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Title: Swashray Co-op. Housing Society Ltd& Ors. Vs. Shanti Enterprises

Citation: CAP (L) No. 10432 OF 2023

Coram: JUSTICE MANISH PITALE

Decided on: 03-11-2023

Introduction:

The case involves two cross-petitions filed under Section 9 of the Arbitration and Conciliation Act, of 1996. These petitions are related to interim measures sought by the parties while disputes concerning a redevelopment project are pending resolution through arbitration. The disputes in question are common in the context of cooperative housing societies and developers in Mumbai. The parties involved are referred to as follows:

1. Petitioner – Society: Swashray Co-operative Housing Society Ltd., which is the Petitioner in Commercial Arbitration Petition (Lodging) No. 10432 of 2023 and the Respondent in Commercial Arbitration Petitioner (Lodging) No. 15203 of 2023.
2. Respondent – Developer: Shanti Enterprises, which is the Respondent in Commercial Arbitration Petition (Lodging) No. 10432 of 2023 and the Petitioner in Commercial Arbitration Petitioner (Lodging) No. 15203 of 2023. The case pertains to disputes and issues related to a redevelopment project involving these cooperative housing societies and the developer in the city of Mumbai.

Facts:

In this case, the Petitioner–Society engaged the Respondent–Developer for a redevelopment project concerning a property located in Borivali (West), Mumbai. The Petitioner – Society, consisting of 16 members, and the Respondent–Developer entered into a Memorandum of Understanding (MoU) on July 9, 2015. The MoU included obligations for the Respondent–Developer to procure conveyance in favour of the Petitioner–Society and to incorporate the Society’s name in the property register. The conveyance was procured on August 6, 2015. However, issues arose when the Municipal Corporation of Greater Mumbai issued a notice under Section 354 of the Mumbai Municipal Corporation Act, 1881, which led to the evacuation and eventual demolition of the existing building on the site in 2017.

The Petitioner–Society alleged that there was no progress in the redevelopment project, and the Respondent–Developer failed to execute and register the development agreement. A resolution to terminate the MoU was passed on February 13, 2018, but this termination was not acted upon as the Respondent–Developer assured compliance. The development agreement was eventually executed on May 4, 2018.

Despite obtaining necessary permits like Intimation of Disapproval (IoD) and a commencement certificate, the Respondent–Developer’s progress stalled. The Petitioner–Society claimed that the Respondent started defaulting and failed to comply with the terms of the development agreement. The agreement required the Respondent–Developer to provide a bank guarantee, complete the project within a specified timeframe, and obtain an occupation certificate.

As the Respondent – Developer failed to meet these obligations and requested relaxation, a Supplementary Development Agreement was executed on November 28, 2019. However, the Respondent – Developer also failed to fulfill its commitments under this agreement. Society issued several notices and reminders, called a Special General Body Meeting to terminate the agreements, and ultimately terminated the Development Agreement, Power of Attorney, Supplementary Development Agreement, and Permanent Alternative Accommodation Agreements (PAAAs) due to a loss of trust in the Respondent – Developer’s ability to complete the project. The Society sought relief through a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, requesting the court to grant mandatory reliefs due to the repeated defaults and breaches committed by the Respondent – Developer. The Society emphasized that its members should not suffer due to the Respondent’s actions and cited previous court decisions where similar relief was granted in Section 9 petitions.

This case highlights a complex dispute between a housing society and a developer involving a redevelopment project in Mumbai, with allegations of delays, defaults, and the termination of agreements.

Court analysis & judgement:

In this judgment, the court refers to a previous case, Sushil Kumar Agarwal Vs. Meenakshi Sadhu & Ors., where it was observed that in certain agreements, both the property owner and the developer would be entitled to sue for specific performance under Section 14(3) of the Specific Relief Act. However, in the present case, the court states that the Respondent–Developer cannot benefit from this position of law due to the material available on record, which shows significant breaches committed by the Respondent–Developer. The court finds that the Petitioner–Society has established a strong prima facie case, and it cannot be bound to a developer who has repeatedly defaulted, leading to a complete loss of trust and faith. As a result, the court dismisses the Commercial Arbitration Petition (Lodging) No. 15203 of 2023 filed by the Respondent–Developer. Simultaneously, it allows Commercial Arbitration Petition (Lodging) No. 10432 of 2023 filed by the Petitioner.

Restraining the Respondent, its partners, officers, servants, agents, and others from creating third-party rights in the property. Restraining the Respondent from interfering with the redevelopment process, construction, and possession of the property by the Petitioner–Society. Restraint from dispossessing the Petitioner – Society and its members from the project and property. Directing the Respondent to hand over possession of all original documents related to the property and the project. This judgment analysis highlights that the court has recognized the breaches committed by the developer and has granted specific reliefs to the petitioner society, ensuring that their interests are protected.

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Written By: Gauri Joshi

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