilapidated condition and requires heavy repairs and/or reconstruction/redevelopment; H. The Owners are at present using, occupying and residing in Flat Nos. 7, 8 and 9 on the First Floor of the said building Padmavati Sadan admeasuring approximately 572 sq.ft., 461 sq.ft. and 419 sq.ft. (carpet area)respectively and Flat No.11 on the Second Floor of the said Building Padmavati Sadan admeasuring approximately 572 sq.ft. (carpet area) (hereinafter referred to as the existing residential premises); I. The Owners are at present using and in occupation of the office/commercial premises bearing Nos. 4 and 5 on the Ground Floor of the said building Padmavati Sadan admeasuring approximately 419 sq.ft. and 389 sq.ft. (carpet area) respectively (hereinafter referred to as the existing office/commercial premises); J. The Owners have decided to demolish the said building and to erect new building/s thereon by consuming FSI as well as floating FSI of the outside properties in the form of TDR, if any, under the redevelopment scheme as permitted by MHADA; K. Due to lack of experience and shortage of funds, the Owners hav
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