M/s Bhavsar Construction Co. Pvt. Ltd. v. M/s Oyster Shipmanagement Private Limited

2. The said Suit has been filed by Respondent/Plaintiffs inter alia seeking a declaration that they are the purchasers of certain units in a proposed commercial building complex known as “Sharda Complex”, to be built on land bearing Survey No.41part (1)(B), CTS No.444, 444/1, 444/2 and 445 situated at Swami Vivekanand Road, Village Oshiwara, Jogeshwari, Mumbai 400 102 (“the said plot”). The Respondent/Plaintiffs have based their claim inter alia on certain Letters of Allotment (“LOAs”) issued to them by the Appellants. It is not in dispute that the Appellants subsequent to issuing the said Letters of Allotment had also entered into development agreements initially with Respondent Nos.36 to 39 and thereafter a Joint Venture Agreement (“JVA”) dated 10th May 2001 with the Respondent/ Developers by and under which the Respondent/Developers were to construct upon the said plot and deliver possession of the various units in respect of which the LOAs were issued by the Appellants. Since despite the passage of considerable time, the Respondent/Plaintiffs did not receive their units, they filed the captioned Suit against inter alia the Appellants, Respondent Nos.36 to 39 and the Respondent/Developers collectively in their capacity as Promoters under the provisions of the Maharashtra Ownership of Flats Act, 1963 (“MOFA”) and accordingly sought the discharge of their obligations as Promoters. During the course of the said Suit, the Respondent/ Plaintiffs had taken out a Notice of Motion in which the Court Receiver, High Court, Bombay came to be appointed as Receiver in respect of the said plot as also to remove certain encroachment on the said plot. It is not in dispute that by an order dated 22nd March 2001 passed by the competent authority under the provisions of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (“SAFEMA”), the said plot was infact stood forfeited in favour of the Central Government. The said order was challenged by the affected parties before the Appellate Tribunal, which inter alia remanded the matter back to the competent authority under SAFEMA. By the order of the competent authority dated 10th October 2018, possession of the said plot was restored to the Respondent/Developers and only the interests of the Appellants under the said JVA stood forfeited. It is in this backdrop that the Respondent/Plaintiffs and the Respondent/Developers have entered into the said Consent Terms.

3. Mr. Chinoy, Learned Senior Counsel appearing on behalf of the Appellants at the outset submitted that the very basis of the claim of the Respondent/Plaintiffs in the said Suit was misconceived, since the same was admittedly based only upon LOAs and not any Agreement/s, much less registered agreements under the provisions of MOFA. He submitted that it was well settled that mere LOAs would not confer any right upon the Respondent/Plaintiffs under the provisions of MOFA. He then submitted that in any event, the Appellants were disputing the said LOAs and therefore the question of the Respondent/ Plaintiffs making any claim on the basis of the said LOAs did not arise.

4. Mr. Chinoy then submitted that the Appellants had terminated the JVA, basis which the Respondent/Developers were claiming the right to develop the said plot and deliver the various units to the Respondent/Plaintiffs on the basis the various LOAs issued by the Appellants. In support of his contention, he placed reliance upon a public notice dated 7th July 2012 and pointed out that by the same, the public at large were clearly informed “that no one should deal with said M/s Shree Sai Developers, M/s Royal Developers and M/s Tanna Construction Co. and/or its partners named above, in respect of under mentioned schedule property”. Basis this, he submitted that there was no question of the Respondent/Developers now carrying out any construction on the said plot of land absent the consent of the Appellants.

5. Mr. Chinoy then submitted that what was being attempted by the Respondent/Plaintiffs and the Respondent/ Developers by the said Consent Terms was to get the imprimatur of the Court on something which was otherwise impermissible. He submitted that if the Respondent/Developers could legally construct upon the said plot, there was no need for the said Consent Terms. He pointed out that it was only because the Respondent/Developers and the Respondent/Plaintiffs were well aware that they could not construct on the basis of the documents executed, they had sought to enter into the Consent Terms. He submitted that the object of entering into the said Consent Terms was only to obtain the requisite permissions which otherwise would not be made available to the Respondent/Developers absent the consent of the Appellants. He thus submitted that what the Respondent/Plaintiffs and the Respondent/Developers were by virtue of the Consent Terms seeking was a declaration that the Respondent/Developers had a right to build upon the said plot, which he submitted could never have been granted absent the Appellants’ consent. In support of his contention, he placed reliance upon clause 14 of the Consent Terms which recorded that the Appellants were entitled to undertake the development of the said plot. Basis this, he submitted that there was no manner of doubt that the Consent Terms were being entered into only to vest the Respondent/Developers to do what was otherwise impermissible.

6. Mr. Chinoy then pointed out that even on the assumption that the said JVA was valid, the same contemplated that the Appellants were to get 13500 sq. ft. super built up area thereunder. He also pointed out that the same was entered into in the year 2001 and there had since been a huge rise in the permissible FSI etc. and thus the considerations which applied in 2001, would not be applicable now.

7. Mr. Chinoy then submitted that the Appellants had filed an Appeal against the order dated 22nd March 2001 passed in proceedings taken against the Appellants under the provisions of the SAFEMA, by which the Appellants’ leasehold rights in the said land came to be forfeited. He submitted that in the event the Appellants were to succeed in the Appeal, all the rights of the Appellants in the said plot would stand restored and if the Respondent/Developers were permitted to build upon the said plot in the interregnum, the same would directly prejudice and/or defeat the rights of the Appellants.

8. Per contra, Mr. Kamat, Learned Senior Counsel appearing on behalf of the Respondent/Plaintiffs submitted that the Consent Terms did not in any manner affect the Appellants. He pointed out that the Appellants had not even filed a Written Statement to oppose the said Suit, despite the passage of over fourteen years. He then submitted that the Appellants had infact in an Affidavit filed in the course of the hearing of the said Suit, specifically admitted the rights of the Respondent/Plaintiffs under the said LOAs. He therefore submitted that the question of the Appellants now opposing the Consent Terms and/or denying the said LOAs did not arise.

9. Mr. Kamat then submitted that the Appellants did not have even the slightest semblance of a right in the said plot. He pointed out that by virtue of the JVA the Appellants had not only given up all their rights in the said plot, save and except to be entitled to a super built up area of 13500 sq. ft., but had also parted with possession of the said plot. He submitted that had it not been for the JVA, infact the entire plot would have stood forfeited. He thus submitted that it was not open to the Appellants to today claim any right whatsoever in the said plot. He pointed out that on the date when the Impugned Order was passed, the Appeal which had been filed by the Appellants before the Appellate Tribunal under SAFEMA had also been dismissed for default. He thus submitted that there was absolutely no merit in the claim of the Appellants or even the slightest sincerity in their conduct to support such a claim.

10. Mr. Kamat then in dealing with the contention that the Appellants had terminated the said JVA pointed out that the public notice upon which reliance was placed by the Appellants infact made no mention of any termination of the said JVA. He pointed out from the public notice that (i) the Appellants had terminated a previous agreement entered into with Respondent Nos.36 to 39 and not the JVA entered into with the Respondent/Developers and (ii) the public notice merely cautioned the public at large not to deal exclusively with the Respondent/Developers and nothing more. He thus submitted that the Appellants’ contention that the said JVA had been terminated was ex facie untenable.

11. He then invited our attention to various letters addressed by the Appellants to Respondent No.43 i.e. partner of Respondent/Developers in which the Appellants had specifically recognized the rights of the Respondent/Plaintiffs under the said LOAs and infact called upon the Respondent/Developers to protect the same. Basis this, he submitted that the question of the Appellants now, for the first time disputing and/or denying the rights of the Respondent/Plaintiffs did not arise.

12. Mr. Jagtiani, Learned Senior Counsel appearing on behalf of the Respondent/Developers adopted the submissions made on behalf of the Respondent/Plaintiffs. He reiterated that the JVA dated 10th May 2001 entered into between the Appellants and the Respondent/Developers had never been terminated. In addition, to point out that the public notice dated 7th July 2012 made absolutely no mention of any such termination, he submitted no termination letter had ever been issued by the Appellants to the Respondent/Developers which would naturally be a step which would precede the issuance of a public notice. He thus submitted that the said JVA was therefore very much valid and subsisting. Mr. Jagtiani then pointed out that it was not in dispute that possession of the said plot was in the possession of the Respondent/Developers as evidenced by the order dated 10th October 2018 passed by the Competent Authority under SAFEMA. He submitted that had there infact been any termination of the JVA, the Appellants would have taken steps to recover possession of the said plot from the Respondent/Developers, which the Appellants had admittedly not taken. He thus submitted that the Appellants’ contention that the said JVA stood terminated apart from being plainly misconceived was also false to the Appellants’ knowledge.

13. Mr. Jagtiani then submitted that essence of the Appellants' contentions was that the Consent Terms affected the Appellants property rights in view of the termination of the said JVA. He pointed out that this was a dispute inter se Defendants to the said Suit and therefore not one which could have been determined in the preset Suit. He submitted that if the Appellants in any manner apprehended that their property rights were in any manner in jeopardy, it was always open to the Appellants to take recourse to appropriate legal action, which was precisely what the Learned Judge had held while disposing of the said Suit in terms of the said Consent Terms. He however submitted that the Appellants could not have any grievance to the Respondent/Plaintiffs and the Respondent/Developers in settling the said Suit on the basis of the said Consent Terms.

14. Mr. Jagtiani then submitted that the Appellants would still be liable under the terms of the said JVA. He thus submitted that the Appellants’ apprehension of their rights being defeated and/or affected did not in any manner arise. He then reiterated that in any view, any inter se dispute between the Appellants and the Respondent/Developers qua rights following from the said JVA were inter se dispute between the Defendants in the said Suit. Mr. Jagtiani clarified that the Appellants’ apprehension of any misuse of the Impugned Order and/or Consent Terms did not arise as the Respondent/Developers would have to still comply with the law to carry out construction. He also clarified that no construction would be carried out through the Receiver, but that the Receiver’s appointment would only be to ensure there is no encroachment on the said plot and only to remove the existing encroachments. He submitted that this could in no manner affect the Appellants.

15. Mr. Dedhia, Learned Counsel appearing on behalf of Respondent Nos.36 to 38 (M/s. Shree Sai Developers), with whom the Appellants had initially entered into a Development Agreement, also supported the arguments of the Appellants. The Learned Counsel submitted that Respondent Nos.36 to 39 had filed their independent Appeal, in which they had also challenged the Impugned Order essentially on the ground that the Consent Terms would affect the rights of Respondent Nos.36 to 39. Essentially the submission was that Respondent Nos.36 to 39 had rights in respect of the said plot based on the said Agreement, which was entered into with the Appellants prior to the JVA. It was thus he submitted that the present Appeal deserves to be allowed.

16. We have heard Learned Counsel for the parties and we find no infirmity with the Impugned Order and we find that the Appeal deserves to be dismissed for the following reasons, viz.