Notice of Motion No.2966 of 2007,Suit No.1297 of 2007

10th November, 2008

Petitioner Counsel: Mr. NITIN DESHPANDE, INDRAYANI KOPARKAR
Respondent Counsel: Mr. P.K. SAMDANI, Mr. SNEHAL SHAH, Mr. G.B. KEDIA

Cases Cited:
H. S. Khan & Sons Vs. Homi J. Mukadam, 1991(2) Bom.C.R. 61 [Para 36]
Chheda Housing Development Corpn. Vs. Bibijan Shaikh Farid, 2007(3) ALL MR 780=2007(3) Mh.L.J. 402 [Para 38,40]

JUDGMENT

JUDGMENT :- The Plaintiff has essentially sued for specific performance of an Agreement/MOU executed by and between the Plaintiff and Defendants on 8th May, 2004, Exhibit-Q to the plaint. The Defendants have claimed that the said agreement has been terminated by their notice dated 10th August, 2005. The Plaintiff has sought a declaration that the notice of termination is without authority of law.

2. The Plaintiff has prayed for an injunction restraining the Defendants from creating any 3rd party rights in the suit property in the above Notice of Motion.

3. The Plaintiff claims to have been granted right, title and interest as a Developer of the suit plot of land. He claims to have purchased TDR in respect of the development pursuant to the Agreement/MOU entered into by him. He also claims to have been made a co-owner of the suit plot of land which has been transferred to him upon payment of consideration pursuant to the Agreement/MOU dated 8th May, 2004. He further claims to have acted upon the said agreement to develop the suit plot of land by negotiating and entering into registered agreement with several of the tenants on the suit plot of land. The Plaintiff further claims to have obtained ownership rights in respect of certain flats in the building to be constructed on the suit plot of land, also pursuant to the said Agreement/MOU dated 8th May, 2004.

4. The Plaintiff, therefore, claims that based upon the said agreement, the Plaintiff was allowed to develop the suit plot of land before the Defendants sought to terminate it.

5. It is the Defendants case that the MOU does not settle the rights of the parties for development of the suit plot of land and that the agreement for development was yet to be entered into between them. It is contended that the Plaintiff was merely a construction Contractor. He was to demolish the existing structure on the suit plot of land and construct a new building, which agreement is not specifically enforceable.

6. The precise agreement between the parties and the intention of the parties behind the agreement would, therefore, have to be ascertained.

7. The MOU dated 8th May, 2004 shows the parties to the suit by name. It records the understanding arrived at by all the parties mentioned therein. The Plaintiff is stated to be the Developer/Builder/Constructor/Contractor. He was to do certain acts for putting up new construction. Defendant No.1 and 2 are lessees of the suit plot of land belonging to Defendant No.3 Society. Defendants 4 to 8 are the tenants in the existing structure.

8. Clause 1 of the MOU shows that "the Plaintiff will develop" the property by demolishing the existing building and constructing a new building on the suit plot of land. The total available FSI plus the TDR has already been got approved by him from the MMC. Clause 1 further shows that TDR has already been purchased by the Plaintiff upon payment in the name of Defendants 1 and 2, who were then the only lessees of the suit plot of land.

9. Clause 2 shows that two of the tenants, Defendants 5 and 7, who were also signatories to the agreement would reside in temporary alternate accommodation already provided to them, which will be financed by the Plaintiff till the new building is constructed.

10. Clause 3 mentions about the arrangement with another tenant, Defendant No.4 for which a registered agreement was to be entered into within 7 days.

11. Another tenant, Defendant No.8 agreed to sell his two flats to the Plaintiff at the specific consideration in that regard mentioned in the said clause for which a formal tripartite agreement was to be executed within 7 days. The Plaintiff was to be the owner of those two flats upon paying the agreed consideration to Defendant No.8. The Defendant No.8 was to vacate those two flats upon receiving the consideration.

12. An agreement for permanent alternate accommodation was to be executed yet with another tenant Defendant No.6.

13. Under clause 6 of the MOU the agreement between the Plaintiffs and Defendants 1 and 2 was to be executed and registered within 7 days. The specific terms agreed between the parties in the MOU are set out therein. Those terms are shown as terms (a) to (h) in Clause 6 of the MOU. That is in essence the agreement between the Plaintiff and Defendants 1 and 2, which the Plaintiff seeks to specifically enforce.

14. Clauses 6(a) to (h) are as follows:-

i) Under Clause (a) Defendants 1 and 2, who were the Lessees of the plot belonging to Defendant No.3 Society were to obtain permission from Defendant No.3 Society for demolition of the old structure and construction of the new structure as per sanctioned plans. The Plaintiff was to pay for the TDR to be obtained on the said plot.

ii) Under Clause (b) Plaintiff was to demolish the old structure and construct a new building at his cost and as per sanctioned plan of the MMC. The Plaintiff was to hand over possession of two flats of the specifications mentioned therein to Defendants 1 and 2 and one flat each to the tenants, Defendants 4 to 8 as per agreements with them.

iii) Under Clause (c) the Plaintiff was to obtain ownership rights in respect of the rest of the flats in the new construction. This was specifically because, the Plaintiff was to develop the suit plot of land by construction of the new structure utilizing the TDR obtained and produced by him. Under the said clause the Plaintiff was not to have rights in the suit plot, save and except those limited and related to the ownership of the flats. Hence the Plaintiff could only be a part owner to the extent of the other flats owned by him, which would be flats other than those of Defendants 1, 2 and 4 to 8 in the new construction.

iv) Under Clause (d) Defendants 1 and 2 were to pay the Plaintiff Rs.6.5 lakhs towards part construction cost.

v) Under Clause (e) access to all the open terraces except the 8th floor terrace was to belong exclusively to the Plaintiff and the access to all the floors above the 4th floor was also to be available exclusively to the Plaintiff. Defendants 1 and 2 were to have access to the terrace above the 7th floor only for occasional use. Hence it can be seen that the new construction was to be of a 7 floors. Defendants 1 and 2 as the Lessees of the suit plot of land were to have possession of two flats. Defendants 4 to 8 were to have possession of 5 other flats. All of these Defendants would be accommodated between the 1st and the 4th floors. The remaining flats were to belong to the Plaintiff as owner. Further the open terraces and the access thereto was also to belong to the Plaintiff.

vi) Under clause (f) the parking spaces were to be equally divided between the Plaintiff on the one hand and Defendants 1 and 2 on the other.

vii) Under Clause (g) all the occupants were to incur and pay maintenance costs and taxes proportionate to the area occupied by them.

viii) Under Clause (h) of the existing tenants would be entitled to one parking space on payment of Rs.100/- in that regard.

15. A reading of the entire Agreement/MOU dated 8th May, 2004 as a whole, shows that on the plot belonging to Defendant No.3 Society and leased to Defendants 1 and 2 where an old structure existed and was occupied by 5 tenants, Defendants 4 to 8, all the parties agreed to demolish the said structure and develop the said plot by constructing a new structure. For such construction the available FSI was to be used. In addition TDR was purchased by the Plaintiff. The Plaintiff was to demolish as well as re-construct. Upon demolition the Plaintiff was to offer temporary accommodation and thereafter permanent alternate accommodation to the existing tenants. The Plaintiff was also to give possession of 2 flats to Defendants 1 and 2. For the remainder of the construction the Plaintiff was to be the sole owner. Upon such construction the Plaintiff was to be entitled to exclusive access to all the terraces and the access to the terrace above the entire construction.

16. It is an admitted position that the Plaintiff has purchased TDR. The purchase has been made for Rs.34 lakhs. The worth of the TDR has since escalated. It is also an admitted position that the Plaintiff has entered into a registered agreement with some of the tenants offering them for temporary alternate accommodation. The Plaintiff has expended monies on that ground. I have been informed that some of the tenants had vacated upon such agreements between entered into and upon payments being made by the Plaintiff in respect of the temporary alternate accommodation, but since further development and construction could not take place as Defendants 1 and 2 did not allow the Plaintiff to demolish the whole structure and construct the new structure as per sanctioned plan as agreed in the MOU, they have returned to their old premises on the suit plot of land.

17. Defendants 1 and 2 are the only contesting Defendants. They are brothers. They are the Lessees of the suit plot of land. The memorandum records not only the essential agreement of development between the Plaintiff and Defendants 1 an 2, but also the separate agreements with the tenants separately.

18. Clauses 2, 3, 4 and 5 relate to the agreements of the Plaintiff with the tenants.

19. The essential clauses which the Plaintiff seeks to specific enforcement against Defendants 1 and 2 are clauses 1 and 6.

20. Clause 1 shows the Plaintiff to be a Developer and not a Contractor. It shows development as per plans already got sanctioned by the Plaintiff from the MMC. It also shows the purchase of the TDR for putting up additional construction.

21. Clauses (a), (b), (c) and (e) of Clause 6 show the extent of the Plaintiff's rights and entitlements.

22. Clause 6(a) shows the corresponding reciprocal obligation of Defendants 1 and 2 to obtain the permission of the Society of the suit plot of land for demolition of the old structure and construction of the new building as per sanctioned plans.

23. Clause 6(b) shows the cost of the demolition and construction which has to be incurred by the Plaintiff and further an obligation of giving the flats in the newly constructed building to Defendants 1, 2 and 4 to 8.

24. Clause 6(c) shows the entitlement of the Plaintiff to the remainder of the new construction. The Plaintiff was entitled to ownership rights of the "rest of the flats". He was also to have ownership rights of the plot, but only limited to the ownership of those flats. Hence, the Plaintiff would not be a complete owner of the new construction. The Plaintiff would have only rights corresponding to the extent of the new construction owned by him on the suit plot of land. Defendants 1 and 2 who were the lessees of the plot would also continue as such lessees. Their rights would be limited.

25. Under Clause 6(e) the Plaintiff's rights extended also to all open terraces except the 8th floor terrace as well as access to all the floors above the 4th floor. This clause shows the exclusive entitlement of the Plaintiff in the part of construction above the 4th floor.

26. The MOU, therefore, shows the comprehensive, consolidated agreement between the parties to the suit including the Plaintiff as the Developer, Defendants 1 and 2 are the lessees, as also Defendants 4 to 8 as the tenants. The execution of the MOU by Defendants 1 and 2 is not denied. It is signed in confirmation by the Plaintiff as also the 5 tenants.

27. A reading of the MOU shows that the parties have set out whatever was agreed by and between them. However it is only not a formal, legal document for development of the suit plot of land. Consequently the parties agreed that the Development Agreement would be executed and registered between the Plaintiff and Defendants 1 and 2 within 7 days of the execution of the MOU. That Development Agreement was to incorporate the terms agreed upon between the parties which were enumerated as Clauses 6(a) to (h). Nothing further was to be done except to give it a formal legal colour.

28. It has to be seen whether the parties did actually act upon the MOU also. Defendants 1 and 2 were to obtain the permission of the Society for the development. The Plaintiff was to get part ownership rights. The Defendants 1 and 2 performed their part of the reciprocal promises and obligations under clause 6(a). Accordingly by their letter dated 25th June, 2004 Defendant No.1 wrote to the Society to make the Plaintiff (as also Defendant No.8) co-owner in respect of the suit plot of land. They also got the permission of the Society conditionally approving the plans submitted by them in respect of the new construction. Consequently the Society by its letter dated 29th July, 2004 recorded the names of the Plaintiff (as also the Defendant No.8) as the co-owners of the plot and members of the Society. They issued the share certificates after recording their names accordingly.

29. The Plaintiff was to be a co-owner to the extent of 30%. Defendants 1 and 2 were to be co-owners to the extent of 30% each. Defendant No.8 was to be a co-owner to the extent of remainder 10%. It may be remembered that under Clause 4 of the MOU the Plaintiff was to be sold the ownership rights of Defendant No.8 upon payment of consideration mentioned therein to Defendant No.8. Hence, the Plaintiff would then be a member/co-owner to the extent of 40% interest in the suit plot of land (30% of the Plaintiff himself and 10% of Defendant No.8). Hence, under Clause 6(c) the Plaintiff would have ownership rights in the plot to the said extent.

30. A reading of Clause 6(c) shows that upon development of the suit plot of land by the Plaintiff as per Clauses 1 and 6(a) and 6(b) the Plaintiff was to have corresponding ownership rights. Aside from the payment of part construction cost of Rs.6.5 lakhs as shown in Clause 6(d) the Plaintiff was not to be paid any construction cost. In fact the Plaintiff was to incur construction cost and had already incurred the cost for purchase of the TDR.

31. A reading of the entire agreement, therefore, shows that the Plaintiff was not a mere Contractor. It was agreed between the parties that the Plaintiff would develop the suit plot of land as a Developer. He would have interest in the new construction as also the corresponding interest in the plot of land as a co-owner with Defendants 1 and 2 and as a member of Defendant No.3 Society upon the construction. The Plaintiff was to be paid for the construction. The consideration paid by the Plaintiff was by way of purchase of TDR and by way of incurring the construction cost as also the cost of the alternate accommodation to be given to the tenants/occupants. The consideration to be received by the Plaintiff was by way of ownership rights in the flats on the 5th to 7th floors as also corresponding 40% interest (30+10) in the plot itself.

32. It is argued on behalf of Defendants 1 and 2 that because the Development Agreement was still to be signed and registered by the parties the MOU is not specifically enforceable. The contention is completely misconceived. If an MOU is entered into by the parties merely agreeing to enter into a Development Agreement for developing the suit plot of land upon terms not agreed by the parties, the MOU, which does not set out a full agreement between the parties, would not be enforceable. If, however, an MOU sets out the entire agreement between the parties for the development of the entire plot of land as per sanctioned plan to the extent of the FSI as also the additionally purchased TDR and sets out the extent of the rights and entitlements of the parties being the owner as well as the Developer in the new construction to be put up by the Developer at his own cost, the agreement between the parties is complete. Such MOU is itself specifically enforceable, whether or not, a formal Development Agreement is to be further entered into by them.

33. The MOU of the kind, as in this case is an agreement for development itself. It is nothing short of that except that it is entered into informally by the parties putting on record the complete agreement arrived at between themselves as also with the tenants. It only lacks legal jargon. Such an agreement is exhaustive and takes into account not only the reciprocal promises and obligations of the owner and the Developer, but also the rights of the tenants/occupants in the old structure confirmed by them as also the Developer in that regard. Such an agreement is not any-the-less legally enforceable. It is an agreement upon which an action in law is maintainable. The specific action in law filed by the Plaintiff is its specific enforcement. It is too late in the day to merely rely upon one of the clauses of an MOU showing that the Development Agreement was to be executed between the parties to outright reject an action for specific performance. The agreement has to be read as a whole. The intent of the parties has to be ascertained from the agreement. If the agreement shows the full extent of the intent of the parties for complete development of the property, the agreement is nothing but a Development Agreement, howsoever drafted or titled. In fact it is argued on behalf of the Plaintiff that the Plaintiff seeks the execution of the Development Agreement incorporating therein the agreement between the parties as set out in Clauses 6(a) to 6(h).

34. It is contended on behalf of the Defendants 1 and 2 that they have terminated the MOU by their letter dated 10th August, 2005. The letter of termination shows that the Plaintiff was to "redevelop within 12 months or so". It states that the Plaintiff could not settle with the tenants and had started various activities prejudicial to Defendants 1 and 2. It also alleges that the Plaintiff unlawfully got his name incorporated into the Society and since the MOU is neither registered nor stamped, nor acted upon, nor completed, the development could not take place. The termination notice further mentions about an earlier notice issued under Maharashtra Rent Control Act by Defendants 1 and 2 upon the Plaintiff in respect of the bonafide use and requirement of these Defendants with regard to one flat. The Agreement/MOU does not set out any time limit of 12 months or otherwise for putting up construction or redevelopment. The Plaintiff is ready and willing to develop the property. In fact Defendants 1 and 2 are not ready and willing to develop the property. The Plaintiff settled with the tenants and the tenants re-occupied the old premises in view of the stalemate. The Plaintiff could not be held liable for the same. No prejudicial activities of the Plaintiff are shown. The aforesaid letters show that the Defendants have themselves got the name of the Plaintiff as also Defendant No.8 entered into records of the Society as members and accordingly as co-owners of the suit plot of land. The allegation that the Plaintiff has no right, title and interest is seen to be erroneous. The consideration that passed under the agreement need not be only monetary consideration. The consideration given to Defendants 1 and 2 is in terms of the flats to be constructed and given to them. The parties are seen to have acted upon the said MOU. The Defendants are seen to have allowed the Plaintiff to further act upon it. The notice of termination is of little effect.

35. The Agreement/MOU dated 8th May, 2004 would be specifically enforceable as seen from its contents. Mr. Samdani relied upon several judgments with regard to the execution of an Agreement/MOU between the parties which do not lay down explicitly the rights and entitlements of the parties and which require further Development Agreement to be entered into, to show that this agreement is not specifically enforceable.

36. The case of H. S. Khan & Sons Vs. Homi J. Mukadam, 1991(2) Bom.C.R. 61 is the case in which the parties did not intend to be bound until a formal contract was signed by them. It was held that there was no concluded contract between the parties. It was further observed that this aspect depends upon the intention of the parties and the special circumstances in each particular case. In that case the Developer/Contractor had agreed to not receive or collect any amount or enter into any agreement for sale of any flat, shop or premises with the tenants or occupants. They were not to enter into any agreement for sale or even to accept any money by way of earnest until the completion of sale. In this case the Plaintiff was not only allowed to demolish the old structure and construct a new building as per sanctioned plan, the Defendants 1 and 2 themselves got permission of the Society to construct as per the sanctioned plans and also got the Plaintiff to be a co-owner along with them and a member of the Society. The Defendants allowed the Plaintiff to negotiate with the tenants. The Plaintiff was allowed to execute registered agreements with some of them; also the Plaintiff offered temporary alternate accommodation to some of them. The Plaintiff also purchased TDR for additional construction. Hence the Defendants 1 and 2 took steps under such Agreement/MOU and allowed the Plaintiff to take steps as per the terms of the MOU.

37. Similarly the case of Kalpadi Krishnarai Kamath Vs. Harishchandra Anant Pandit in NMS. No.1835 of 2005 in Suit No.1448 of 2005 of this Court shows that the parties had not reached any final agreement either in relation to the consideration that was to be paid to the owners by the Developers or in relation to the mode and the manner of the development of the property. They had agreed to enter into a regular Agreement for development incorporating all the terms and conditions with regard to these aspects. It was held that such an MOU was not a final agreement and was a tentative agreement arrived at between the parties and that only after the other terms was settled a final agreement would be entered into. In this case all the terms between the parties were settled on 8th May, 2004. They were incorporated into MOU albeit without legal jargon. There was a final agreement between the parties who were not only the owners and developers, but also the occupants/tenants. A mere agreement to enter into a formal Development Agreement is, therefore, of little or no significance, since such a Development Agreement was specifically agreed to be entered into as per Clauses 6(a) to 6(h) enumerated in the MOU itself.

38. Mr. Samdani relied upon the case of Chheda Housing Development Corpn., Vs. Bibijan Shaikh Farid, 2007(3) Mh.L.J. 402 : [2007(3) ALL MR 780] which sets out which agreements could be specifically enforcible and which not, as enumerated in paragraph 12(A) therein. It may be noted that the prerequisite for any decision about the specific enforceability of the agreement is stated to be "the facts of each case" in paragraph 12(A) itself. Paragraph 12(A) sets out 3 types of agreements:

a)	The agreement only entrusting construction work	Not enforceable
b)	An agreement entrusting work of development with the right to sell the constructed portion to flat purchasers with a conveyance as per statutory requirements.
c)	A normal agreement for sale	Specifically enforceable
d)	A rider to the said paragraph shows that the mere agreement for development which creates no interest in the land would not be specifically enforced.

39. The suit agreement is not a mere agreement for development. It creates an interest in the land in favour of the Plaintiff to the extent of 40% (30+10) as co-owner/member of the Society already in existence. The Plaintiff's ownership rights further implies a right to sell, mortgage, lease, assign etc.

40. In fact the Plaintiff paid consideration of Rs.4.92 lakhs for obtaining the transfer to the said extent as reflected in letter dated 1st July, 2004 Exhibit-R to the plaint, signed by all the co-owners being the Plaintiff and Defendants 1, 2 and 4 to 8. Hence as per the conclusion arrived at in paragraph 12A of the case of Chheda Hsg. Development Corpn. [2007(3) ALL MR 780] (supra) as per the "Facts of this case and the agreement under consideration" it can be seen that the suit Agreement is specifically enforceable.

41. Mr. Samdani further relied upon the judgment in the case of M/s. Shah and Jhaveri Developers Vs. M/s. Classic Developers Pvt. Ltd., in Notice of Motion No.3820 of 2006 in Suit No.3151 of 2006 of this Court in which the applicability of Section 14 of Specific Relief Act, 1963 has been considered. It was observed in that judgment that at the very outset the nature of the agreement between the parties has to be considered. That was a construction contract. The Defendant was entrusted only the work of constructing the building on the land of the Plaintiff. The Plaintiff was to do all the other things such as vacating tenants, preparing plans, submitting the plans for sanction to the MMC, making payment in that behalf, obtaining certificates and the other letters etc. Hence, it was held that such a contract cannot be stated to be a contract for transfer of immovable property. A building construction contract is not specifically enforceable as it falls within the ambit of Sub-Sections (a) and (d) of Section 14(1). That is because non-performance of those contracts are compensable in terms of money and the performance of the suit contracts would involve the continuous duty which the Court cannot supervise. Section 14(c) which is in the nature of an exception to the Section itself, has been specifically considered in that judgment. That relates to building construction contracts. Section 14(c) requires:

1. Description of the property to be stated

2. Interest of the Plaintiff in the property to be shown

3. Possession to be obtained by the Defendant

42. Only a developer/builder can "obtain possession". The owner already "has possession". Therefore it implies that when the suit is filed by the owner, the builder/developer is given possession of the plot or building. A contractor is not given possession. He cannot be held to have "obtained possession". When he himself is the Plaintiff, the owner cannot be held to have "obtained possession" - the owner already "has possession" of the land/plot/property. Clause 14(3)(iii) specifically implies that the suit is filed by the owner against the Defendant who has obtained possession of the whole or part of the land to develop it. Hence, the owner can sue for specific performance of the contract and have the land developed.

43. Whilst it is observed that the development agreement at the instance of the developer is hit by Section 14(3)(iii) but the suit by the owner is maintainable, it is held in paragraph 5 of the judgment that it is possible for the Court to pass a decree for the performance even when the contract is for development of the property. That depends upon the nature of the agreement. Consequently if the agreement is not otherwise excluded under Section 14(1) all such agreements including contracts for development of properties would be specifically enforceable even at the instance of the Developers.

44. Since it would depend upon the nature of the agreement we have to see whether the agreement in this suit can fall outside the purview of Section 14(1). In other words whether the agreement in this suit is not only an agreement at the instance of a developer compensable in money and involving the continuous duty, unsupervisable by the Court.

45. In this case the nature of the agreement between the parties is not only for construction. It is for the development of the entire plot. The development is at the cost of the Plaintiff. The development is upon purchase of TDR. The construction put up in addition to the FSI already available, would be for the Plaintiff exclusively. The Plaintiff is to have ownership rights. It need hardly be stated that the ownership rights would include the right of further transfers. The agreement shows the implicit stamp of the approval of Defendants 1 and 2 in obtaining the permission of the Society for such further development as per the sanctioned plans. It grants interest in the suit plot of land to the Plaintiff. Hence the Development Agreement even at the instance of the Developer, depending upon the nature of the agreement as in this case, would be specifically enforceable unless only if it falls within the mischief of Section 14(1).

46. The Plaintiff has made out a clear prima facie case for grant of the relief of injunction against creation of further 3rd party rights. The Notice of Motion is made absolute in terms of prayer clause (b).

47. The Defendants 1 and 2 shall not create any third party rights in respect of the suit plot of land or in any manner deal with, transfer or surrender the TDR obtained by the Plaintiff for development of the suit property.

Ordered accordingly.