Notice of Motion No.1631 of 2013,Suit No.910 of 2013

9th July, 2014.

Petitioner Counsel: Mr. RAVI KADAM, Sr. Adv. Mr. CHETAN KAPADIA along with Mr. VIKRAM TRIVEDI, Mr. SUNIL TILOKCHANDANI, Mr. BHARATKUMAR JAIN, i/b. MANILAL KHER AMBALAL & CO.
Respondent Counsel: Ms. F. CONTRACTOR, Mr. RAJENDRA S. DESAI, i/b. Mr. KUNAL BHANAGE, Mr. D.D. MADON, Sr. Adv. with Dr. BIRENDRA SARAF, Mr. MANISH DOSHI and Ms. DHRUVI SHAH, i/b. VIMADALAL & CO.

JUDGMENT

JUDGMENT :- The Notice of Motion is taken out by the Plaintiff in a suit for specific performance of a development agreement. The development agreement is entered into by a Co-Operative Housing Society - Defendant No.4 - with the Plaintiff, who is a developer. The Notice of Motion seeks appointment of Court Receiver with power to take over physical possession of two flats in the building owned by Defendant No.4 Co-operative Society.

2. The short facts of the case, as alleged by the Plaintiff, may be stated thus:

(i) Defendant No.4, which is a Co-operative Housing Society of flat owners, owns a plot being Plot No. 94-B, T.P.S. IV, Linking Road, Santacruz (West), Mumbai 400 054. A building consisting of 11 flats exists on the suit plot. There are 10 members of Defendant No.4, who owns these 11 flats. Defendant No.1 and Defendant Nos.2 and 3, who are members of Defendant No.4 Society, respectively, own Flat Nos.9 and 10 in the suit building (which are referred to as "suit flat/s").

(ii) By a resolution dated 15 July 2009, Defendant No.4 decided to redevelop the suit building. Project Management Consultants ("PMC") were appointed for the redevelopment project. By a resolution dated 22 November 2009, passed in a Special General Body Meeting of Defendant No.4, development rights in respect of the redevelopment work were granted to the Plaintiff. In pursuance of this resolution, a development agreement dated 21 December 2010 was executed by Defendant No.4 in favour of the Plaintiff. All members of Defendant No.4, including Defendant Nos.1 to 3 herein, were parties to this agreement. There were separate declarations and undertakings executed by all members of Defendant No.4, including Defendant Nos.1 to 3 herein in this behalf.

(iii) In pursuance of the development agreement, the Plaintiff submitted plans/amended plans for redevelopment of the suit property. Amended plans submitted by the Plaintiff were accepted by the Special General Body of Defendant No.4. A letter was accordingly issued on 29 Augury 2011 by Defendant No.4 to the Plaintiff, inter alia communicating its acceptance of the plans and seeking inter alia a parking layout plan. The parking layout plan was submitted by the Plaintiff to Defendant No.4.

(iv) Subsequently, the D.C. Regulations were amended by Municipal Corporation for Greater Mumbai to include what is known as Fungible FSI which encompassed the entire built up area of construction, including flower beds, terraces, voids and niches in the FSI of the property.

(v) Subsequent to the amendment of DCR, a Special General Body Meeting of Defendant No.4 was convened to discuss the aspect of Fungible FSI with the PMC appointed by Defendant No.4. Meetings were also held by Defendant No.4 and its members with the PMC and the advocate of Defendant No.4. In pursuance of these meetings and decisions taken therein, the issue of Fungible FSI was satisfactorily resolved between the parties. A letter dated 27 August 2012 was accordingly issued by Defendant No.4 to the Plaintiff recording inter alia about satisfactory resolution of the issue of Fungible FSI.

(vi) The Plaintiff thereafter proceeded to acquire 33% of the total TDR which could be loaded on the suit property. The Plaintiff also obtained an IOD from the Municipal Corporation of Greater Mumbai for construction upto FSI one of the net plot area plus 33% TDR and 20% Fungible FSI. After obtaining the IOD, the Plaintiff gave a notice to vacate the flats in the suit building to Defendant No.4 and its members. A bank guarantee for a sum of Rs.4.8 crores in compliance of the relevant Clause in the development agreement was also furnished by the Plaintiff to Defendant No.4. The Plaintiff also obtained a declaration from M/s. Aum Shiv Enterprises, the erstwhile builders concerned with the project of redevelopment, recording the latter's no objection to the redevelopment work entrusted by Defendant No.4 to the Plaintiff. Eight out of ten members of the Society holding 9 flats from out of 11 flats, vacated their respective flats in pursuance of the notice to vacate. The Plaintiff paid compensation for alternative transit accommodations for these members.

(vii) Defendant No.1 and Defendant Nos.2 and 3, however, have refused to vacate their respective flats. As a result, the entire redevelopment work has been held up. In these premises, the Plaintiff has approached this Court and taken out the present Notice of Motion. Defendant No.4 supports the Plaintiff's application.

3. It is submitted by learned Counsel for the Plaintiff that there is a binding development agreement and a declaration and undertaking executed by Defendant Nos.1 to 3 along with the other members of Defendant No.4 Society. It is submitted that the Plaintiff has complied with the development agreement; that both Defendant No.4 and its nine members as well as the Plaintiff, have substantially acted upon the development agreement; that the Plaintiff has incurred substantial costs towards the redevelopment project, including payment of compensation for alternative transit accommodation to the members who vacated their respective flats as well as towards loading of TDR and sanction of plans etc.; and that the Plaintiff is entitled, in the premises, to have a Receiver appointed of the suit flats so as to take over possession thereof and proceed with the redevelopment work.

4. On the other hand, it is submitted by learned Counsel for Defendant Nos.1 to 3 that the Plaintiff has failed to perform its part of the contract. Learned Counsel for Defendant No.1 also challenges the locus of Defendant No.4 Society as well as the Plaintiff to act in the matter of redevelopment of the suit property. It is submitted by learned Counsel that the term of the Society's Managing Committee has come to an end and that they have no locus to carry out any redevelopment project. Learned Counsel for Defendant Nos.2 and 3 raises three contentions. It is submitted that the loading of entire TDR necessary for the entire redevelopment work was a condition precedent which had to be complied with by the Plaintiff before the members of Defendant No.4 could be asked to vacate their respective flats. Secondly, it is submitted that the areas of flats offered to members of Defendant No.4 and in particular, to Defendant Nos.2 and 3, were not in accordance with the development agreement. It is submitted that the agreement stipulates sharing of any FSI that may subsequently become available in respect of suit property as between the Plaintiff and Defendant No.4 in equal proportion. It is submitted that the Fungible FSI having become available subsequent to the development agreement, the sharing thereof and the area calculations on the basis of such sharing are not in accordance with the development agreement. Thirdly, it is submitted that one Mr. Nagin Mehta, who is member of Defendant No.4 Society, acted as a broker for the development between the parties and was paid an illegal gratification for the development agreement. It is submitted that this has vitiated the development agreement between the parties.

5. Learned Counsel for Defendant Nos.2 and 3, in particular, relied upon Clauses No.4.2 and 16.1 of the development agreement. Clause 4.2 of the agreement provides that within six months from the date of the agreement, the developers (the Plaintiff) shall procure and load on the plot TDR/FSI that will be needed for the project and get the plans in respect of the new building sanctioned by MCGM (to confer FSI one of the Net Plot and TDR/FSI equivalent to FSI one of the Net Plot) and furnish to the Society certified true copies of the agreement for acquiring D.R. Certificates evidencing loading of 100% TDR/FSI on the plot. Clause 16.1.1 of the agreement which inter alia deals with the obligation of the members of Defendant No.4 to vacate their existing flats provides that only after the developers have procured and loaded on the plot TDR/FSI that will be needed for the project and got plans sanctioned by the MCGB on that basis, the members are liable to vacate their respective flats. It is submitted that the Plaintiff has not loaded the entire TDR/FSI required for the project. On the other hand, it is the case of the Plaintiff and Defendant No.4 Society, which supports the Plaintiff, that Defendant No.4 had confirmed by a writing that it was sufficient for the developer to initially load TDR to the extent necessary to cover the society members' flats and that TDR/FSI required for free sale area could be loaded later by the Plaintiff. It is submitted by the Plaintiff and Defendant No.4 that the particular provision of the development agreement having thus been waived by Defendant No.4 on behalf of its members, the Plaintiff was within its rights to demand vacant possession of the members' flats. It is submitted that it was on this express basis that the Plaintiff purchased 33% of total TDR, loaded the same on to the suit property and had the plans for the suit building sanctioned upto 10 floors which would take care of rehousing of the existing members of Defendant No.4. It is submitted that on this basis the Plaintiff had proceeded to settle the disputes with M/s. Aum Shiv Enterprises and procured their no objection for redevelopment of the suit property and also furnished a bank guarantee for a sum of Rs.4.8 crores in compliance of the development agreement. It is accordingly submitted that Defendant Nos.1 to 3 are liable to handover possession of their respective flats to the Plaintiff.

6. As far as the Fungible FSI issue is concerned, learned Counsel for Defendant Nos.2 and 3 relied on the provisions of Clause 9.4 of the development agreement, which inter alia provides that if upto the date of the part Occupation Certificate of the new building, there is any change in the D.C. Regulations or any other applicable law whereby any further FSI can be utilised on the property beyond FSI Two (covering the primary FSI of the net plot and TDR/FSI) or if any additional construction is possible exceeding the area reserved for under the development agreement, the same shall inure to the benefit of the developers and the members of Defendant No.4 in equal proportion. It is submitted that by reasons of amendment of the DCR and availability of Fungible area as part of constructable area, additional area had become available for construction and under the relevant clause ought to have been shared in equal proportion as between the Plaintiff and members of Defendant No.4. It is submitted by learned Counsel for Defendant Nos.2 and 3 that the area allotted to Defendant Nos. 2 and 3 is not in accordance with this provision. On the other hand, it is the case of the Plaintiff and Defendant No.4 Society that the issue of Fungible FSI and the sharing thereof as between the Plaintiff and Defendant No.4 was resolved between the parties after the Special General Body Meeting of the members of Defendant No.4 was convened, the aspect of Fungible FSI was discussed with the PMC and resolved as between the Plaintiff and Defendant No.4. It is submitted that a letter confirming such resolution was issued by Defendant No.4 to the Plaintiff and that only after this issue was resolved that the Plaintiff took various aspects towards procurement of TDR, sanction of plans, resolution of the disputes with the erstwhile developers M/s. Aum Shiv Enterprises and furnishing of the bank guarantee, etc. It is submitted that in the premises the relevant provision of the redevelopment in respect of the sharing of the Fungible area stood satisfied.

7. What needs to be considered in this case is, whether in the face of the relevant clauses of the redevelopment agreement dealing with loading of TDR/FSI and sharing of additional area that may become available, the subsequent communications between the parties and conduct of the parties amounts to fulfillment of the promise given by the Plaintiff in this behalf. Parties to a contract are always free to substitute or rescind the entire contract or even modify, alter or vary any individual term or terms of the contract. The promisee may dispense with or remit the performance of the promise or accept any other satisfaction instead of such performance. This is the principle of Sections 62 and 63 of the Contract Act. It was clearly permissible to the parties in the present case to accept loading of TDR/FSI commensurate with the entitlement of extra built up area referable to the flats to be allotted to the members of the Society, as the condition precedent for vacating of the existing accommodations by the members. Learned Counsel for Defendant Nos.2 and 3, however, relies upon Clause 1.2.1 of the agreement which requires that any novation of the agreement must be in writing and signed by the parties. Novation is provided for in Section 63 of the Contract Act. Apart from the provisions of novation, under the provisions of Section 63 of the Contract Act, a party who has the right to demand performance may dispense with or remit the performance or extend the time for performance or accept any other satisfaction instead of performance. This provision excuses a promissor from performing a promise which the other party to the agreement has dispensed with or waived. Neither consideration nor an agreement is necessary for enabling a promisee to dispense with the performance of the promise or accept any satisfaction instead of the promise.

8. Having regard to these principles, it needs to be seen whether there is in fact a dispensation with or remission of performance or acceptance of other satisfaction in place of such performance on the part of Defendant No.4 and its members. At the outset, one submission of the Defendant Nos.2 and 3 may be dealt with. It is submitted that in the present case, individual members of the Society were parties to the development agreement and any dispensation or remission of performance could only be done by such individual members. As an owner of the property and an incorporated body of members, it is really the Society which deals with the redevelopment proposal. In so dealing with the proposal, the Society essentially acts by the rule of majority. Any issue concerning the collective entitlement of its members or even individual entitlement of a member which is to be enjoyed or shared in common with other members, is of necessity decided by this rule of majority. Individual members by reason of their own proprietary rights, do have a say in arriving at such a decision, but cannot claim to have a vetolike power to obstruct any such decision. The facts of the case do show that both the issue of Fungible FSI as well as loading of TDR/FSI on the suit property as a condition precedent for requiring vacant possession from the members, were resolved between the Plaintiff and Defendant No.4. Defendant No.4 Society agreed to accept the Fungible FSI that was sought to be used for flats to be allotted to the members of the Society as well as the loading of TDR relatable to such flats as a condition precedent before the members could be asked to vacate their respective flats. It was on this basis that the Plaintiff was asked to prepare its plans and obtain sanction from the Municipal Corporation. On that basis, the Plaintiff obtained IOD from the Municipal Corporation, settled with the erstwhile developers and furnished the bank guarantee in terms of the development agreement. It was on this basis that the Plaintiff called upon the members of Defendant No.4 to vacate their respective flats and offered and paid compensation for alternative transit accommodation. Eight out of ten members of the Society have accordingly vacated their respective flats and accepted the compensation offered by the Plaintiff.

9. It is submitted by learned Counsel for Defendant Nos.2 and 3 that there is no resolution passed by the general body of members of Defendant No.4 in this behalf. Prima facie it is not necessary that there ought to be a General Body resolution for waiver or remission of performance. Managing Committee of Defendant No.4 is prima facie entitled to act in the matter. No member of society has ever raised any issue concerning the decision of Defendant No.4 Society in this behalf. Based on the written communication of Defendant No.4 Society in this behalf, the Plaintiff has altered its position to its detriment. Any way, it transpires at the hearing of the Notice of Motion that at least eight out of ten members of the Society are clearly in support of such waiver or remission and together with Defendant No.4 support the Plaintiff. In these premises, it can be safely concluded at least at this interlocutory stage that there is a clear dispensation with or remission of the promise as regards the condition precedent of loading of the TDR/FSI and sharing of the fungible area as between the Plaintiff and Defendant No.4.

10. As far as the issue of brokerage paid to Mr. Nagin Mehta is concerned, it is pertinent to note that the brokerage is paid officially and not in a clandestine manner. The brokerage paid by the Plaintiff to Mr. Nagin Mehta is not only for the particular deal between the Plaintiff and Defendant No.4 but also for settling the erstwhile developers and procuring their no objection for redevelopment of the suit property through the Plaintiff. The brokerage paid to Mr. Nagin Mehta is disclosed by the Plaintiff in the plaint itself. It is claimed by the Plaintiff that the payment of brokerage to Mr. Mehta was known to all members, who had no objection to the same. In this behalf, it needs to be noted that Defendant Nos.2 and 3 themselves were aware of the brokerage paid by the Plaintiff to Mr. Nagin Mehta. In a letter addressed by the Advocate of Defendant Nos.2 and 3 to the Advocates of the Plaintiff, Defendant Nos.2 and 3 have referred to the fact of Mr. Nagin Mehta having acted as a broker in the matter of development rights given by Defendant No.4 to the Plaintiff. It lends credence to the case of the Plaintiff that brokerage paid by the Plaintiff to Mr. Nagin Mehta was known to all members of the Defendant No.4 Society and it was paid officially and not in a clandestine manner.

11. Having regard to these facts, the Plaintiff has clearly made out a prima facie case.

12. Even the question of balance of convenience needs to be decided in favour of the Plaintiff and Defendant No.4 Society. Based on the general body resolutions of Defendant No.4 Society, decisions taken therein and communications addressed by the Society to the Plaintiff in pursuance thereof, the Plaintiff has taken various steps including the sanction of the plans, loading of TDR/FSI, settling with the erstwhile developers of the suit property, furnishing of bank guarantee and payment of compensation for alternative transit accommodation to the members of the Society. Since November 2012, eight out of ten members of Defendant No.4 Society have been staying in transit accommodations pending reconstruction of the suit building. Merely on the ground that the entire TDR/FSI is not loaded on to the Suit property, which in any event reflects on the developer's share of the TDR/FSI, as also on the ground that Defendant Nos.2 and 3 have been allotted about 200 sq.ft. plus area less than their entitlement, the entire redevelopment project which involves ten members and eleven flats of the suit building cannot be held up till the Plaintiff obtains final relief in this suit.

13. In that view of the matter, the Plaintiff has made out a case for grant of reliefs in the Notice of Motion. Reliefs would be granted to the Plaintiff subject to paying compensation to Defendant Nos. 1 to 3 towards their proportionate share of corpus as well as advance rent for alternative accommodation pending reconstruction of the suit building and shifting charges. The compensation amounts respectively calculated for Defendant No.1 at Rs. 59,56, 035 and Rs.38,47,720 for Defendant Nos. 2 and 3 are not disputed by learned Counsel for Defendant Nos. 1 to 3. Accordingly, the following order is passed :-

(I) Court Receiver, High Court, Bombay is appointed the Receiver of the suit flats, namely, Flat Nos. 9 and 10 in Midsummer Co-Op. Housing Society Ltd., Plot No.94-B, T.P.S. IV, Linking Road, Santacruz (West), with all powers under Order XL Rule 1 of Civil Procedure Code, 1908 including power to take physical possession of the suit flats;

(II) Defendant Nos.1 to 3 are directed to handover possession of the suit flats to the Plaintiff within a period of four weeks from today. In the event of Defendant Nos.1 to 3 refusing to handover possession of the suit flats to the Court Receiver as directed, the Court Receiver shall take physical possession of the suit flats, if necessary with the help of police.

(III) The Plaintiff to pay compensation of Rs.59,56,035/- to Defendant No.1 and Rs.38,04,720/- to Defendant Nos.2 and 3 towards advance rent for alternative accommodation, shifting charges and proportionate share of corpus of these Defendants. In case Defendant Nos.1 to 3 refuse or any of them refuses to accept the amount of compensation referred to above, the Plaintiff will be at liberty to deposit such amount in Court before the possession of the suit flats is taken over from the Defendants.

(IV) The Plaintiff undertakes to obtain further TDR/FSI necessary to complete the whole redevelopment project, including the sale component, within a period of 12 months of getting vacant possession of the suit building.

(V) Notice of Motion is disposed of accordingly.

(VI) There shall be no order as to costs.

14. Learned Counsel for Defendant Nos. 2 and 3 applies for stay of this order. Considering the fact that Defendant Nos.2 and 3 anyway do not reside in the suit flat and have been granted four weeks time to vacate the suit flat, no further protection is necessary. The Application for stay is accordingly rejected.

Ordered accordingly.