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2018 Supreme(Mad) 2158
IN THE HIGH COURT OF JUDICATURE AT MADRAS
INDIRA BANERJEE, P.T.ASHA, JJ.
M/s. Green Vistas Property Development (Private) Ltd. - Appellant
Versus
M/s. Leatherex Tanning Company, Kattur Sadayappan Street, Chennai - Respondent
O.S.A.Nos.147 & 201 of 2018 and C.M.P.Nos.8440, 8441 & 10125 of 2018
Decided On : 06-08-2018
For the Appellant : Mr. M.Murari, Senior Counsel for Ms. Hema Srinivasan
For the Respondent: Mr. R.Thiagarajan
The court emphasized that parties are entitled to compensation for losses directly resulting from a breach of contract, even if a liquidated damages clause exists.
Headnote:
Arbitration and Conciliation Act - Joint Development Agreement - 34
Fact of the Case:
The appellant and the first respondent entered into a Memo of Understanding for jointly developing a property into an IT Software Park. Disputes arose when the appellant failed to obtain approval for the project, leading to termination of the contract by the first respondent.
Finding of the Court:
The court upheld the award in favor of the first respondent for loss of rental income, damages for removal of piles/plinth beams, and compensation for erecting the demolished factory building. The court modified the award for liquidated damages.
Issues: The issues revolved around breach of contract, entitlement to damages, and interpretation of the Joint Development Agreement.
Ratio Decidendi: The court held that the first respondent was entitled to compensation for losses directly resulting from the appellant's breach, despite the existence of liquidated damages clause.
Final Decision: The appeals were dismissed, and the award in favor of the first respondent was confirmed, with a modification to the award for liquidated damages.
P.T. ASHA, J.
The above appeals arise against the order of the learned Single Judge in O.P.No.591 of 2014 filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act”) to set aside the award dated 28.05.2014 passed by the Arbitral Tribunal/second respondent herein. Since both the appeals arise out of the same Original Petition a common judgment is being pronounced.
2. The facts in a nutshell are as follows:
The appellant herein in O.S.A.No.147 of 2018 and the first respondent had entered into a Memo of Understanding on 26.11.2004 for jointly developing the property belonging to the first respondent herein. The appellant had undertaken to develop the same into an IT Software Park. The Memo of Understanding further provided that the appellant would include the adjacent property which had been acquired by their sister concern M/s. Maan Sarovar Properties Development Private Ltd., (hereinafter referred to as “MSPD”). Since the inclusion of this property would benefit the first respondent as they would get the maximum Floor Space Index (FSI), the appellant had undertaken to have a Tripartite Agreement entered into between themselves, the first respondent and MSPD. In pursuance of this understanding, the appellant/first respondent and MSPD had entered into a Joint Development Agreement (hereinafter referred to as “JDA”) on 25.02.2005.
3. Some of the salient features of this Agreement are detailed hereinbelow:
(a) The appellant at their cost, effort and expense was to construct an IT Park by re-constituting the first and second items of the 'A' Schedule Property, 38% of the over all FSI was to be given to the first respondent and in case, they were able to get an extended FSI, 22% of this excess FSI was to be given to the first respondent.
(b) The appellant was to construct and deliver 38,300 Sq.ft. of super built up area to the first respondent in a single floor in a building to be constructed on the 'B' Schedule Property. The remaining was to be shared by the appellant and the MSPD.
(c) The parties were entitled to undivided share in Item Nos.1 & 2 of the 'A' Schedule Property. It was further agreed that once the CMDA approved the plan and after ascertaining the exact FSI, the parties would enter into a Tripartite Supplementary Agreement. The appellant was to pay the first respondent a sum of Rs.40,00,000/- (Rupees Forty Lakhs only) towards Refundable Security Deposit. The JDA provided the schedule of payment in Clause 3.
(d) The parties had further agreed that the entire project would be completed within fifteen months from the date of the Corporation of Chennai/CMDA or the delegated body sanctioning the plan. A grace period of ninety days was also provided. Parties have agreed that time would be essence of the contract barring force majeure conditions.
(e) The first respondent had undertaken to vacate the existing tenant in the first item of the 'A' Schedule Property and to hand over the vacant possession of the same on or before 15.03.2005. The JDA also provided a default clause which was detailed in Clause 12.
(f) Clause 12 of the JDA provided as follows:
“12. In case the Party of the Second Part commits default of delay in handling over the building or the portion of it earmarked for the Party of the First Part, over and above the period of 18 months, then they will be liable to pay Rs.2,50,000/- (Rupees two lakhs fifty thousand only) per month to the Party of the First Part for the delayed period for the Schedule 'B' super built up area of the building earmarked for the Party of the First Part. In the event the Party of the Second Part has not delivered the portion earmarked for the Party of the First Part within 24 months from the date of CMDA/Government approval, the Party of the Second Part shall undertake to pay Rs.5,00,000/- (Rupees five lakhs only), per month, to the Party of the first Part as compensation till the possession of the constructed area is handed over to the Claimant
