Dismissed

Dilip P. Patel and 2 Ors. v. Acme Associates and 12 Ors.

Bombay HC5 Aug 2013APP/435/2013

Case brief

AI extract

What is this about?

These appeals challenge an interlocutory order granting an injunction to restrain interference with rights under a power of attorney. The High Court held that while the prima facie case for specific performance existed, the relief must be confined to the suit property as described in the plaint, rather than the larger property covered by the attorney, due to lack of specific averments regarding th

What did the court decide?

The injunction restraining interference with rights under the Power of Attorney was remapped to apply only to the suit property of 4,167 sq. meters as described in the plaint, excluding the larger pro

Dilip P. Patel and 2 Ors. Vs Acme Associates… — Contract and Commercial Disputes | Bombay HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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APPEAL (LDG.) NO. 767 OF 2012 IN

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NOTICE OF MOTION NO. 178 OF 2010 IN

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SUIT NO. 14 OF 2010

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Dilip Purushottamdas Patel and others. … Appellants. V/s.

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M/s.ACME Associates and others. … Respondents.

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WITH APPEAL (LDG.) NO. 768 OF 2012 IN

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NOTICE OF MOTION NO. 330 OF 2011 IN

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SUIT NO. 209 OF 2011

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Dilip Purushottamdas Patel and others. … Appellants. V/s. M/s.ACME Associates. … Respondents.

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Ravi Kadam, Senior Advocate with Ashish Kamath and Ms.Sharan Patole i/b. Pravin Kamble for the appellants.

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P.K.Samdani, Senior Advocate with Simil Purohit i/b. Wadia Ghandy and Co. for the respondents.

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CORAM : DR.D.Y.CHANDRACHUD AND S.C GUPTE JJ.

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5 August 2013.

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P.C. :

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These appeals arise out of two orders passed by the learned Single Judge on 26 June 2012, disposing of the motions

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which were taken out respectively by the parties in two suits which have been instituted by them. The first suit is a suit instituted by the appellants¹ seeking a declaration that the agreement between the parties dated 7 August 2003 and the power of attorney dated 26 March 1999 have been validly terminated and for consequential reliefs including of a permanent injunction. The second suit by the first respondent is for specific performance of the agreement dated 7 August 2003 and for declaration that the agreement and the power of attorney dated 26 March 1999 continue to be valid, subsisting, and binding on the parties² . The learned Single Judge has made the notice of motion absolute in terms of prayer clause (b) in the following terms:

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“b) That pending the hearing and final disposal of the suit the Defendants by themselves, their servants and agents be restrained by an order and injunction of this Hon'ble Court from in any manner interfering with or obstructing in any manner the Plaintiffs exercising the rights under the Power of Attorney dated 26^th March, 1999”

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In view of the order passed in the motion that was taken out in the suit for specific performance filed by the first respondent, no separate order has been passed in the companion suit filed by the appellants on the ground that the interest of the appellants would be sufficiently safeguarded. While making the notice of motion absolute in terms of prayer clause (b) as stated above, the learned single Judge directed the first respondent to deposit an amount of Rs.1 crore with the Prothonotary and Senior Master, comprising of the balance consideration of Rs.55 lakh payable under the agreement dated 7 August 2003 together with some amount towards interest.

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1 Suit No.14/2010

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2 Suit No.209/2011

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The suit for specific performance was instituted by the First Respondent on 4 November 2011. The plaint indicates that the appellants are the owners of what is described as a larger property bearing CTS Nos.125; 125/1 to 31; 128; 131; 132; and 132/1 to 4 admeasuring 28,093.04 sq.meters at village Gundavali. The description of the larger property is contained in paragraph- 2 of the plaint. According to the first respondent, agreements were entered into by the appellants with the sister concerns, associate companies, group companies and firms of the first respondent in respect of lands which have been or are being developed. Powers of attorney were executed for the purpose of the development and sale of portions of the larger property. The suit property is described in paragraph- 5 of the plaint and in Exh.A to comprise of a total area admeasuring 4,167.46 sq.meters forming part of CTS Nos.125; and 125/1 to 31.

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An agreement for development was entered into between the parties on 7 August 2003 in relation to the suit property comprising an area of 4,167 sq.meters. The consideration payable under the agreement was Rs.1 crore. According to the first respondent, an amount of Rs.45.42 lakh was paid out of the total agreed consideration. Prior to the execution of the agreement a power of attorney was executed on 26 March 1999 by the appellants in favour of the first respondent in respect of the larger property. The appellants terminated the agreement and the power of attorney by an advocate's notice dated 9 March 2009 and called upon the first respondent to stop all construction activities which have been carried out under the development agreement. The basis of the termination

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was that the first respondent failed to pay the balance consideration due and payable under the agreement dated 7 August 2003 and had committed various breaches of its obligations towards the Municipal Corporation of Greater Mumbai, inter alia , by carrying out construction on the DP road, in failing to hand over the reservation while at the same time availing of TDR/FSI and by making an alteration on the private layout of the property. The first respondent challenged the basis and validity of the termination by an advocate's reply dated 6 April 2009.

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The first suit in point of time was the suit instituted by the appellants seeking relief on the basis that the agreement dated 7 August 2003 and the power of attorney dated 26 March 1999 had been terminated. The first respondent instituted a suit for specific performance on 4 January 2011. According to the first respondent, besides paying an amount of Rs.45.42 lakhs in pursuance of the agreement, it had taken various steps including (i) negotiating and settling with the occupants of the property for which an amount of Rs.2.27 crores was paid; (ii) developing and constructing for the benefit of the municipal corporation a constructed area in respect of the reservation for a municipal market on a part of the property; (iii) the construction of two buildings each consisting of a ground floor plus 12 upper storeys comprising of 41 flats and 71 flats respectively which were sold on ownership basis to the flat purchasers incurring a cost of construction of Rs.13 crore. The case of the first respondent is that the agreement dated 7 August 2003 was made immune to termination by clause 10(d) of the agreement and the power of attorney dated 26 March 1999 was by its terms irrevocable and

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coupled with an interest for consideration. Moreover, it is asserted that time was not the essence of the contract nor was it ever made the essence of the contract.

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No ad-interim relief had enured to the benefit of the parties in either of the motions which were taken out in their respective suits. Both the motions were contested. When the motions came up for final hearing before the learned single Judge on 26 June 2012, the appellants remained absent. The learned single Judge granted an interim order in terms of prayer clause (b) of the motion in the suit for specific performance of the first respondent but made it conditional on the first respondent depositing the balance consideration of Rs.55 lakhs together with some interest. Consequentially a direction was issued to the effect that the first respondent shall deposit an amount of Rs.1 crore with the Prothonotary and Senior Master within six weeks. That amount has been deposited. While granting this relief, the learned Single Judge held that (i) under the power of attorney dated 26 March 1999, the powers with regard to transfer, sale and alienation of the suit property were given to the first respondent; (ii) under clause 10(b) of the agreement dated 7 August 2003, the first respondent was conferred with the power to transfer and assign his rights in favour of third parties and the agreement was made non terminable; (iii) the first respondent has incurred expenditure for making payment to the tenants, besides constructing a municipal retail market which has been handed over to the Municipal Corporation; (iv) agreements were entered into between the flat purchasers prior to the date of termination and the interest of flat purchasers would have to be duly

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protected; and (v) the claim of the appellants is only in respect of the balance consideration.

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Two submissions have been urged on behalf of the appellants at the hearing of the appeals: (i) the impugned order of the learned single Judge does not adjudicate upon the validity of the termination of the agreement for development dated 7 August 2003; and (ii) prayer clause (b) of the motion which has been allowed restrains the appellants from in any manner interfering with the exercise of the rights of the first respondent under the power of attorney dated 26 March 1999. The power of attorney covers, besides the suit property, the larger property and hence the relief which is granted would travel beyond the scope of the suit. Hence, the order in terms of prayer clause (b) would have to be structured so as to be confined to the suit property.

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On the first submission, it has been urged on behalf of the first respondent that- (i) clause 10(d) of the agreement specifically stipulates that the agreement is not capable of termination; (ii) time was not the essence of the contract and was never made the essence of the contract; (iii) the first respondent stated in the advocate's reply to the notice that the balance of the consideration was not paid in view of the internal disputes between the appellants; and (iv) acting on the basis of the agreement, the first respondent has made investments, incurred expenditure, carried out construction including of the municipal retail market and created third party rights.

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The learned Single Judge has, in our view, furnished cogent reasons for coming to the conclusion that a prima facie case for the grant of relief was made out in the suit of specific performance of the first respondent. Besides the payment of Rs.45.42 lakhs to the appellants, the first respondent has acted on the agreement dated 7 August 2003. Since there was a reservation on the plot of land for a municipal retail market, the amenity has been constructed and handed over to the Municipal Corporation. The first respondent has also claimed that it has incurred an expenditure of Rs.2.27 crore in settling with the occupiers of the land. Besides, two buildings comprising of 12 storeys have been constructed and third party rights have been created in favour of the flat purchasers. There is no merit in the contention that the learned Single Judge did not adjudicate upon the validity of the termination of the agreement. The circumstances which have been adverted to in the order of the learned Single Judge would prima facie indicate that the first respondent was ready and willing to perform its part of the contract so that the development agreement could be satisfactorily fulfilled. The validity of the termination was challenged by the first respondent on the ground that clause-10(d) makes it non terminable and that the agreement together with the power of attorney confers an interest for valid consideration. The view of the learned Single Judge is a correct view to take on the basis of the record before the Court for the purpose of a prima facie determination at the interlocutory stage. Consequently, the balance of convenience would require that the first respondent should be protected, having regard to the nature of investment and expenditure undertaken and the steps taken by the first respondent in pursuance of the agreement and the power of

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attorney.

On the second aspect of the matter, the relief which has been granted by the learned Single Judge operates to restrain the appellants from in any manner interfering with or obstructing in any manner the rights of the first respondent under the power of attorney dated 26 March 1999. With the assistance of the learned counsel, we have perused the averments contained in the plaint. The plaint in the suit for specific performance refers to the larger area of 28,093 sq.meters which is described as the “larger property”. The suit property is described in paragraph-5 of the plaint read with Exh.A as land admeasuring 4,167 sq.meters. The agreement dated 7 August 2003 of which performance is sought is confined to the suit property. Paragraph- 7 of the plaint sets out the payment of consideration and paragraphs- 8 and 9 set out the steps taken by the first respondent for the development of the suit property. Paragraph- 13 which contains the basis of the cause of action is that the agreement dated 7 August 2003 could not have been terminated in view of the provision contained in clause- 10(d); that time was not the essence of the contract and the agreement created an interest in favour of the first respondent. Paragraph- 14 of the plaint states that the power of attorney read with the agreement dated 7 August 2003 is coupled with an interest and for consideration and creates an agency in favour of the first respondent which would make it irrevocable. The valuation in paragraph- 19 of the plaint is on the basis of the consideration of Rs.1 crore set out in the agreement dated 7 August 2003 of which performance is sought. The agreement relates to the suit property.

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Order 7 Rule 3 of C.P.C. provides that where the subject matter of the suit is immovable property, the plaint shall contain a description of the property sufficient to identify it. In the present case, it is abundantly clear that the suit property as more specifically described in paragraph- 5 of the plaint and in Exh.A is the property admeasuring 4,167 sq.meters and not the larger property. Though the power of attorney may comprise of the larger property as well but it is evident that all the averments contained in the plaint relate to the execution of the agreement dated 7 August 2003, the steps taken by the first respondent towards fulfillment of the agreement and elaborate upon the case that the power of attorney coupled with the agreement creates an interest and is irrevocable. We have also considered the averments in paragraphs- 11 and 16 of the plaint and we are satisfied that these averments would not entitle the first respondent to claim relief in respect of anything but the suit property. In this view of the matter, in the absence of any averments in the plaint with regard to the larger property, more particularly the steps which have been taken towards the development of the larger property and in relation to the breach thereunder, we find that the order of the learned Single Judge would require to be structured by confining the relief granted in terms of prayer clause (b) to the suit property. At the same time, we clarify on the request of counsel for the first respondent that liberty is reserved to the first respondent to move an application before the learned trial Judge, if so advised, for seeking further relief after making necessary amendments to the plaint in respect of the larger property. Should such an application be made, we clarify that the same would be disposed of on its own merits.

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In the circumstances, we dispose of the appeals by confining the grant of relief by the learned Single Judge in terms of prayer clause (b) of the motion to the suit property more particularly described in Exh.A to the plaint.

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The appeals are accordingly disposed of. There shall be no order as to costs.

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(S.C.Gupte, J.)

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S.K.Nanoskar, P.S.

Dilip P. Patel and 2 Ors. v. Acme Associates and 12 Ors.

Case brief

What is this about?

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Dilip P. Patel and 2 Ors. v. Acme Associates and 12 Ors.

Case brief

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