Sai Chintan C.H.S.LTD. v. The State of Maharashtra

4. The Petitioners stated that they submitted plans for the redevelopment of a residential building through a new Architect under Regulation 33 (7) (B) and applied for approval of the plans and IOD. The Petitioner Society applied for a separate redevelopment proposal to the Respondent Corporation without using the benefits granted to the previous developer. The Respondent Corporation issued a CFO NOC on 7.4.2021 to the new Architect for the fire fighting and fire protection system for the proposed construction on the property.

5. The Petitioner Society requested a change of developer and Architect, and also sought approval for new plans without taking the benefits granted to the erstwhile Architect/Developer. The Petitioner Society was willing to provide an undertaking to indemnify the MCGM. As a result, on 12.4.2021, the fourth Respondent requested remarks from the Law Officer under a detailed note, the relevant paragraph of which is as under: “In view of the above Dy.Law Officers remarks are requested whether this office can process proposal in name of Society as Applicant in absence of registered deed of cancellation of Development Agreement and Power of Attorney granted of M/s Zenal Const. Pvt. Ltd. with Society without giving advantages of various payments paid by M/s Zenal Const. Pvt. Ltd. And accepts the Supervision Memo of newly appointed Architect Shri Premal Gogri in absence of resignation letter from previous Architect subject to Indemnity Bond indemnifying MCGM and its staff.”

6. Accordingly, the Deputy Law Officer provided his opinion on the matter by a letter dated 26.4.2021. The relevant paragraph of the opinion reads thus: “In the circumstances, the Society is entitled to apply for development of the subject property in its own name and to appoint its own Architect for the same and the MCGM (BP) can process such application without the registered Deed of Cancellation and without the resignation letter of the previous Architect i.e. V.V. Joshi and Associates. However, as is recorded in the letter dated 27th March 2021 of the Society, a registered undertaking should be obtained from the Society inter alia that it shall not seek any advantage in respect of any amounts paid by Zenal Construction Pvt. Ltd. for and in connection with the development of the subject property and further Society shall indemnify the MCGM and its staff in connection with any disputes and/or claims between the Society and Zenal Construction Pvt. Ltd. and/or on any account whatsoever.”

7. The Petitioners complained that despite adhering to the Law Officer’s advice and submitting an undertaking, and even though the proposal was accepted in the name of the second Petitioner and the Architect was changed, their file was not processed. Instead, it was sent to a new Law Officer for his opinion.

8. It is the grievance of the Petitioners that on 25.03.2022, the new Law Officer, who was influenced and pressured by the Officers of Respondent Corporation and ‘Zenal’, provided an opinion that contradicted and was in stark contrast to the opinion of the previous Law Officer. This new opinion stated that the Society had not followed the legal procedure when it terminated the Deed of Agreement and that Society should have obtained appropriate orders from a competent authority before taking any further action. The opinion reads thus: “ This has reference to the note of E.E.(B.P.) (W.S.)K’ Ward dated 01.02.2022 at page no.N-11 to N-12, thereby forwarded the file papers and Law Officer is requested to offer remarks and further directions to whether the office of E.E.(B.P.)(W.S.)’K’ Ward can proceed with further approvals in the circumstances as mentioned therein. On perusal of your note under reference it is seen that, by the detail note of E.E.(B.P.)(W.S.)’K’ Ward under no.Dy.Ch.Eng.(B.P.)/022/W.S.-I dated 12.04.2021 alongwith the relevant documents as submitted by the Secretary on behalf of M/s Sai Chintan CHS, the opinion of Law Officer was sought for changing the name of the applicant and change of Architect on record in absence of registered Deed of Cancellation of M/s.Zenal Construction Pvt. Ltd. with the society and in absence of registration from previous Architect. seen that, the then Law Officer vide note under no.LO/LOP/1159/Law Officer, dated 26.04.2021, had opined that, “The Society is entitles to apply for development of property in its own name and appoint its own Architect for the same and the Building Proposal department can process this application without registered deed of cancellation and without resignation of letter of previous Architect i.e. V.V.Joshi & Associates. It is further opined that, however, as recorded in the letter dated 27th March 2021 of the society, a registered undertaking should be obtained from the society inter alia that it shall not take any advantage of any amount paid by Zenal Construction Pvt. Ltd. for & in connection with the development of the subject property & further shall indemnify MCGM and its staff for any dispute and/or claim between Society & Zenal Construction Pvt. Ltd. and/or any account what so ever.” seen that, accordingly the office of E.E.(B.P.)(W.S.)’K’ Ward has accepted application of change of Applicant and change of Architect and same was updated on Auto DCR system, on submission of RUT and indemnity bond as mentioned by Law Officer. seen that thereafter a letter was received from Zenal Construction Pvt. Ltd. through their Advocate Jeet Gandhi dated 07.04.2021 which states that as per letter from Developer there is a No termination clause (clause 16) in Registered Development Agreement with society. Its further seen that, the file papers were thereafter once again referred to the then Law Officer for revised remarks in lieu of the said letter by the office of E.E.(B.P.)(W.S.)’K’ Ward under no.Dy.Ch.Eng.(B.P.)/2893-2894/WS(I) dated 11.08.2021 and the then Law Officer referred back the file papers to offer remarks on the said letter of Adv. Jeet Gandhi. It further seen that, the office of E.E. (B.P.)(W.S.)‘K’ Ward requires concurrence of Law department on the given approval of change of developer and Architect with respect to letter received from M/s. Zenal Construction Pvt. Ltd. through their Advocate Jeet Gandhi. seen that, the proposal for approval of concession was submitted by Architect however same was rejected by the office of E.E.(B.P.)(W.S.)'K' Ward. Its further seen that, Society wide their letter dated 07.12.2021 has submitted requested letter to process the proposal along with the copy of order dated 04.10.2021 passed by HH AD-HOC CITY CIVIL JUDGE in Notice of Motion No.1824 of 2021 in S.C.Suit No.1780 of 2021 filed by Zenal Constructions Pvt. Ltd. wherein MCGM is also party as defendant No.1 and 2 in the said suit. Its further seen that, M/s. Zenal Construction has also filed Arbitration application no.9982/21 before Hon'ble High Court. It is seen from the copy of Development Agreement dated 22.12.2009 that, the said Development Agreement dated 22.12.2009 executed between Sai Chintan Co-Operative Housing Society Limited, a Society registered under the Maharashtra Co-operative Societies Act, 1960, therein referred to as the “Society” of the One Part AND M/s. Zenal Construction Pvt. Ltd., a company duly registered under the Indian Companies Act, 1956, therein referred to as the “Developer” of the Other Part: By the said Development Agreement, the Society therein has granted the exclusive development rights in favour of the Developer therein in respect of all that piece and parcel of land bearing Plot No.56, TPS II, adm.about 1956 sq.yards equivalent to 1568.643 sq.mtrs. or thereabouts along with the building known as “Sai Chintan” standing thereon and more particularly described in the First Schedule thereunder written, for the consideration and on the terms and conditions mentioned therein. The said Development Agreement dated 22.12.2009 duly registered with the office of Sub-Registrar of Assurances at Andheri No.2 under sr.no.BDR- 4/11968/2009 dated 24.12.2009. The copy of the said Development Agreement dated 22.12.2009 seen at page no. C/7 to C/76. In view of the above, it appears that Sai Chintan Co-Operative Housing Society Limited, has granted the exclusive development rights in favour M/s. Zenal Construction Pvt. Ltd. by registered Development Agreement dated 22.12.2009. Furthermore due to termination of the Development Agreement dated 22.12.2009 by the Society on 10.08.2020, M/s. Zenal Construction Pvt. Ltd. has filed Arbitration Application (L) No.9982 of 2021 before Hon'ble High Court of Bombay and the same is pending. In view of the above, the undersigned is of the opinion that, the Society has not followed the procedure let down in the law, while terminating the Development Agreement dated 22.12.2009 which is duly registered with the office of Sub-Registrar of Assurances at Andheri No.2 under sr.no.BDR- 4/11968/2009 dated 24.12.2009. Hence, it is advisable to call upon the Society to get the appropriate orders from the competent authority, before processing further.” (sic)

9. The Respondents have not bothered to file their reply affidavit. This Court permitted the intervenor to join as a party intervenor but only with the right to be heard and without the right to file written submissions. The necessary amendment was permitted accordingly.

10. We have heard Mr Sanjay Jain, learned Counsel for the Petitioners; Mr Himanshu Takke learned AGP for Respondent State; Ms Vandana Mahadik, learned Counsel for the Respondent MCGM and Mr Gauraj Shah for the Intervenor and perused the materials on record.

11. Mr Sanjay Jain, learned Counsel for the Petitioners, submitted that the first Petitioner had appointed ‘Zenal’ to redevelop the property by executing a Development Agreement. The Developer was required to pay compensation to the members of the Petitioner Society to enable them to vacate, as per the relevant clauses. This compensation was to be paid upon obtaining the IOD, and the members were to give possession to the Developer for demolition within 45 days of receipt of the IOD. However, the Developer never paid the compensation.

12. Mr Jain further submitted that the Development Agreement specified that the Developer would complete the development within 24 months of receipt of the Commencement Certificate, which could only be issued after the old building was demolished. Since the Developer never paid for vacating, and did not demolish the building, they could not obtain the Commencement Certificate.

13. Mr Jain would submit that after providing the Developer several opportunities to rectify their actions, the Petitioner terminated the Development Agreement and Power of Attorney for breach of contract, detailing the breaches committed by ‘Zenal’. The Petitioner issued a public notice announcing the termination of the development agreement with ‘Zenal’ and appointed a new Developer after following a fresh process as required by law. The new Architect then submitted the applications to various departments to commence the development process of the property.

14. It is submitted that the Law Officer of Respondent Corporation initially stated that the appointment of a new Architect was appropriate and should be accepted and that there was no need for a registered Deed of Cancellation of the Development Agreement with ‘Zenal’. Accordingly, the new Architect’s appointment was accepted and reflected on the Respondent Corporation’s “AutoDCR” web portal, where the new Architect was shown as the project’s Architect. The Chief Fire Officer issued a ‘No Objection’ Certificate for the development of the property.

15. Mr Jain argues that the earlier Developer, however, filed a suit in the City Civil Court seeking interim relief to prevent Respondent Corporation and its Officers from processing any applications filed on behalf of the Petitioner through the new Architect. The application for interim relief was rejected. In paragraph 13 of the order, the Respondent Corporation’s arguments were recorded, including that the Respondent Corporation is not concerned with title disputes and will accept applications from the owner. It is also noted that the old Architect, who was terminated, has not challenged the termination. Despite these events, a fresh reference was made to the Law Officer for his opinion, which is a source of grievance for the Petitioner.

16. According to learned Counsel, the Corporation cannot go into the question of entitlement of the petitioner society. Moreover, there was no cause or occasion for this new reference as the change in Architect had already been accepted. Administrative decisions cannot be overturned simply because a new Officer has taken charge. The impugned opinion does not explain or disagree with the first opinion and makes no reference to any law requiring a Deed of Cancellation. No explanation was given for ignoring the order of the City Civil Court or the Respondent Corporation’s position therein.

17. In support of his contentions he relied on the documents such as the development agreement dated 22.12.2009, Public Caution notice, interim order in Civil Suit bearing S.C.Suit No.1780 of 2021, and a copy of the application filed u/s 11 of the Arbitration and Conciliation Act, 1996, and a copy of letter dated 10.08.2020 addressed by the first Petitioner to ‘Zenal’, and the decisions in i) Sushil Kumar Agarwal Vs. Meenakshi Sadhu & Ors.1; ii) Shree Sai Reality through Partner Shri Sandeep Dindyal Aagarval & Ors. Vs. State of Maharashtra and Ors.2; iii) Rajawadi Arunodaya Co-op. Hsg. Soc. Ltd. Vs. Value Projects Pvt. Ltd.,[3] iv) M/s Srushti Raj Enterprises (India) Ltd. Vs. Tilak Safalya Cooperative Housing Societies Ltd.[4]

18. On the other hand, Mr Gauraj Shah, the learned Counsel for the Intervenor, submitted that the Development Agreement is a comprehensive document that protects the interest of the Developer. According to him, the Petitioner Society could not unilaterally terminate the agreement since ‘Zenal’ had already created third-party rights by selling the free sale components. Such a document cannot be unilaterally cancelled by one party. He submitted that unilateral termination does not mean that the Society is now entitled on its own and retains all the benefits. According to the learned Counsel, Clause 16, in unequivocal terms 1 (2019)2 SCC 241.

19. It is submitted that ‘Zenal’ paid a premium to the Respondent Corporation to obtain and load an additional 33% of FSI. Despite repeated requests, the members of the Society did not vacate the premises. ‘Zenal’ sold, transferred and allotted sale flats to various prospective buyers, as authorised by the Respondent Society. However, sudden changes in regulations and the imposition of a lockdown in 2020 prevented ‘Zenal’ from completing the project as per the development agreement. To fulfil the conditions of the development agreement ‘Zenal’ added a financial partner and entered into a joint venture agreement. The Arbitration Application No.9982 of 2021 is currently pending before this Court.

20. Mr Shah pointed out the Law Officer’s impugned opinion dated 25.03.2022, stating that the Respondent Society did not follow the legal procedure when terminating the deed of agreement and advised them to obtain appropriate orders from a competent authority. According to learned Counsel, there is no stand-alone or distinct unilateral termination clause in the development agreement and no perversity is seen from the impugned opinion and the action based on it. Mr Shah contended that in the present case, the termination of the contract was unilateral, and the Respondent Society cannot retain the benefits that it had received. Mr Shah also relied upon the Judgment of the Telangana High Court in P. Venkata Ravi Kishore & Ors. Vs. JMR Developers Pvt. Ltd & Ors.[5]

21. In the present petition, the record bears out that the development agreement was executed between the Petitioner Society and ‘Zenal’ on 22.12.2009. The agreement is a registered document and inter alia provides for reference of disputes to arbitration, contents of which are reproduced below for ease of reference. “All disputes and differences between the parties hereto in connection with this agreement including the interpretation of any term or condition hereof either during the subsistence of this agreement or subsequent thereto shall be referred to arbitration of three arbitrator, one to be appointed by Society jointly with members and one to be appointed by developer and the arbitrators so appointed shall appoint a third Arbitrator who shall act as the presiding Arbitrator. The Arbitration shall be governed by the provisions of the Arbitration and Conciliation Act, 1996 or its statutory modifications for the time being in force. The Arbitration shall always be held in Mumbai and the Courts of Mumbai shall alone have jurisdiction in the matter.”

22. Having bestowed due consideration to the rival claims, it is 5 2022 (5)ALT 382. noticed that this Court is called upon to rule on the issue of unilateral termination of the development agreement and its validity or otherwise.

23. In the instant case, the Application for appointment of Arbitrator u/s 11 of the Arbitration and Conciliation Act, 1996, filed by ‘Zenal’ is pending consideration before this Court, and if the application is granted and Arbitrator is appointed, the learned Arbitrator may find it difficult to exercise his discretion and decide the question regarding the validity or otherwise of the unilateral termination of the development agreement independently, if any finding on the said issue is recorded by this Court. Even otherwise, the said issue pertains to contractual obligations, the remedy for resolution of which lies elsewhere.

24. As stated already, the earlier developer will not be left remedy-less if the said question or issue is not decided here, and he would have an effective remedy to seek redressal of his grievance arising from the same before the appropriate civil forum. That apart, the said issue, in our opinion, is infact not relevant for deciding the real question involved in the Petition.

25. We may note here that the issue involved here is about the right of the owners to develop the property, which is entirely different from the reciprocal rights of the parties arising from inter se contractual obligations. While the rights and obligations under the contract between the parties could be decided by a competent Court, a separate and independent right of one of the parties to the contract to develop his property the way he wants to, subject to the framework of law, cannot be postponed or allowed to be frustrated. For breach of terms and conditions of the contract, there is a separate remedy available, and it can be resorted to by an aggrieved party, but the aggrieved party cannot obstruct the right of the owner of the property to develop his property only because the separate remedy available to him is yet to fructify for him. That separate remedy could be in the nature of damages and seeking indemnity and something more in a given case but could not be in the nature of forcing his entry in a process where the owner is making an attempt to exercise his right in developing the property. If there is an unlawful termination of the development agreement, there would be a case, if made out, for damages, recovery of cost, expenses, seeking indemnity, interest and so on and so forth as, generally speaking, a breach of a development agreement would cause loss, which in the ordinary course of circumstances could not be stated to be irreparable, though exceptions in some cases could be there. For these reasons, we refrain from recording our observations and finding on the said issue, relating to validity of termination of development agreement or otherwise.

26. Now, we would deal with the main issue involved in this Petition which is about the right of the owner to develop the property, as per law.

27. The Petitioner Society is the owner of the property and has the authority to decide how to use their legal ownership rights. In case the Society’s redevelopment project does not go as planned, it has the option to undertake the development on its own or through a Developer of its choice. To contest this, a Developer must provide clear and direct evidence that Society is at fault, rather than relying on indirect or conjectural means. The only scenario in which a Developer may be eligible for relief is if he can prove that he has followed all the rules and regulations and is not at fault. If the Arbitrator is appointed, he would evaluate the various alleged violations, the provisions of the development agreement, the behaviour and rights of the parties involved, including the third party flat purchasers privity of contract with Society and the legitimacy of the unilateral termination.

28. As noted above, the approval of the new plans was sought without taking advantage of the benefit granted to ‘Zenal’. Furthermore, the petitioner society was willing to give an undertaking to indemnify the respondent corporation. The corporation never raised any objections to the society entering into an agreement with petitioner No.2. In a civil suit, the respondent corporation took the stand that it had no concern with the title dispute. Initially, the law officer stated that the appointment of a new Architect was appropriate and should be accepted, and that there was no need for a registered deed of cancellation of the development agreement with ‘Zenal’. Consequently, the new Architect’s appointment was accepted and reflected in the corporation’s ‘Auto DCR’ web portal, where the new Architect was shown as the project’s Architect. Additionally, the chief fire officer issued a ‘no objection’ certificate for the development of the property.

29. In view of this, we are of the opinion that the Petitioner Society is certainly entitled to attempt and complete the project by appointing another developer, and if the project is terminated, they can claim damages. However, we cannot grant the relief sought by the petitioners in prayer clause (a) of this petition as this Court cannot quash the expert’s opinion.

30. As a result, the writ petition is allowed in terms of prayer clause (c) of this petition, and the rule is made absolute in the above terms. The arbitration proceedings and the aforesaid civil suit will undoubtedly be considered on its own merits and in accordance with the law. The pending interim application also stands disposed of. In the circumstances, there shall be no order for costs. [ R.N.Laddha, J.] [ Sunil B. Shukre, J. ]