M/s. Maruthi Movies vs. Income Tax Officer

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* IN THE HIGH COURT OF DELHI AT NEW DELHI + CS(OS) 486/2011 & I.A. No.9067/2011 Reserved on: 31.10.2018

Date of decision : 02.07.2019

SITAC PVT LTD

..... Plaintiff Through Mr.Amit Sibal, Sr. Adv. with Mr.Vinay P.Tripathi and Mr.Abhinav Jaganathan, Advs.

versus

BANWARI LAL SONS PVT LTD & ORS ..... Defendants Through Mr.Kamaldeep Dayal, Adv. for D-1. Mr.Sonal Sinha and Ms.Aastha Vashistha, Advs. for D-2.

CORAM: HON'BLE MR. JUSTICE NAVIN CHAWLA 1. This suit/petition has been filed by the plaintiff/petitioner under Sections 14(2), 17 and 29 of the Arbitration Act, 1940 (hereinafter referred to as the „Act‟) seeking a direction for the Arbitrator to file the Arbitral Record and the Arbitral Award dated 25.01.2011 before this Court and making the same a Rule of Court, alongwith decree against respondents awarding Rs.5,35,920/- paid by the petitioner to the Arbitrator as their share of fees as per order dated 21.12.2010. 2. Respondent no.1 has filed its objections to the Award under Section 30 and 33 of the Act in form of I.A. No.9067/2011. Respondent No.2 has also filed its objections to the Award.

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No.1638-A of 1986. This Court by its order dated 08.04.1991 appointed a Sole Arbitrator to adjudicate the claims of the petitioner. 8. The abovesaid order was challenged by the respondent no.1 and the respondent nos.2 and 3 by way of appeals, being FAO(OS) Nos.122/1991 and 123/1991 respectively, which were disposed of by the Division Bench of this Court vide its order dated 25.01.2007. A Review Application filed against the said order was also dismissed by the Division Bench vide its order dated 16.04.2007. The SLP filed by the respondents challenging the orders of the Division Bench was dismissed by the Supreme Court vide its order dated 09.07.2007. 9. The Arbitrator by the Impugned Award has held that the petitioner had carried out its obligations under the Collaboration Agreement and there was no justification for the respondent no.1 to cancel the Agreement as it purported to do by its notice dated 14.06.1986. The Arbitrator further held that the petitioner was entitled to enforce specific performance of the Agreements dated 07.08.1985 and 21.08.1985. The respondents were directed to give to the petitioner a fresh Power of Attorney on the same terms and conditions as given earlier. As the claim of the petitioner for specific performance had been granted, the Arbitrator did not consider the alternate prayer of the petitioner for award of Damages in lieu of specific performance. The Arbitrator further awarded the cost of Rs.5 lacs in favour of the petitioner, while rejecting the counter claims filed by the respondents. 10. The first point urged by the counsel for respondent no.2 in his challenge to the Award is that the Arbitrator has failed to consider that

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the petitioner was in breach of the Agreement dated 07.08.1985 inasmuch as it had failed to provide alternate accommodation to the respondent nos.2 and 3. He submits that the Arbitrator having held that if accommodation was available in the preferred localities then the petitioner was under an obligation to provide the same, failed to consider various documents on record which clearly establish that accommodation was indeed available in the preferred localities, however, the petitioner failed to provide the same to the respondents on fallacious pleas. 11. In this regard, it would first be essential to quote the relevant provision in the Agreement dated 07.08.1985 executed between the petitioner and respondent nos.2 and 3 “THAT the OCCUPIERS agree to vacate the premises presently occupied by them for past long number of years on the condition that the BUILDERS undertake to provide space in the building/s which may be proposed to be raised at these premises and that the BUILDERS shall at their own cost make available to OCCUPIERS alternative accommodation not less than three spacious bed rooms, drawing, dining, kitchen, servants quarters, garage in New Delhi in any decent locality preferably in Sundar Nagar, Golf Links, Jorbagh, Defence Colony. All costs in this connection shall be borne by the BUILDERS and such alternative accommodation shall be available for use by the OCCUPIERS till such time as the Group Housing Project is ready and OCCUPIERS can shift back to such area in the building which falls to their share. The BUILDERS undertake to provide 8% (eight percent) of the total built up constructed area free of cost to the OCCUPIERS in the proposed building to be raised at 1, Aurangzeb Road, New Delhi in lieu of their relinquishing their right to occupy and remain in possession of the existing premises.”

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respondents were unable to show availability of alternative accommodation in the preferred localities. 14. I am unable to agree with the submission made by the counsel for the respondent no.2. Apart from the fact that this Court is not exercising its jurisdiction as an Appellate Court, the letters sought to be relied upon by the respondents do not in any manner forward the case of the respondents. The petitioner vide its letter dated 17.05.1986 pointed out that the rent demanded for the group‟s owned house was unreasonable as compared to the market rent. On the same day, the respondent No.1 addressed the second letter dated 17.05.1986 enclosing therewith the list of properties from the property broker. The petitioner vide its letter dated 21.05.1986 replied to the above letter seeking confirmation from the respondents to the effect that they have seen those properties and found them acceptable as also to provide the complete address of these properties to the petitioner. The petitioner further stated as under: “For the property acceptable to you we are on our part, prepared to meet the owners and discuss directly or through broker and should the owner agree to reasonable terms and rent, we shall certainly finalise necessary arrangements.” 15. The petitioner also forwarded a list of other properties which may be considered by the respondents as alternative accommodation, including one property in Defence Colony, which was one of the preferred locality. 16. The counsel for the respondent no.2 was unable to show any response given to this letter by the respondents. Therefore, the finding of

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the Arbitrator that the petitioner was not in breach of the Agreement in respect of providing alternative accommodation to the respondents, cannot be faulted. 17. The learned counsel for the respondent no.2 has further argued that the petitioner was in breach of the Agreement by its failure to appoint an Architect as provided under Clause 3 of the Collaboration Agreement dated 21.08.1985. The counsel submits that the petitioner not only delayed approaching the Architects but also thereafter there was no clarity as to whether Jasbir Sachdeva of Sachdeva Eggleston, Architect was indeed appointed by the petitioner as an Architect. 18. Clause 3 of the Collaboration Agreement is reproduced hereinunder: “3. The parties agree that the plans etc are to be got prepared from any of the undermentioned Architects/Engineers at the sole discretion of the Builders. However, in the event the Builders intend to appoint any other Architect and or Engineer apart from the list, this shall be with mutual consultation. All professional fee, charges, incidentals payable to the Architects and/or Engineers shall be paid by the Builders alone to the exclusion on the owners. However, it is clearly understood between parties that the concept planning of the building, landscaping and the final building plans shall be discussed and approved mutually by the parties hereto. All expenses for getting the clearances from the appropriate authorities be it Central, Local or State shall be borne by the Builders.

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List of Architects: i) Sengupta & Sengupta ii) Jasbir Sachdev iii) Bharadwaj & Bharadwaj.” 19. A reading of the above clause would show that the parties had agreed on three names for any one of them to be appointed as an Architect for the preparation of plans etc. The permission under the The Urban Land (Ceiling & Regulation) Act, 1976 (ULCRA) was obtained on 23/25.04.1986. The petitioner approached two of the named architects vide letter dated 05.05.1986. It is also not disputed that the petitioner had made a payment of Rs.75,000/- to Mr.Jasbir Sachdeva on 22.05.1986/03.06.1986. Therefore, it cannot be said that the petitioner had defaulted in appointing an Architect in terms of the Agreement. 20. The Arbitrator has also discussed this issue at length and has held that the petitioner was not remiss in discharging its obligation and to the contrary, has acted with expedition. This finding of the Arbitrator cannot be faulted. 21. It is next submitted by the counsel for the respondent no.2 that the petitioner has also failed to obtain the permission and approval from the Competent Authority as contemplated under Clause 2 and 10 of the Collaboration Agreement. He submits that it was only with the efforts of the respondents that the permission had been obtained from the L& DO on 17.12.1985 and thereafter from Delhi Administration under Section 20 and 22 of the ULCRA on 25.04.1986. Even thereafter, the petitioner did not make the deposit of the charges demanded by the L&DO, thereby

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committing breach of the Agreement. He submits that the Arbitrator has ignored various vital documents in the Award. 22. I have considered the submission made by the counsel for the respondent no.2, however, find no force in the same. Clause 2 of the Collaboration Agreement no doubt casts an obligation on the petitioner to obtain all clearance certificates from the concerned authorities. Clause 10 names such authorities as DDA, L&DO, Authorities under the ULCRA etc. Clause 10 further provides as under: “In any event if clearance from any of these authorities is delayed, then this Agreement will automatically stand extended unless both parties agree to cancel it. In the event of this Agreement coming to end the Owners shall refund to the Builders the interest free earnest money deposited without incurring any other liability by the Owners.”

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the said document is a sham inasmuch as it records the presence of Mr.Dilbagh Singh as Chairman in the Board Meeting though he was not a Director on that date. He further submits that the Arbitrator has erred in holding that the petitioner company has, in any case, owned up all the action of Mr.Dilbagh Singh and therefore, the respondents cannot challenge his authority. He submits that there was no Board Resolution of petitioner‟s company filed on record ratifying all action taken by Mr.Dilbagh Singh and in absence thereof such presumption of the Arbitrator is incorrect. 29. I again do not find any merit in the said submission. Mr.Dilbagh Singh had been appointed as an Additional Director of petitioner‟s company on 27.05.1985. By the Board Resolution dated 13.07.1985 he was authorised to negotiate and finalise terms with the respondents regarding redevelopment of the property in question. In the meeting of the Board of Directors of the petitioner company held on 31.07.1985, while accepting the resignation of Mr.Dilbagh Singh from Directorship, it was resolved that notwithstanding his resignation, he shall continue to act in pursuance of the Board Resolution dated 13.07.1985 for finalising and concluding the agreement with the respondents. In fact, he was reappointed as an Additional Director on 12.08.1985. From the above sequence, it cannot be said that Mr.Dilbagh Singh had executed the Agreement without proper authority from the petitioner. In any case, the petitioner till date claims that the said Agreements were executed with its due authorization. The Arbitrator has also negatived the submissions of

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respondent no.2 in this regard relying upon Section 46 of the Companies Act, 1956. 30. In Panchanan Dhera & Ors. v. Monmatha Nath Maity (Dead) Through LRs & Anr., (2006) 5 SCC 340, the Supreme Court held that where the Company never denied or disputed the terms of the agreement nor raised any plea that the agreement was not binding on the company or the same was illegal and as long as the act of the Directors was not ultra vires and no issue of public policy was involved, the Company would still be liable (in the present case entitled) under the contract even in absence of a seal of the Company. 31. I, therefore, see no reason to interfere with the finding of the Arbitrator on this issue. 32. It is next contended by the counsel for the respondent no.2 that the Agreements in question were void in view of Section 5(3) of the Delhi Rent Control Act, 1958 (DRC Act). He submits that in lieu of surrender of tenancy rights and in consideration thereof, the Agreements provided for built up property to be given to respondent nos.2 and 3, therefore, the same would be liable to be declared unlawful under Section 5(3) of the DRC Act. 33. I am unable to agree with the said submission of the learned counsel for the respondent No.2. Section 5(3) of DRC Act is reproduced hereinunder: “5. Unlawful changes not to be claimed or received. - xxx

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(3) It shall not be lawful for the tenant or any other person acting or purporting to act on behalf of the tenant or a sub- tenant to claim or receive any payment in consideration of the relinquishment, transfer or assignment of his tenancy or sub- tenancy, as the case may be, of any premises.” 34. In the present case, promise to allot certain extent of the built up property upon redevelopment cannot be said to be a payment made in consideration of the relinquishment of the tenancy right. In Hans Raj Shiv v. Nirmaljit Arora, 67 (1997) DLT 379, this Court has held that in order to attract the provision of Section 5(3) of the DRC Act, the payment has to be in cash or in form of money paid by the landlord to the tenant in order to allure him to relinquish his rights in tenancy. In the present case, there was no such payment being made by the petitioner to respondent nos.2 and 3. 35. Learned counsels for respondents have further submitted that the petitioner infact lacked funds to perform the Contract. They submit that the petitioner failed to produce any document to show availability of funds with it to perform the Contract. On the other hand, it was established on record that the petitioner had an Authorized Share Capital of only Rs.1 lac and Subscribed and Paid up Capital of only Rs.2000/- and did not even have a bank account on the date of entering into the Agreement. They submit that even the amount of Rs.1.25 lac stated to have been deposited with the L&DO was infact paid by Mr.R.Ganguly and not by the petitioner. They submit that therefore, the petitioner was neither ready nor willing to perform its obligation under the Agreement. In this regard they have placed reliance on the following judgments:

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Thus the lack of funds plea by the Counsel for the respondent is of no significance because nothing has been shown that any funds or deposit to be made by the parties in order to get permission and the same was not within the reach of the Claimant. Whether claimant had total funds required for the whole project at the time of agreement is not of any relevance and is against commercial commonsense. No one holds such a huge

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amount in deposit at one time. Funds are raised along with the working of the contract. Nothing is shown by the respondents that the credit of claimant was doubted by any institution or lending agency, except for making a grievance though not substantiated that the Claimant had sought to talk to some people about allotting accommodation to them probably with a view to obtain funds from them and this was a breach and showed that he did not have funds; Malvindar Singh in his evidence has denied this charge. No such agreement has been produced by the respondent. Even if it was suggested that claimant was taking of allotting areas which fell to the Claimant's share, it is not the case of the Respondent that the portion of the area which has to be given to the respondent was in any way breached, So, this plea for cancelling the contract cannot stand scrutiny.

In this connection the respondents sought to suggest that Rs.1,25,000 which had to be paid to L &DO was not paid by the claimant. But this stands refuted by the receipt (X/1 Pg.l63 A) produced by the claimant of money being deposited. The fact that the receipt was made out was in the name of respondents is natural because property stands in-its name. Respondents have not shown any document to prove that the said amount was not transferred from the accounts of the claimant.”

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drawn by the Arbitrator from the evidence led by the parties cannot be said to be unreasonable or perverse, warranting any interference from this Court. 38. In His Holiness Acharya Swami Ganesh Dassji (supra), the Supreme Court after holding that the factum of readiness and willingness to perform is to be adjudged with reference to the conduct of the parties and the attending circumstances, on the facts of that case, found that the plaintiff therein was not ready nor had the capacity to perform his part of the contract. The said judgment, therefore, is not applicable to the facts of the present case, especially on the factual finding of the Arbitrator. 39. In Biswanath Ghose (supra), the Supreme Court held that for compliance of Section 16(c) of the Specific Relief Act, it is not necessary for the plaintiff to aver in the same words used in the section. Absence of the specific words in the plaint would not result in dismissal of the suit if sufficient facts and evidences are brought on record to satisfy the Courts of the readiness and willingness to perform his part of the contract. This judgement, therefore, is of no help to the respondent. 40. In Pushparani S.Sundaram (supra), the Court found that the plaintiff had not only failed to prove that he had performed his obligation under the contract, but also that he was ready and willing to perform the contract. The said judgement, therefore, has no application to the facts of the present case. 41. The learned counsel for respondent no. 1 submits that in the present case the Arbitrator should have exercised his discretion and not

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directed specific performance of the Agreement. He submits that specific performance being discretionary, as the petitioner had itself claimed damages as an alternate relief, the Arbitrator should have exercised discretion by awarding damages instead of directing specific performance. He places reliance on the judgment of the Supreme Court in Kanshi Ram v. Om Prakash Jawal, AIR 1996 SC 2150. 42. I am unable to agree with the submission made by the counsel for respondent no. 1. Even assuming that directing specific performance of an Agreement is at the discretion of the Court, Section 20 of the Specific Relief Act, 1963 before amendment itself states that such discretion is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal. In terms of the un-amended Section 21 of the Specific Relief Act, the plaintiff may also claim compensation for the breach of the contract, either in addition to or in substitution of specific performance. Therefore, merely because the plaintiff had claimed damages as an alternate relief, it cannot be denied the benefit of specific performance of the Agreement on that ground alone. 43. This takes me to the further submission of the learned counsel for respondent no. 1 wherein he submits that in the present case, Section 10 of the Specific Relief Act before amendment would not be applicable as the present is not a case of a contract to transfer immovable property. He submits that for the purposes of falling under Section 10 of the Act, the immovable property has to be sufficiently identifiable. Relying upon Clause 3, 11 and 12 of the Collaboration Agreement, he submits that the parties were yet to agree on the plans for construction and only the ratio

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as per which such constructed portion is to be divided amongst the parties had been determined. He submits that the description of the property is therefore vague and incapable of being identified. He places reliance on the judgment of the Supreme Court in Nahar Singh v. Harnak Singh and Others, (1996) 6 SCC 699 to submit that the Supreme Court has held that unless the property in question for which the relief of specific performance has been sought for is identifiable, no decree of specific performance can be granted in respect of the same. He also places reliance on the judgment of the Allahabad High Court in Nagar Mahapalika, Kanpur v. Punjab Association, 1980 SCC OnLine All 554, to submit that a contract dependant on personal volition of parties, such as preparation of a building plan by mutual agreement as in present case, cannot be specifically enforced. 44. As far as enforceability of Collaboration Agreement is concerned, he places reliance on the judgment of this Court in Vijay Dixit v. Sheila Khanna, 1996 (36) DRJ 476 to submit that where in a Collaboration Agreement the builder is allotted certain portion of the newly constructed building, the Agreement is only one of construction and as the cost of such construction was to be borne by the builder, the other terms had been agreed only to reimburse the builder for the expenses he was to incur in such construction. He also places reliance on the judgment of the Supreme Court in Vinod Seth v. Devinder Bajaj and Another, (2010) 8 SCC 1, wherein again the Supreme Court had refused to grant specific performance of a Collaboration Agreement holding that the same does not amount to an Agreement for sale/transfer of an immovable property but is a Contract which requires consensus, decisions or further

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agreement on several minute details which would involve performance of continuous duty by the builder, which the Court will not be able to supervise. 45. The learned counsel for the respondent no. 1 has also placed reliance on the judgment of this Court in MM Builders v. SK Bajaj & Ors., 2017 SCC OnLine Del 8693 and Prem Kumar Bansal v. Ambrish Garg, 230 (2016) DLT 360 (DB) in support of his arguments. 46. On the other hand, the learned senior counsel for the petitioner submits that these grounds were never urged before the Arbitrator and therefore, the respondents cannot be allowed to assail the Award on these grounds. He submits that in any case, the property is not only clearly identified in the Agreement but also an interest has been created therein in favour of the petitioner. He relies upon the following Clauses of the Agreement:- “WHEREAS the Owners are holders of perpetual lease hold rights of property known as 1, Aurangazeb Road, New Delhi situated at the junction of Aurangazeb Road and Prithvi Raj Road and bound by the property of Raja Jubbal on the other side have acquired the same in terms of deed registered as documents No. 3042 additional book No. 1 volume 457 at page 217 to 296 on the first day of May, 1959 with Sub-Registrar, Delhi. The Owners acquired all rights and interest in the property vested with original lease holders in whose favour Secretary of State, Council of India, executed perpetual leases detailed below.

xxxxxx

“11. It is agreed between parties hereto that 45% of the total built up area shall be available to the owners and 55% with the Builders. The Builders shall arrange with Bhanamal

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Gulzarimal Private Limited and Bal Krishna Das & Sons the tenants and occupiers of the premises at present on such terms as the Builders may settle with these parties. 12.

After the plans are sanctioned, in case, there be any change in the bye-laws whereby additional floor area ratio is increased/or determined and any further construction is permitted, the same shall be got done by the Builders for which the Builders shall have the right as if it is available at the time of execution of this Agreement which addition shall also be shared in the ratio appearing hereunder.”

xxxxxxx

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authority require execution of tripartite agreement between the Owners, flat-buyers and concerned authority the Owners undertake to execute such agreement. The impartable areas such as roads, parks etc shall be enjoyed by flat owners without any let or hindrance or preference of any kind. The parties hereto undertake that the Builders shall ensure that the buildings are raised in two blocks to enable the equitable distribution of Built up areas and open space which shall be decided mutually prior to plans being finalized and submitted to sanctioning authority. The Builders undertake to make plans in such manner that the maximum permissible built up area is covered and utilized. The entire covered area shall have basement also of the largest size permissible. The Builders and Owners agree that entire constructed area and open space shall be shared in the ratio herein specified.

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“6. Whether the Claimant is entitled to specific performance of the Agreement dated 21.8.1985 and if so, what directions are required to be given in this regard?

Counsel had sought to urge that the claimant had only been appointed agent to carry out, assignment and orders as may be given by the respondent, and this was in the nature of personal service and such an agreement cannot be specifically enforced. I cannot agree. The agreement did not appoint the claimant as a mere contractor to build - rather, it was for sharing the portion as owner of the complete Group Housing Complex in the ratio of 42% to the claimant with the additional right to undertake construction. The agreement in fact created an interest in the buildings once they were built and to deal with them as the respondent liked (of course his own share) subject of course to the overall conditions agreed to in the agreement of 21/08/1985. Such an agreement can be specifically enforced - in fact once it is found, as I do, that the respondents action in cancelling the agreement was void, it must consequently follow that there should be an order that the claimant is entitled to specifically enforce the agreement, and I do so order accordingly. I thus find that the claimant is entitled to specifically enforce the contract. Counsel for the claimant had argued that in case, specific performance is ordered, further directions be issued on some further points.

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a) So far as Power of Attorney is concerned, I have already held that the cancellation was illegal and a fresh Power of Attorney, in the same terms and conditions should be given by the respondents to the claimant, as mentioned above.

The agreement in clause 3 provides that concept plans prepared by the Architects from the extended list would be the basis for mutual discussion and approved mutually by the parties hereto. The claimant had urged that I should issue a direction that if one of three concept plans prepared by the architect is not approved be the respondents within 3 months, failing which the plans should be deemed to be approved, Counsel also urged that direction be given by me regarding sum to be allocated for rent for houses so as to carry out the obligation to give alternative accommodation to the respondents and also specifying the time for vacating the site by the respondents, l can not agree.

The reason is that all these directions relate to the events arising post award period. After I have given the award, I have no jurisdiction to give further directions. That jurisdiction would lie with the Hon'ble High Court, because there may be various factual matters which may have to be considered and that can only be done by the Hon'ble High Court at that particular time.

Obviously concept plans would have to be submitted, what if any objection there are would have to be sorted out. I can not give any directions to accept the plan submitted in future by the claimant without even having seen it. Similarly I have held that the Respondents are entitled to alternative accommodation to be provided by the claimant as mentioned in the Agreement; I have also held that if the accommodation is not available in the preferred areas and if the Respondents cannot indicate any such accommodation in the preferred areas, they can be offered alternative accommodation in other reasonably decent areas as they had been offered earlier. I, for obvious reasons, after giving the award cannot supervise the activities; of the parties namely, whether suitable accommodation has been given to them or whether the Respondents are justified or not in rejecting the same.

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In that view, this is a matter which will have to be either worked out by the parties in an amicable manner or the courts intervention for supervision may have to be invoked.

Similar is the situation where Claimant urge that time should be specified for clearing the site. This again will depend on the question of alternative accommodation having been sorted out. If the parties are not able to clear it among themselves, evidently they have to move the courts for necessary directions and it is thereupon that the various terms mentioned in Clause 20 of the Agreement dated 21st August, 1985 between the parties can be worked out. All these prayers are post Award and evidently I am not competent to give any directions in the matters and courts alone have to be moved for these situations which may arise in carrying out the directions given in the award.

Issue No.7

This issue claims the alternative prayer that if specific performance cannot be granted then the Claimant should be given compensation. The Claimant has purported to give losses which they have suffered which according to them, had the project gone through they would have made a profit of Rs.4,31,84,402/-. This on calculation they purport to do on the apparently plausible basis of 42% of their share and say it is reasonable because the respondents in its turn had himself mentioned that they would have earned a profit of Rs.10 crores from the 58% of their share. I am not going into this aspect for the reasons that I have already held that the Claimants are entitled to the specific performance of the contract. This follows finding that the Respondents were not justified in cancelling the Agreement. The claimant, are claiming specific performance in the first instance, and I have so held in their favour on this aspect. I therefore see no reason to work out the loss of profits for which no specific evidence was produced by either party.”

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Obviously concept plans would have to be submitted, what if any objection there are would have to be sorted out. I can not give any directions to accept the plan submitted in future by the claimant without even having seen it. Similarly I have held that the Respondents are entitled to alternative accommodation to be provided by the claimant as mentioned in the Agreement; I have also held that if the accommodation is not available in the preferred areas and if the Respondents cannot indicate any such accommodation in the preferred areas, they can be offered alternative accommodation in other reasonably decent areas as they had been offered earlier. I, for obvious reasons, after giving the award cannot supervise the activities; of the parties namely, whether suitable accommodation has been given to them or whether the Respondents are justified or not in rejecting the same, in that view, this is a matter which will have to be either worked out by

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the, parties in an amicable manner or the courts intervention for supervision may have to be invoked.

Similar is the situation where Claimant urge that time should be specified for clearing the site. This again will depend on the question of alternative accommodation having been sorted out. If the parties are not able to clear it among themselves, evidently they have to move the courts for necessary directions and it is thereupon that the various terms mentioned in Clause 20 of the Agreement dated 21st August, 1985 between the parties can be worked out. All these prayers are post Award and evidently I am not competent to give any directions in the matters and courts alone have to be moved for these situations which may arise in carrying out the directions given in the award.”

(a) when there exists no standard for ascertaining actual damage caused by the non-performance of the act agreed to be done; or

(b) when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief.

Explanation.- Unless and until the contrary is proved, the court shall presume- (i) that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money; and

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(ii) that the breach of a contract to transfer movable property can be so relieved except in the following cases:- (a) where the property is not an ordinary article of commerce, or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market;

(b) where the property is held by the defendant as the agent or trustee of the plaintiff.”

(a) a contract for the non-performance of which compensation in money is an adequate relief;

(b) a contract which 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;

(c) a contract which is in its nature determinable;

(d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise.”

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performance of its material terms or involves performance of a continuous duty which the Court cannot supervise, such Contracts cannot be specifically enforced/unamended. 59. Section 14(3)(c), however, carves out an exception incase of a Contract for construction of any building, subject to the fulfillment of the conditions mentioned therein. The same is reproduced hereinbelow:- “14. Contracts not specifically enforceable.- xxxxxx

(3) Notwithstanding anything contained in clause (a) or clause (c) or clause (d) of sub-section (1), the court may enforce specific performance in the following cases:

xxxxxx

(c) where the suit is for the enforcement of a contract for the construction of any building or the execution of any other work on land: PROVIDED that the following conditions are fulfilled, namely:-

(i) the building or other work is described in the contract in terms sufficiently precise to enable the court to determine the exact nature of the building or work; (ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and (iii) the defendant has, in pursuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.”

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consider Section 14(3) (c) of the Specific Relief Act. The Supreme Court held as under: “18. When a pure construction contract is entered into, the contractor has no interest in either the land or the construction which is carried out. But in various other categories of development agreements, the developer may have acquired a valuable right either in the property or in the constructed area. The terms of the agreement are crucial in determining whether any interest has been created in the land or in respect of rights in the land in favour of the developer and if so, the nature and extent of the rights.

(1995) 5 SCC 238, para 6) Ownership denotes the relationship between a person and an object forming the subject-matter of the ownership. It consists of a complex of rights, all of which are rights in rem, being good against the world and not merely against specific persons. There are various rights or incidents of ownership all of which need not necessarily be present in every case. They may include a right to possess, use and enjoy the thing owned; and a right to consume, destroy or alienate it. (Swadesh Ranjan Sinha v. Haradeb Banerjee (1991) 4 SCC 572). An essential incident of ownership of land is the right to exploit the development, potential to construct and to deal with the constructed area. In some situations, under a development agreement, an owner may part with such rights to a developer.

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This in essence is a parting of some of the incidents of ownership of the immovable property. There could be situations where pursuant to the grant of such rights, the developer has incurred a substantial investment, altered the state of the property and even created third-party rights in the property or the construction to be carried out. There could be situations where it is the developer who by his efforts has rendered a property developable by taking steps in law. In development agreements of this nature, where an interest is created in the land or in the development in favour of the developer, it may be difficult to hold that the agreement is not capable of being specifically performed. For example, the developer may have evicted or settled with occupants, got land which was agricultural converted into non-agricultural use, carried out a partial development of the property and pursuant to the rights conferred under the agreement, created third-party rights in favour of flat purchasers in the proposed building. In such a situation, if for no fault of the developer, the owner seeks to resile from the agreement and terminates the development agreement, it may be difficult to hold that the developer is not entitled to enforce his rights. This of course is dependent on the terms of the agreement in each case. There cannot be a uniform formula for determining whether an agreement granting development rights can be specifically enforced and it would depend on the nature of the agreement in each case and the rights created under it.

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24.1 The courts do not normally order specific performance of a contract to build or repair. But this rule is subject to important exceptions, and a decree for specific

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performance of a contract to build will be made only upon meeting the requirements under law;

24.2 The discretion to grant specific performance is not arbitrary or capricious but judicious; it is to be exercised on settled principles; the conduct of the plaintiff, such as delay, acquiescence, breach or some other circumstances outside the contract, may render it inequitable to enforce it;

24.3 In order to determine the exact nature of the agreement signed between the parties, the intent of the parties has to be construed by reading the agreement as a whole in order to determine whether it is an agreement simpliciter for construction or an agreement that also creates an interest for the builder in the property. Where under a development agreement, the developer has an interest in land, it would be difficult to hold that such an agreement is not capable of being specifically enforced; and

24.4 A decree for specific performance of a contract to build will be made if the following conditions are fulfilled:

24.4.1 the work of construction should be described in the contract in a sufficiently precise manner in order for the court to determine the exact nature of the building or work;

24.4.2 the plaintiff must have a substantial interest in the performance of the contract and the interest should be of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and 24.4.3 the defendant should have, by virtue of the agreement, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.

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land on which the building is to be constructed or other work is to be executed. If the rule of literal interpretation is adopted to interpret Section 14(3)(c)(iii), it would lead to a situation where a suit for specific performance can only be instituted at the behest of the owner against a developer, denying the benefit of the provision to the developer despite an interest in the property having been created. This anomaly is created by the use of the words “the defendant has, by virtue of the agreement, obtained possession of the whole or any part of the land” in Section 14(3)(c)(iii). Under a development agreement, an interest in the property may have been created in favour of the developer. If the developer is the plaintiff and the suit is against the owner, strictly applied, clause (iii) would require that the defendant should have obtained possession under the agreement. In such a case if the developer files a suit for specific performance against the owner, and the owner is in possession of the land by virtue of a lawful title, the defendant (i.e. the owner) cannot be said to have obtained possession of the land by way of the agreement. This would lead to an anomalous situation where the condition in Section 14(3)(c)(iii) would not be fulfilled in the case of a suit by a developer. Application of the literal rule of interpretation to Section 14(3)(c)(iii), would lead to an absurdity and would be inconsistent with the intent of the Act.

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(ii) of Section 14(3)(c), for the suit for specific performance to be maintainable against the owner. This will ensure that both owners and developers can avail of the remedy of specific performance under the Act. A suit for specific performance filed by the developer would then be maintainable. Whether specific

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performance should in the facts of a case be granted is a separate matter, bearing on the discretion of the court.”

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category of development agreement can be where the developer does not subject the property either to the MOFA or the said Act of 1970, but agrees to execute the sale deed in favour of flat purchasers in respect of their respective flats along with proportionate undivided right, title and interest in the land on which the building is constructed. There can be another category of development agreement where a developer is supposed to construct building at his own cost and recover the cost of construction by leasing out some of the premises in the newly constructed building. In such a case, there cannot be any clause regarding execution of any sale deed or lease in respect of the land as the title is to be retained by the owner of the property. These are only illustrations. The development agreements can be in some other forms also. In case of breach of certain contracts of development, the monetary compensation cannot be adequate relief and it may not be possible to ascertain actual damage caused by non- performance. The first category of development agreement where the developer proposes to subject the property either to the provisions of MOFA or the said Act of 1970 may be a category of agreement which may be specifically enforceable.

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the total built-up area of the new construction. In terms of clause 12 of the Collaboration Agreement, the petitioner was also entitled to any additional area that may become available in the same proportion. In terms of clause 14 of the Collaboration Agreement, the petitioner was entitled to enter into agreements with prospective buyers for the area that falls within the share of the petitioner in the plans submitted with the authorities. 65. By another contract, the petitioner had offered 5% and 8% of the total built-up area to the respondent no.2 and respondent no.3 who are the occupants/tenants in the building in existence. The petitioner also offered them an alternate accommodation during the period of construction. 66. The above terms clearly indicate that under the Collaboration Agreement a right in the property was created in favour of the petitioner and the agreement in question was not a pure construction contract. 67. However, the issue is whether this contract, in spite of it being a Development Agreement, is specifically enforceable. For answering this question few Clauses of the agreement need to be revisited. 68. As noted hereinabove, in terms of the agreement the plaintiff is to provide “a suitable alternate accommodation” to the respondent no. 2 and 3 in the preferred localities. It is already noticed hereinabove that there was a major dispute between the parties with respect to the availability of such suitable alternate accommodation. In any case, what such suitable alternate accommodation would be is a matter of subjective satisfaction dependent on one‟s personal taste and satisfaction.

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clause 14 of the agreement gains significance in as much as though the plaintiff was entitled to enter into agreement with prospective flat buyers offering them the areas that may finally fall in its share, the building was to be raised in two blocks to enable the equitable distribution of the built- up areas and open spaces. Such distribution was to be decided mutually prior to plans being finalised and submitted to the sanctioning authorities. Such agreements were also stated to be not binding on the owners till the completion of the project. 72. In terms of clause 15, the plaintiff was to phase the construction in such a manner that the portions allotted to the owners and builders are constructed simultaneously. 73. What is most important is that in terms of clause 22 of the agreement, the plaintiff was granted a license to enter upon the land only for the purpose of raising construction. The agreement clearly provided that this would only be a license and the legal possession of the plot shall remain with the owners. 74. The Power of Attorney that was to be executed along with the Collaboration Agreement was only for the purposes of construction activity and no further. 75. In Vinod Seth (Supra), specific performance was being sought of an oral Agreement which also provided for transfer of ground floor of a building to be constructed in favour of the builder upon such construction. The Supreme Court refused to grant such relief to the plaintiff therein and held as under:-

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“13. The agreement alleged by the appellant is termed by him as a commercial collaboration agreement for development of a residential property of the respondents. Under the alleged agreement, the obligations of the respondents are limited, that is, to apply to DDA for conversion of the property from leasehold to freehold, to submit the construction plan to the authority concerned for sanction, and to deliver vacant possession of the suit property to the appellant for development. But the appellant-plaintiff has several obligations to perform when the property is delivered, that is, to demolish the existing building, to construct a three-storeyed building within one year in accordance with the agreed plan, deliver the first and second floors to the respondents and also pay a token cash consideration of Rs. 3,71,000. The performance of these obligations by the appellant is dependent upon his personal qualifications and volition.

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able to supervise. The performance of the obligations of a developer/builder under a collaboration agreement cannot be compared to the statutory liability of a landlord to reconstruct and deliver a shop premises to a tenant under a rent control legislation, which is enforceable under the statutory provisions of the special law. A collaboration agreement of the nature alleged by the appellant is not one that could be specifically enforced. Further, as the appellant has not made an alternative prayer for compensation for breach, there is also a bar in regard to award of any compensation under Section 21 of the Specific Relief Act.”

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points, finished distemper and bathroom fittings of glazed tiles up to 6″ height and lift, “etc.” Further, at Clause 13 of the agreement, the parties have agreed that the contractor would construct a building at the premises consisting of “residential apartments of various sizes and denomination” in the said building complex in accordance with plans sanctioned by the Calcutta Municipal Corporation and the owner shall convey the proportionate share in the land to the respective buyers. Clause 22 of the agreement states that if for any reason after the plan is sanctioned or “for any act or omission on the part of the owner” the building cannot be constructed; the owner shall refund to the contractor Rs 4,00,000 in addition to all costs, charges and expenses incurred by the contractor. At Clause 20 of the agreement, the parties have agreed that the apartments of the owner shall be constructed and be made in “similar condition” as that of the contractor with water connection, sewerage, electric wiring except “special fittings”. 30. Use of such vague terms in the agreement such as “first class materials”, “residential apartment of various sizes and denomination”, “etc.”, “similar condition”, and “special fittings”, while discussing the scope of work clearly shows that the exact extent of work to be carried out by the developer and the obligations of the parties, have not been clearly brought out. The parties have not clearly defined, inter alia, the nature of material to be used, the requirements of quality, structure of the building, sizes of the flats and obligations of the owner after the plan is sanctioned. Further, Clause 9 of the agreement states that the owner shall pay the contractor costs, expenses along with agreed remuneration only after completion of the building on receiving the possession. However, the exact amount of remuneration payable by the owner to the contractor is not to be found in the agreement. The agreement between the parties is vague. The court cannot determine the exact nature of the building or work. The first condition in Section 14(3)(c)(i) is not fulfilled.

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(ii) of Section 14(3)(c) of the Act. In such a case, specific performance cannot be granted.

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Attorney executed by the owners. These facts clearly distinguish the said case making it inapplicable to the present case. 79. In Jaichandlal Ashok Kumar (Supra), unlike in the present case, the plans had already been approved by the builder from the Calcutta Municipal Corporation. The Agreement further provided for payment of lease premium by the developers upon execution of the Agreement. In those facts the Court found that the Agreement therein was not for development simpliciter; the Agreement was coupled with an interest created in favour of the developer. The same is therefore, distinguishable from the facts of the present case. 80. As noted above, the petitioner itself had requested the Arbitrator to issue further directions incase the Arbitrator was granting specific performance of the Collaboration Agreement. The Arbitrator in the Impugned Award refused to issue such further directions stating that these would be matters which may require examination of various factual matters and which can be considered by the High Court at an appropriate stage. The Arbitrator further held that even with respect to the alternative accommodation, the same would require supervision and would have to be worked out by the parties in an amicable manner or through Court‟s intervention and supervision. This itself shows that even as per the petitioner and the Arbitrator, the Contract, to be specifically performed, required constant supervision and direction from the Court. There may be substance in the submission made by the learned senior counsel for the petitioner that such apprehension has been compounded due to past conduct of the respondent on termination of the Agreement on frivolous

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ground, however, the same cannot justify grant of specific performance against the statutory presumption. 81. Though some argument was made on basis of the exemption letter dated 23/25.04.1986 issued by the Delhi Administration under the ULCRA stating that a person shall be entitled to own only one dwelling unit under the scheme and therefore, contending that the Collaboration Agreement, insofar as it provided for vesting of more than one dwelling unit to each of the parties, it had become unlawful and had stood frustrated, I cannot agree with the said submission. These stipulations by the Delhi Administration would not have caused the frustration of the Contract. However, there is yet another reason for non-grant of relief of specific performance in the facts of the present case. The Collaboration Agreement stipulates raising of a Group Housing/Multistorey construction on the property. As on the date of the Agreement, there was no restriction as to height and number of storeys that could be constructed on the plot. On 17.10.1985 the Government of India issued an order restricting the height to 45ft. and not exceeding four storeys. The petitioner while calculating and claiming its loss on account of breach of Agreement by the respondent had taken the total area to be constructed as nearly 97,000 sq.ft. 82. On 08.02.1988 further restrictions were imposed on the construction of building in the Lutyen‟s Bungalow Zone (where plot in question was situated) whereby the height of the building to be constructed was reduced to the height of the existing building, which in this case was fifteen and a half ft., and the area of construction was restricted to the existing plinth area. The counsel for respondent no. 1

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submits that due to such restrictions instead of an area of 97,000 sq.ft. that was proposed under the Collaboration Agreement, construction of only 7,500 sq.ft. could now be made, that to only with a ground floor and with no basement. Even the petitioner in his submission submits that the total built-up area under the Lutyen‟s Bungalow Zone regulation would be approx 11767.98 sq.ft. This is a fundamental change from the Agreement. 83. In Energy Watchdog v. Central Electricity Regulatory Commission, 2017 SCC OnLine SC 378, the Court reiterated that under Section 56 of the Indian Contract Act, the performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose of the parties. If an untoward event or change of circumstance totally upsets the very foundation upon which the parties entered into their agreement, it can be said that the promisor finds it impossible to do the act which he had promised to do. While a wholly abnormal rise or fall in the prices may not allow the party to get rid of its bargain, however, where it is shown that a fundamentally different situation has unexpectedly emerged, the contract ceases to bind the parties. The Court also approved the judgment in Sea Angel case, 2013 (1) Lloyds Law Report 569, wherein it was held that the test of “radically different” is important. In the present case, with the coming into force of Lutyen‟s Bungalow Zone Regulation, the circumstances have undergone a radical change not contemplated by the parties. 84. Though the learned senior counsel for the petitioner has sought to contend that as per the Explanation of Section 4(3) of the ULCRA, Group Housing has been defined to mean a building with one or more floors and

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the Ministry of Urban Affairs and Employment by its Circular dated 19.02.1997 has also clarified that under the Lutyen‟s Bungalow Zone guidelines there is no stipulation that the building should have the same plinth as well and therefore, even under these guidelines a group housing scheme is permissible, in my opinion what was in contemplation of the parties was certainly a different nature of group housing scheme with Multistorey construction. 85. At the same time, I agree with the learned senior counsel for the petitioner that the frustration of contract has been brought about by the respondents due to their own breach of the Agreement and they cannot be allowed to gain out of the same. In my opinion, while these subsequent events would hamper the claim of the petitioner to claim the specific performance of the Contract, the same can have no effect on the claim of damages of the petitioner due to such breach of the Agreement by the respondents. 86. In view of the above, the direction of the Arbitrator to order specific performance of the Collaboration Agreement cannot be sustained. 87. On the question of damages, though as noted above, the Arbitrator had framed issue no. 7, the Arbitrator did not go into the said issue for the reason that he had granted specific performance of the Contract. As I have held that specific performance of the Collaboration Agreement cannot be granted and as the Arbitrator during the pendency of the present proceedings has died, I deem it appropriate to exercise my powers under Section 8(b) read with Section 20 of the Act to appoint an Arbitrator to consider the issue of damages.

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NAVIN CHAWLA, J JULY 02, 2019 vp/RN/rv