Judgment:
Kumar Swatanter, C.J.
1. Admit. By consent of the learned Counsel made returnable forthwith. Counsel appearing for the respondents waive service. With the consent of the learned Counsel and at their request, the Appeals are taken up for hearing and final disposal.
2. The Appeals arise out of an order passed by a learned Single Judge dismissing a Motion for interim relief in a suit for specific performance. The relief that was claimed was an order of injunction restraining the defendants from developing or creating third party rights in respect of the property which forms the subject-matter of the suit and the appointment of a Receiver in respect of the property.
3. On 28th June, 1994 the appellant entered into an agreement for development in respect of property bearing City Survey No. 422 situated at tower Parel, Mumbai. The agreement was entered into between the appellant, the second and third respondents and Smt. Nalini Kalewar. Nalini Kalewar died and the first respondent is stated to be the executor of her Will.
4. The agreement for development postulated that there were about 110 tenants on the property, the structures thereon being in existence prior to 1st September, 1940. The vendors, under the terms of the agreement assumed the obligation to obtain the consents of the 110 tenants to the development of the property and for accepting alternate accommodation admeasuring 200 sq.ft. in lieu of their old tenements situated on the property. The obligation of the vendors to do so was absolute and unequivocal. The consideration payable under the agreement was Rs. 90 lacs of which an amount of Rs. 4.50 lacs was paid as earnest money deposit. Clause 2(a) of the agreement spelt out the obligation of the vendors to obtain letters of consent of the 110 tenants and provided thus:
The Vendors hereby confirm that they will obtain the requisite agreements and consent letters of 110 tenants of the said property for consenting to the said development and accepting the permanent alternate accommodation of 200 sq. ft. (carpet area) in lieu of their old tenements in the old ckawls, within two months from the date of execution of this agreement.... The aforementioned condition is condition precedent and on failure of the party of the First Party to remove the aforementioned encroachment and/or removal of any structure/structures on the said plot of land and/or obtaining the requisite agreement and consent letters of 110 tenants and the written consent of Shri Shailendra Lamge as provided hereinabove within a period of one month the Party of the Second Part shall be at liberty to terminate die said agreement and shall be entitled to demand the aforementioned amount of Rs. 4,50,000/. However, in spite of the failure on the Party of the First Part to comply with the aforementioned requisition within the prescribed period and in case the Party of the Second Part is desirous of continuing the said Agreement further they shall be at liberty to do so and/or grant extension for fulfilling the said obligation on the part of the First Party by granting the extension of additional period on such mutually agreed terms and conditions between the parties.
5. The next installment of Rs. 4.50 lacs was payable on the vendors fulfilling their obligation of furnishing 110 agreements and consent letters of the tenants. The appellant as purchaser was required to obtain a commencement certificate and permission to reconstruct the building from the Municipal Corporation and the Maharashtra Housing and Area Development Authority on FSI of 1:2 within a period of six months. The balance of the consideration was payable within stipulated intervals of the receipt of the commencement certificate and the commencement of construction. The obligation of the vendors to obtain the consents of the tenants was reiterated in Clause 22 of the agreement which provided as follows:
22. It is expressly agreed by and between the Parties that it shall be express duty of the Vendors to obtain the requisite agreements from all the 110 tenants within the prescribed period of two months from the date of execution hereof. On Vendors' failure to obtain such agreements within the prescribed period, it will be open for the Purchasers to consider the continuance of this agreement. However, if the Purchasers decide to rescind the said contract on the aforementioned failure on the part of the Vendors, the Vendors shall refund the entire amount received by them until that stage to the Purchasers within four weeks from the communication thereof with the right to claim the damages to that effect.
6. Clause 18, however, provided that the appellant as purchaser would be at liberty to negotiate with the tenants for executing agreements for accepting alternate accommodation with the cooperation of the vendors.
7. Now it is an admitted position before the Court that in pursuance of the agreement the appellant paid to the vendors a sum of Rs. 4.50 lacs as part payment of the amount of consideration. On 14th September, 1994 the appellant obtained permission under Chapter 20-C of the Income Tax Act. The requisite certificate under the Urban Land Ceiling and Regulation Act, 1971 was obtained on 23rd January, 1995. The appellant obtained a letter of intent from the Repair Board on 16th May, 1995 and a No Objection Certificate from the Board for carrying out development on the property on 24th August, 1994. Plans for the building to be constructed on the property were approved and an IOD was issued by the Municipal Corporation on 27th June, 1996. According to the appellant, the vendors having failed to perform their obligations under the agreement of obtaining the consent of the tenants a requisition was issued to the vendors by a letter dated 15th September, 1999 followed by a letter to the Repair Board on 3rd December, 1999. The appellant is stated to have met with the representatives of the tenants until February 2000 in order to persuade them to shift to the transit accommodation but without any fruitful result. The appellant addressed letters to the Repair Board on 28th February, 2000, 9th May, 2000, 2nd February, 2001 and 30th March, 2001. MHADA had issued a notice to show cause to the appellant as to why the No Objection Certificate should not be cancelled to which the appellant submitted a reply on 21st May, 2003 explaining the circumstances in which a delay in the commencement of the work had taken place. On 30th July, 2004 a letter was addressed to the Repair Board recording that the tenants had made unreasonable demands as a result of which the work of development could not be commenced.
8. Some time in January 2006 the appellant claims to have learnt that respondent Nos. 1 to 3 had entered into an agreement with respondent No. 4 purporting to confer upon the latter the right to develop the property. The appellant issued a notice to respondent Nos. 1 to 3 on 14th January, 2006 and thereupon to the fourth respondent on 18th January, 2006 to revoke all the agreements and arrangements, if any, between them. Correspondence thereupon ensued and the suit for specific performance was instituted in August 2007. On 21st September, 2007 a Learned Single Judge granted ad interim relief directing respondents 1 to 3 not to create third party rights in respect of the suit property, which held the field until the Notice of Motion was dismissed on 27th February, 2009.
9. Counsel appearing for the appellant submitted that under the terms of the agreement for development the vendors assumed the absolute obligation to arrive at agreements with the 110 tenants on the property agreeing to the development of the property and to the acceptance of permanent alternate accommodation admeasuring 200 sq. ft. in the newly constructed premises. Learned Counsel submitted that the vendors failed to discharge the obligation to do so. On its part, the appellant had obtained a letter of intent and a No Objection Certificate from the Eioard for carrying out development of the property and the Municipal Corporation had furnished its IOD. One of the specific conditions of the IOD was that the consents of all the tenants were required to be obtained. Hence, it was urged that the vendors having failed to discharge their obligation to obtain the requisite consents, there was no breach on the part of the appellant who remained ready and willing to perform the agreement. It was urged that the agreement that was arrived at between the vendors and the Fourth respondent was with notice of the pre-existing agreement with the appellant and that consequently, the Fourth respondent would not be entitled to the benefit of Section 19(b) of the Specific Relief Act, 1961. It was urged that even though the property was to be redeveloped under Development Control Regulation 33(7), that would not obviate compliance by the vendors of the contractual obligations in the agreement for development qua the appellant. The learned Single Judge having accepted the case of the appellant that it was the vendors who had partly defaulted in their primary obligation under the contract, an order of injunction ought to have been passed.
10. On the other hand, it was urged on behalf of the respondents that by their letters dated 2nd February, 2001 and 30th July, 2004 to the Repair Board, the appellants had admitted that they were bound and ready to commence redevelopment and that they had been unable to do so due to the demands of the tenants. The appellants stated that they had in fact approached the tenants but had been unable to settle the dispute with them. Hence, it was urged that the appellant having negotiated with the tenants and having failed to obtain the consents over an inordinately long period of time, the vendors were justified in terminating the agreement on 18th May, 2006. After a public notice on 25th May, 2006, a fresh agreement was entered into by the vendors with the Fourth respondent on 29th December, 2006. The scheme for redevelopment cannot proceed under DCR 33(7) without the consents of the tenants and the Fourth respondent has obtained consents of 85% of the tenants. The appellants failed to achieve any progress from 1994 to 2006 and hence the agreement was terminated. Even after termination, the suit was instituted after a considerable delay. That would disentitle the appellants to equitable relief and their remedy lies in damages.
11. These submissions would now fall for consideration.
12. The terms of the agreement between the parties stipulate that it was the duty of the vendors to obtain consents from all the 110 tenants within a period of two months from the date of the execution of the agreement. If the vendors failed to do so, an option was given to the appellant as purchaser to consider as to whether the agreement should be continued. In the event that the appellant, in turn, decided to rescind the contract, the vendors were obliged to refund the amount received by them. By Clause 22 of the agreement the obligation to obtain the consents of the tenants was cast upon the vendors. During the course of hearing of these proceedings, it has not been in dispute before the Court that the consents of more than 70% of the tenants was obtained by the vendors. The property in question, was a cessed structure and was in existence since 1940. The development of the property which is stated to be an 'A' category cessed structure, within the meaning of the Maharashtra Housing and Area Development Act, 1976, was envisaged under the provisions of Development Control Regulation 33(7) which prescribe an enhanced Floor Space Index. MHADA issued a No Objection Certificate in favour of the appellant on 24th August 1995. The No Objection Certificate was cancelled by MHADA on 14th July 2004 for the reason that even after a lapse of nearly nine years, the appellant had failed to comply with the terms and conditions thereof. The No Objection Certificate was, however, revalidated in 2006 on an application made by the appellant to MHADA. Since no progress had taken place, and acting on a complaint by the tenants, MHADA issued a notice to show cause to the appellant. In reply to the notice, the appellant submitted a letter dated 5th August 2006 together with Bar chart setting out a time schedule within which various requirements would be complied with by the appellant. The appellant envisaged therein that it would complete several tasks within seventy days. MHADA, upon the expiry of the period stipulated therein, cancelled the No Objection Certificate by a communication dated 18th November 2006. In its letter MHADA stated that the tenants had complained that no progress had been carried out in the work since a No Objection Certificate for redevelopment was issued on 24th August 1995. MHADA noted that despite submitting a Bar chart, setting out a schedule for the progress of the work, the appellant had not complied with even a single task. The appellant, according to MHADA, was not interested in the redevelopment of the property and the tenants had lost faith in them. The No Objection Certificate was accordingly cancelled. The agreement between the appellant and respondent Nos. 1 to 3 was cancelled on 18th May 2006 and a public notice came to be issued on 25th May, 2006. The suit for specific performance was instituted in August 2007, nearly fifteen months after the termination of the agreement took place.
13. There is more than one reason as to why, we are of the view that the order passed by the learned Single Judge declining interim relief does not call for interference. First, the appellants have after the termination of the agreement on 18th May 2006, waited for nearly fifteen months to institute a suit for specific performance. The project involved redevelopment of a building which was constructed in 1940. Such structures are classified as 'A' category cessed structures in the Maharashtra Housing and Area Development Act, 1976. Many have faced the ravages of time. A need for the redevelopment of such structures, a large number of which are dilapidated, was a felt necessity. That led to the making of Development Control Regulation 33(7). DCR 33(7) is an important aspect of urban planning. In the structure in question, there are 110 tenants whose need and requirement cannot be lost sight of in evaluating the equities for the grant of interim relief. The tenants, as the material before the Court would show, have evidently lost faith in the capacity of the appellant to carry out the work. Secondly, as already noted above, the obligation to obtain the consents of the tenants was that of the vendors under the terms of the agreement dated 28th June 1994 and under the IOD. There is no dispute about the fact that 70% of the tenants had granted their consents. The existence of the consent of 70% is a threshold requirement under the Development Control Regulation 33(7) for the work of redevelopment to proceed. Evidently, that requirement was met. Section 95A of the Maharashtra Housing and Area Development Act, 1976 was amended by Maharashtra Act 16 of 1998. As amended, the statutory provisions contemplate the submission of a proposal with the written consent of not less than 70% of the occupiers to the Board and the issuance of a No Objection Certificate by the Board for the reconstruction of a building. Thereupon, under Sub-section (2), a provision has been made for summary eviction on the refusal of an occupant to vacate the premises on being approached by the holder of a No Objection Certificate. Despite the enabling provision made in the statute, evidently no steps were taken by the appellant for the redevelopment of the property though the vendors had obtained the consents of 70% of the tenants. Thirdly, the position as it stands at present is that the No Objection Certificate that was granted by MHADA in favour of the appellant has been cancelled. The appellant had, by its letter dated 5th August 2006, committed to MHADA of the observance of a time schedule for performing several tasks including the obtaining of agreements with the tenants within seventy days. Upon the failure of the appellant to do so, MHADA cancelled the No Objection Certificate issued to the appellant. Hence, the redevelopment as envisaged in the agreement between the appellant and the vendors under DCR 33(7) cannot be carried out by the appellant since the No Objection Certificate granted to it stands revoked. For all these reasons, we are of the view that the exercise of discretion by the learned Single Judge for declining the grant of interim relief in favour of the appellant should not be disturbed. The remedy of the appellant must sound in damages.
14. We, therefore, do not find any merit in the Appeals. The Appeals shall accordingly stand dismissed.