REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 11093 OF 2017

(Arising out of Special Leave Petition (Civil) No.18912 of 2017)

Yusuf Khan @ Dilip Kumar

Through Power of Attorney … Appellant

Versus

Prajita Developers Pvt. Ltd. & Another … Respondents

WITH

M.A. NO.629 OF 2017 IN

SLP (CIVIL) NO.7483-7484 OF 2016

J U D G M E N T

Chelameswar, J.

1.Leave granted in Special Leave Petition (Civil) No.18912

of 2017.

2.The appellant aged about 95 years is also the applicant

in Interlocutory Application No.75003 of 2017 in

Miscellaneous Application No.629 of 2017

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filed in SLP(C)

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Prayer: It is, therefore, most respectfully prayed that this Hon’ble Court may be pleased to:

a. That pending the special leave petition, the Respondent No.1 by themselves, their

servants, agents and/or otherwise howsoever, be ordered and directed to forthwith remove the

security guards posted by them on the said property and to permit the petitioner to freely enter

upon the said property as and when desired by the Petitioner and Respondent No.2;

Nos.7483-7484/2016 filed by the 1

st

respondent herein, which

stood dismissed by an order of this court dated 16.03.2016.

For the sake of convenience, he is referred to hereafter as the

appellant.

3.The appellant owns landed property admeasuring 2412

sq. yards in Plot No.16 of Pali Hill in the village of Dand,

Bandra in the city of Bombay, now called Mumbai.

4.The appellant entered into an agreement dated 23.6.2006

(hereafter referred to as AGREEMENT) with two companies

namely M/s Sharyans Resources Private Limited (hereinafter

referred to as “SHARYANS”) and the 2

nd

respondent herein,

Goldbeam Construction Private Limited, both companies

incorporated under the Companies Act, 1956 (hereafter

collectively referred to as DEVELOPERS).

5.The substance of the AGREEMENT is that the appellant

agreed to “grant to the DEVELOPERS the right to develop the said

b. That pending the special leave petition, the Respondent No.1 by themselves, their

servants, agents and/or otherwise howsoever, be permanently restrained form entering upon or

remaining on or using or occupying the said property.

c. That pending the special leave petition, the Court Receiver, High Court, Bombay or some

other fit or proper person be appointed receiver in respect of the said property, with all power

under Order XL Rule 1 of the Code of Civil Procedure, 1908, including the power to remove the

security guards, agents, servants of the Respondent No.1 from the said property, with the help of

police, if necessary; and

d. Pass such further and other orders and/or directions as may be deemed fit and property by

this Hon’ble Court in the facts and circumstances of the case and in the interest of justice.

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property” and the DEVELOPERS agreed to develop the property

on various terms and conditions specified under the

AGREEMENT. It appears from the record that there is some

single venture partnership agreement between the two

companies (DEVELOPERS). From the huge mass of documents

filed in these appeals, it appears that there are two documents

witnessing such partnership agreement. They are dated

16.6.2006 and 10.12.2008. The language and content of both

the documents is substantially similar and an interesting fact

which is required to be taken note of is that the 16

th

June

2006 document refers to the AGREEMENT dated 23.6.2006.

The complete details of the terms and conditions of the

AGREEMENT are not necessary for the purpose of this appeal.

For the present, it must be noted that under the

AGREEMENT, the DEVELOPERS agreed to an amount of

Rs.10 crores in three installments as detailed in the

AGREEMENT. It is agreed under clause 4 of the AGREEMENT

that “the owner shall permit the DEVELOPERS to enter upon

the said property and to commence the development

thereof….” It is agreed under clause 6 that all the necessary

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permissions/NOCs/orders which are required to be obtained

shall be obtained by the DEVELOPERS. The appellant is

obliged to cooperate by executing appropriate documents for

the said purpose. Under Clause 17

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of the AGREEMENT, it is

stipulated that the “DEVELOPERS shall have the license to

enter upon the said property”.

6.Under Clause 31

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of the AGREEMENT, it is provided that

the DEVELOPERS shall commence development of the said

property and the construction of the building thereof within 30

days from the date of the final amended building plan and

complete the construction within a period of 24 months from

the date of issue of the commencement certificate.

7.The various legal consequences that would flow from the

failure on the part of the DEVELOPERS to discharge the

obligations under the AGREEMENT are provided under Clause

32 of the AGREEMENT. The crux of the Clause 32

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is that in

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Clause 17. Upon payment of the balance of monetary consideration by the Developers to the

Owners as provided in Clause 3(b) the Owner shall permit and the Developers shall have the license to

enter upon the said Property to develop the said Property to carry on construction on the said property and

for that purpose to do all acts, deeds, matters and things as may be necessary.

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Clause 31. The Developers shall commence the development of the said property and

construction of buildings thereon within thirty days from the date of sanction of the final amended building

plans and complete the development and construction of all buildings in all respects as provided herein and

make the buildings fit and ready for occupation and the Developers shall apply for issue of Building

Completion Certificate and pending the issue thereof for issue of Occupancy Certificate of each of the

buildings within a period of 24 months from the date of issue of commencement certificate of development.

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Clause 32(A)(a). If the Developers failed to complete within the item stipulated hereinabove the

construction of the Owner’s lot of premises in any building under construction, the Owner shall be entitled

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the event of the DEVELOPERS not performing their part of the

obligations of completing the construction within the period

stipulated in the AGREEMENT, the appellant is entitled to get

the construction completed at the cost of the DEVELOPERS.

Parties also agreed that such cost be determined by an

independent architect of the appellant’s choice. Once the cost

is determined the appellant is entitled to call upon the

DEVELOPERS to deposit such cost with the appellant’s

advocates and solicitors within a period of three months from

the date of receipt of intimation of the cost. If the

DEVELOPERS make such a deposit, the appellant is entitled

to have the construction completed through “ independent

contractors” “at the risk and cost of the DEVELOPERS”. In the event

of the DEVELOPERS failing to make such a deposit, the owner

is entitled to terminate the AGREEMENT.

to get the cost of completion of the alliance work of construction of such entire building including the

Developer’s Lot of premises determined by an independent Architect and thereafter the owner shall

intimate to the Developers the estimated cost so determined by such independent Architect for completing

the construction of such entire building as aforesaid.

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8.By clause 33

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of the AGREEMENT, the parties agreed

that any dispute arising out of the breach of any one of the

various clauses enumerated thereunder shall be resolved by

arbitration. It is further provided that any dispute arising out

of the termination of the AGREEMENT invoking Clause 32(A),

shall not be the subject matter of any arbitration.

9.M/s Prajita Developers Private Limited, the petitioner in

the disposed of SLP(C) Nos.7483-7484/2016 and the 1

st

respondent in the present appeal (hereafter PRAJITA) claims to

be the assignee of M/s Sharyans Resources Private Limited.

The terms of the assignment are said to be evidenced by the

document “Deed of Assignment” dated 20.4.2010 confirmed by

the appellant and the 2

nd

respondent.

10.A number of complicated arrangements were entered into

in different combinations at different points of time between

the appellant, the DEVELOPERS and some third parties to the

AGREEMENT, who are otherwise said to be related to the

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Clause 33. The provisions contained in Clauses 1A, 2, 7, 8, 12, 13(A), 8c(B), 16, 17, 18, 20, 21,

23, 24(a) to (c) 25, 26, 27, 28, 29, 31, 32(A)(B), 34, 35, 35(B), 8c 37 hereof the basic and essential terms of

this Agreement and in case of any breach of the same it shall be referred to Arbitration as provided in

Clause No.40 before termination of this Agreement on account of such breach. The termination on

account of breach of this Development Agreement as provided under Clause 32(A) above shall not be

the subject matter of any arbitration as aforesaid and the parties will be entitled to exercise their

respective rights under the said Clause 32(A) above.

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appellant, the details of which we do not propose to mention in

this order.

11.The first respondent filed an application (No.829 of 2015)

under Section 9 of the Arbitration & Conciliation Act, 1996

(hereafter referred to as ARBITRATION ACT) for an injunction

restraining appellant from dispossessing respondent no.1 and

also an injunction restraining the appellant from creating any

third party right, title or interest in the said property.

Initially some ad-interim orders were passed in the said

application, but the application itself was eventually dismissed

on 14.01.2016.

12.PRAJITA carried the matter in an intra-court appeal

(No.74/2016) which also came to be dismissed by a judgment

dated 04.03.2016. It is recorded therein;

“Para 7 … Admittedly, as per the agreement, the

development was supposed to commence within 30 days and

should be completed within a time period of 12 months from

the date of IOD/Commencement Certificate. The plans

were approved on 2 January 2008 and CC was obtained

22 September 2008. No steps to initiate even

construction were taken. Admittedly the development of

the remaining was not completed before September 2011 –

even the foundation was not laid, except some piling work

with two columns. The position remained same till the

year 2013-2014. The said position of 2013 and 2014 still

remained same till this date. In the background, such

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construction/development contract so entered into by

Respondent No.1/owner to develop his property as a owner

within his lifetime considering his age. The agreement

clause itself shows that time was an essence of the contract

to complete the development so that all the parties including

the Appellants/Petitioners would get his 25% share after

completion of the construction at this costs. The

Appellants/Petitioners entitlement was only after completion

of the development. The remaining 25% was admittedly of

Gold Beam. In the remaining 50% area, the Appellants

and/or Gold Beam and/or Sharyans had no right

whatsoever. Their rights/interest/entitlement was also

subject to the development and construction for the

development potential area. The Developers could not even

obtain permission, NOC, though obtain re-validation of CC

till the year 2013. The Sharyans and his

assignee/Petitioner/Prajita, therefore, failed to develop

the property further as per the agreement.”

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Aggrieved thereby, PRAJITA carried the matter in SLP

(No.7483-7484 of 2016) to this Court which was dismissed on

16.03.2016.

13.During the pendency of the abovementioned proceedings,

on 14.09.2015, PRAJITA filed an application (No.292 of 2015)

under Section 11 of the ARBITRATION ACT praying that the

dispute between the parties be referred to a Sole Arbitrator to

be appointed by the High Court.

14.The Arbitration Application No.292 of 2015 was disposed

of as withdrawn by an order of the Bombay High Court dated

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Para 7 of the judgment of the High Court in Arbitration Appeal (L) No.74 of 2016 at page 208 of

the Special Leave Petition (Civil) No.18912 of 2017.

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25

th

July, 2016. Subsequently, another order dated 5

th

August, 2016 came to be passed in the said matter. The

relevant portion of the order reads as follows:

“The learned Advocate appearing for the Applicant on

instructions seeks to withdraw the above Arbitration

Application as the Applicant is desirous of filing a Suit. The

Arbitration Application is disposed of as withdrawn with

liberty as sought. However, it is clarified that if the

Applicant files a Suit, the same shall be decided on its own

merits and all contentions of the Respondents including

their contention that the Suit would not be maintainable, are

kept open”.

Aggrieved by the order, the instant Civil Appeal (arising

out of SLP (Civil) No.18912 of 2017) is filed.

15.On 8.10.2015, the appellant terminated the

AGREEMENT and informed the same to PRAJITA by issuing a

notice through his lawyer. Relevant part of the notice is as

follows:

“In view of the above, we hereby terminate the development

agreement dated 23

rd

June 2006. And we call upon you to

remove yourself from the said property, with immediate

effect, otherwise, our client will be taking appropriate action

against you.

Our client reserves his right to claim damages for not

carrying out the activity of the construction on the said

property and/or completing the work of construction within

the stipulated time and causing severe hardship to our

client.”

We are informed that subsequently PRAJITA filed a Suit

bearing No.295 of 2016 on 28

th

September 2016 in the

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Bombay High Court on its Ordinary Original Civil Jurisdiction

praying inter alia:–

“a)That this Hon’ble Court be pleased to declare that the

Development Agreement dated 23

rd

June 2006 (being

Exhibit “C” hereto) is valid subsisting and binding

upon the Defendant No.1;

b) That this Hon’ble Court be pleased to declare that the

purported termination notice dated 8

th

October 2015

issued by the Defendant No.1 (being Exhibit “HH”

hereto) is bad in law and contrary to and precluded by

the specific terms of the Development Agreement dated

23

rd

June 2006;

c) That this Hon’ble Court be pleased to pass a Decree

directing the Defendant No.1 to specifically perform his

obligations under the Development Agreement dated

23

rd

June 2006.:

It is not necessary to mention the various other prayers made

in this Suit except to note that there are some more prayers.

16.It appears that another two arbitration petitions are

pending before the Bombay High Court. It is stated in Para 17

of the Interlocutory Application No. 75003/2017:

“As on date, the Petition (under Section 9 of the said Act)

filed by the Respondent No.1/Applicant, before the Bombay

High Court, being Arbitration Petition No.697 of 2016, and

the Application (under Section 11 of the said Act), filed by

the Respondent No.1/Applicant, before the Bombay High

Court, being Arbitration Application No.234 of 2016, are

pending hearing and final disposal.”

The details of those petitions are not readily available

from the record placed before us.

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17.The following undisputed facts emerge:

1.The appellant granted to the DEVELOPERS under the

AGREMEENT of 23

rd

June 2006 the “right to develop” the

property in question;

2.Under the AGREEMENT, the appellant is entitled to 50%

of the “Development potential” and the DEVELOPERS

jointly are entitled to the balance 50% of the

“development potential”.

3.Between the two companies which jointly constituted the

DEVELOPERS, each company is entitled to 50% of that

portion of the “development potential” which falls to the

share of the DEVELOPERS;

In other words, the share of SHARYANS is only 25% of

the “development potential”;

4.It is agreed between the parties that the construction

must be completed within 24 months from the date of the

issue of the commencement certificate of development,

subject to some exceptions;

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5. M/s PRAJITA is not the original party to the

AGREEMENT but stepped into the shoes of M/s

SHARYANS on 20.04.2010 under a deed of assignment.

6.As on date, no construction worth mentioning at all is

made, not to mention about completing the construction;

18.The background of the above-mentioned facts; When

these matters were initially listed before us on 31

st

July, 2017

while adjourning the matter to 21

st

August, 2017, we called

upon the learned senior counsel appearing on either side Shri

Mukul Rohatgi, appearing for the appellant and Shri P.

Chidambaram, appearing for PRAJITA to explore the

possibility of an out of court settlement to give a quietus to the

entire litigation. When the matter was listed on 21

st

August,

2017, on behalf of the appellant, it is stated by Shri Rohatgi

that the appellant has in fact received so far an amount of Rs.

8.5 crores approximately from PRAJITA and its predecessor in

interest. The appellant is willing to pay an amount of Rs. 20

crores to PRAJITA in order to have an undisturbed possession

and peaceful enjoyment of the property in question. According

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to the appellant, PRAJITA has posted armed guards around

the property in question preventing the appellant from

entering the property.

19.On the other hand, Shri Chidambaram appearing for

PRAJITA submitted that PRAJITA is not agreeable for the

settlement of the dispute on the terms offered by the appellant

and since PRAJITA has rights acquired by the deed of

assignment etc. referred to earlier in the property in question,

it posted guards to protect the property in question from

encroachment but not to prevent the appellant in any manner

from visiting the property.

20.Having regard to the totality of the circumstances, we are

of the opinion that the ends of justice would be met in this

case by directing as follows:-

The appellant shall deposit an amount of Rs. 20 crores

by demand draft to the Registry of this Court within a period

of four weeks from today and intimate the same to PRAJITA.

Upon the receipt of such intimation, PRAJITA shall withdraw

all the security personnel deployed by it and hand over

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possession of the property in question within a period of seven

days from the date of the receipt of the above-mentioned

intimation to the appellant in the presence of the

Commissioner of Police, Mumbai or any other senior police

officer subordinate to the Commissioner of Police, Mumbai to

be nominated by the Commissioner of Police.

The Commissioner of Police or his nominee shall draw a

Panchnama of the fact of the handing over of the property by

PRAJITA to the appellant and file the same in the Registry of

this Court within a week from the date of the handing over of

the possession.

Upon the filing of the Panchnama with the Registry of

this Court, PRAJITA shall be at liberty to withdraw the amount

of Rs. 20 crores deposited by the appellant pursuant to this

order.

21.We do not also see any justification for the demand of the

PRAJITA for the specific performance of the agreement dated

23.6.2006. In the circumstances of the case, we are of the

opinion that permitting the continuance of the suit for specific

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performance of the AGREEMENT which is more than a decade

old against a person from whom PRAJITA secured the

development rights of the property in dispute which ultimately

would enable PRAJITA to 25 per cent of the monetary value of

the development potential as against the right of the appellant

who is entitled for 75 per cent of the monetary value of the

development potential would be unjust.

22.The background of the facts and circumstances of the

case whether PRAJITA would be entitled for any damages

apart from receiving the above-mentioned amount of Rs. 20

crores from the appellant is a matter which requires some

examination. We therefore, deem it appropriate to refer the

said question for resolution by arbitration between the

appellant and PRAJITA. We, therefore, direct that the parties

shall submit the above-mentioned dispute for arbitration by

Hon’ble Shri Justice P. Venkatarama Reddy, former Judge of

this Court in accordance with law. Registry is directed to

communicate this Order to Hon’ble Shri Justice P.

Venkatarama Reddy.

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Civil Appeal and Miscellaneous Application are disposed

of accordingly.

….....................................J.

(J. CHELAMESWAR)

…….………….....................J.

(S. ABDUL NAZEER)

New Delhi

August 30, 2017

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