Rajawadi Arunodaya CHSL Ltd V Value Projects
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Rajawadi Arunodaya Coop Hsg Soc Ltd vs Value Projects Pvt Ltd 2-3-CARBPL74-20-J+.docx WWW.LIVELAW.IN Shephali REPORTABLE IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION IN ITS COMMERCIAL DIVISION COMM ARBITRATION PETITION (L) NO. 74 OF 2020 Rajawadi Arunodaya Co-op Hsg Soc Ltd., A society registered under the provisions of the Maharashtra Co-operative Societies Act, 1960 having address at “Arunodaya” Rajawadi, Junction of 4th and 7th Road, Ghatkopar (East), Mumbai 400 077 …Petitioner ~ versus ~ Value Projects Pvt Ltd., A company registered under the provisions of Companies Act, 1956 through its directors Mr. Mimit Ajit Bhuta, Mrs. Jayashree Ajit Bhuta and Mrs Sonal Mimit Bhuta having address at 501, Bhaveshwar Complex, Next to Vidyavihar Station, Vidyavihar (West), Mumbai 400 086 …Respondent Page 1 of 55 15th March 2021 Rajawadi Arunodaya Coop Hsg Soc Ltd vs Value Projects Pvt Ltd 2-3-CARBPL74-20-J+.docx WWW.LIVELAW.IN AND COMM ARBITRATION PETITION (L) NO. 3930 OF 2020 Value Projects Pvt Ltd., A company registered under the provisions of Companies Act, 1956 through its directors Mr. Mimit Ajit Bhuta, Mrs. Jayashree Ajit Bhuta and Mrs Sonal Mimit Bhuta having address at 501, Bhaveshwar Complex, Next to Vidyavihar Station, Vidyavihar (West), Mumbai 400 086 …Petitioner ~ versus ~ 1. Rajawadi Arunodaya Co-op Hsg Soc Ltd., A society registered under the provisions of the Maharashtra Co- operative Societies Act, 1960 having address at “Arunodaya” Rajawadi, Junction of 4th and 7th Road, Ghatkopar (East), Mumbai 400 077 2. Municipal Corporation of Greater Mumbai, incorporated under the provisions of Mumbai Municipal Corporation Act, 1888 having its address at Mahanagar Palika Bhavan, CST, Mumbai 400 001 And Also through Asstt. Assessor & Collector / Page 2 of 55 15th March 2021 Rajawadi Arunodaya Coop Hsg Soc Ltd vs Value Projects Pvt Ltd 2-3-CARBPL74-20-J+.docx WWW.LIVELAW.IN N Ward, Brihanmumbai Mahanagarpalika Building, 3rd Floor, Jawahar Road, Ghatkopar (East) Mumbai 400 086 And also through The Executive Engineer (Building Proposal), MCGM, Easter Suburbs, LBS Marg, Vikhroli (West), Mumbai. …Respondents APPEARANCES FOR RAJAWADI Mr Mayur Khandeparkar, with Tushar ARUNODAYA CHSL Gujjar, i/b Solicis Lex. FOR VALUE PROJECTS Mr Rohaan Shah, with Paresh Shah, & Srisabari Rajan, i/b M/s. Shah & Sanghavi. FOR MCGM Mr Sagar Patil. COURT RECEIVER Mr DN Kher. CORAM : G.S.Patel, J. DATED : 15th March 2021 ORAL JUDGMENT: 1. This order will dispose of two competing Petitions under Section 9 of the Arbitration and Conciliation Act 1996. The first Petition is filed by the Rajawadi Arunodaya Co-operative Housing Page 3 of 55 15th March 2021 Rajawadi Arunodaya Coop Hsg Soc Ltd vs Value Projects Pvt Ltd 2-3-CARBPL74-20-J+.docx WWW.LIVELAW.IN Society Ltd (“Rajawadi”; “the Society”) against the Respondent builder, Value Projects Pvt Ltd (“Value Projects”; “the Developer”). The opposing petition is by Value Projects. 2. While the narrative runs the usual pattern with some minor factual variations, I believe it is important to begin with an analysis of the rival claims and the relief that each seeks. Rather than set out the prayers in full, I will summarise them, thus. Rajawadi seeks, first, a mandatory injunction directing Value Projects to deliver possession of the project site or plot along with the structures on it, whether complete or partially complete. It then seeks the appointment of a Receiver to take possession (a prayer added by amendment); a temporary restraint against the Developer from creating third party rights over the land and building; another restraint against the Developer from interfering with or obstructing the redevelopment process being taken up by the Society or from interfering with Rajawadi’s possession; and, finally, an order to deliver to the society the necessary documents regarding the redevelopment project. 3. The Developer’s Petition first seeks an order of status quo in regard to the Development Agreement as it stood prior to the termination notice of 13th December 2019; a restraint against the Society from appointing another developer; another restraint from creating third party rights; a restraint against the Society from taking steps to eject the Petitioner from the project; and a prayer for a bank guarantee of about Rs.20 crores to secure the Developer’s monetary claim. Page 4 of 55 15th March 2021 Rajawadi Arunodaya Coop Hsg Soc Ltd vs Value Projects Pvt Ltd 2-3-CARBPL74-20-J+.docx WWW.LIVELAW.IN 4. Before I proceed to the factual narrative and the legal questions that arise, I must record here that, although the Society’s Petition was filed in January 2020, much of that year was lost to an effective hearing on account of the pandemic. Hearings could not be regularly scheduled to ensure some continuity. Despite this, whenever possible, I took up the matter on several dates in an effort to bring both sides together to avoid precipitating a more protracted legal battle. I did this because there is a partially complete construction on site. The Society and its members have been out of possession and without their new homes for a long time (some members have possession of commercial units). Proceeding on its own or through a new developer is, I thought, very likely a complex and delicate business demanding a next level of civil engineering and construction skill. Plus, there were financial considerations on both sides. If, therefore, both sides could be brought together, the building completed, the Developer’s financial obligations under the contract met, and all this done in a stated time-frame under Consent Terms with a built-in default clause, then the needs of all sides could be met and litigation costs, time and trouble saved. To this end, I involved the Municipal Corporation of Greater Mumbai (“MCGM”) though not a party to the Society’s petition on the aspect of arrears of property tax. I asked Mr Shah for the Developer more than once to submit without prejudice proposals by which the various issues could be resolved. He has done this, identifying the various financial and development matters that need to be addressed. The most recent of these proposals was just a few days ago. None of these proposals has met with the Society’s approval. But this is not to suggest that the Society and its members have been unreasonable or that they are unjustified in declining to consider the proposals that come from the Page 5 of 55 15th March 2021 Rajawadi Arunodaya Coop Hsg Soc Ltd vs Value Projects Pvt Ltd 2-3-CARBPL74-20-J+.docx WWW.LIVELAW.IN Developer. There is, and now there is no doubt about it, an irreversible and irredeemable loss of confidence in the developer. To put at its most blunt, the Society simply does not trust this Developer one inch. It says through its Counsel, Mr Khandeparkar, that it has ample reasons for this distrust. Some of the considerations that must weigh with a Court of equity are well known, and I will return to these towards the end of this judgment. But, at this stage, it is simply not possible for any Court to compel one or the other side to accept any particular offer. While addressing his case, Mr Shah has fairly stated that his instructions are not to resist the Society’s application to be permitted to appoint another developer or to proceed with the redevelopment, but to submit instead that provision be made to safeguard the Developer’s rights emanating from the contract. He clarified this to mean that while the development may proceed by the Society through any other developer, and members may take possession of their common areas, amenities and individual apartments or commercial spaces if not already done, the free-sale components should be preserved so that no third party rights are created and are kept available as security for the claim that the Developer undoubtedly intends to make in arbitration. His instructions are to say that the Developer has spent between Rs.19 to 20 crores on the project. But this will not be the fullness of the claim. There will be a claim for loss of profit and possibly for damages. The expenditure by the Developer is not such that can be denied. Therefore, in his submission, some provision must be made to secure at least the return of the Developer’s investment in the project. After all, he submits, the Developer started work, and admittedly did a fair amount of it, but none of it was intended to be done gratuitously. Thus, whether one looks at the money claim of the Developer as Page 6 of 55 15th March 2021 Rajawadi Arunodaya Coop Hsg Soc Ltd vs Value Projects Pvt Ltd 2-3-CARBPL74-20-J+.docx WWW.LIVELAW.IN arising under the contract or even as a claim for quantum meruit, there can be no doubt that this claim must, in equity, be appropriately safeguarded. If this is not done, he submits, the Developer will be left with a paper award in arbitration and without any effective means of recovery. Section 9 requires an order to be both just and equitable. The requirement of equity, in Mr Shah’s formulation, is that the competing rights of both sides must be judiciously balanced so that one side is not left without any remedy or recourse in future at all. 5. I note this at the forefront because it considerably narrows the controversy to be decided. What needs to be seen is whether the Developer in this case or, for that matter, any developer in such a case, can demand security for what is essentially a claim in restitution or damages or both.