Housing Society Ltd. Vs Maharashtra Airport Development On 29 November 2013

Housing Society Ltd. vs Maharashtra Airport Development ...
on 29 November, 2013
Bombay High Court

Housing Society Ltd. vs Maharashtra Airport Development ... on 29 November, 2013
Bench: R.D. Dhanuka
.. 1 .. ARBPL-1999/13
IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L)NO.1999 OF 2013
Chaurangi Builders & Developers
Pvt. Ltd.
Formerly known as Reatox Builders
& Developers Pvt. Ltd.
A company incorporated under the provisions
of the Companies Act, 1956, having its

registered office at 3/341, 1A, Rajiv Co-operative
Housing Society Ltd., Bandra-Kurla Complex,

Bandra (East), Mumbai-400 051. ... petitioner.
V/s.
Maharashtra Airport Development Company

Ltd. (MADC)
A company incorporated under the provisions of
Companies Act 1956 and having its registered
office at 8th floor, World Trade Centre, Cuffe Parade,

Mumbai 400 005. ... respondent.
Indian Kanoon - http://indiankanoon.org/doc/74899218/ 1

Mr R. S. Apte, Senior Advocate a/w Ms Najakiyo i/b P.M.Havnur for petitioner.

Mr D. J. Khambatta, Senior Advocate a/w I. J. Nankani, H. S. Khokawala,
Rahul Totla i/b M/s Nankani & Associates for respondent.
CORAM : R.D.DHANUKA J.
DATED : NOVEMBER 29, 2013.
JUDGMENT :
By this petition filed under Section 37(2)(b) of the Arbitration and Conciliation Act 1996
(hereinafter referred as "Arbitration Act" for short) petitioner seeks to impugn the order dated 12th
November 2013 passed by the Asmita 1/53 .. 2 .. ARBPL-1999/13 learned arbitrator rejecting the
application filed by the petitioner under Section 17 of the Arbitration Act. Some of the relevant facts
which emerge from the pleadings and documents filed by both the parties are summarized as under
:
2. (a) On 24 June 2005, respondent published a tender notice in the newspaper for development of
a modern township of MIHAN and invited offers from the experienced developers for development
of a modern township to meet housing requirement of MIHAN. Vide notification dated 29 th May
2007, the Ministry of Commerce and Industries, Government of India notified MIHAN as Special
Economic Zone (SEZ) pursuant to the provisions of the SEZ Act 2005.
(b) On 22 September 2005, M/s Reatox Builders and Developers who had submitted their bid @
Rs.72 lacs per acre was selected as successful bidder for development of the modern township. A
letter of intent came to be issued in favour of the said builder. On 6 January 2006 the respondent
specified the details of land to be allocated to the said builder. On 2 March 2006, the said builder
paid the first installment towards land cost of Rs.4,46,40,000/- for 31 acres of land to the
respondent. On 17 April 2006 the respondent issued No Objection Certificate (NOC) for
development of the said township subject to final approval of all plans and necessary permissions
from Asmita 2/53 .. 3 .. ARBPL-1999/13 the Planning Authority and all other approvals to be
obtained from the competent authorities. On 26 April 2006, M/s Reatox Builders and Developers
came to be incorporated as a private limited company viz., Reatox Builders & Developers Pvt. Ltd.
On 23 May 2006, respondent issued a Certificate of Confirmation for allocation of 31 acres of land
and confirmed the schedule of the land. On 9 June 2006 Airport Authority of India (Airport
Authority of India) approved height up to 61 meters for the buildings in the modern township. On

22 June 2006, respondent entered into development agreement for development of the modern
township with the appellant. Name of M/s Reatox Builders and Developers Pvt. Ltd. was changed
with the new name M/s Chaurangi Builders and Developers Pvt. Ltd., the appellant herein. The
Terms and Conditions of the development agreement were recorded in the said agreement entered
into by and between the parties. It is the case of the appellant that the appellant obtained financial
assistance by way of working capital limit of Rs.20 crores from bank/financial institute on 28 th
December 2006 and created security interest in favour of the bank/financial institute interalia over
the said land of 31 acres. respondent gave counter guarantee of Rs.20 crores in respect of the said
land to be developed by the petitioner.
On 30 March 2007, respondent issued a commencement certificate for construction of buildings up

to 18 floors on the basis of approved height of Asmita 3/53 .. 4 .. ARBPL-1999/13 61 meters
sanctioned by Airport Authority of India. Appellant paid second installment of Rs.4,46,40,000/- on
24 April 2007 to the respondent towards land cost/development fee.
(c ) On 29 May 2007, Ministry of commerce & Industry, Government of India issued a notification
notifying MIHAN as Special Economic Zone (SEZ) which undertook authorized operation to
develop in non-processing area of SEZ for the residential modern township projects including the
said land of 31 acres allotted to the petitioner in the SEZ entailing compliance of SEZ norms for the
development of the said land. On 24 August 2007 respondent executed Power of Attorney in favour
of the appellant to do various acts in connection with the said land including to sell, dispose of,
assign, transfer nominate and/or alienate in any manner whatsoever, all and singular
tenement/apartments, flats, parking spaces, shops in the modern township. On 16 August 2007,
Ministry of Commerce & Industry, Department of Commerce granted approval to the petitioner in
respect of the multi product SEZ including construction of 2082 flats subject to compliance of
procedure in terms of SEZ Act 2005 and Rules of 2006.
Appellant paid third installment to the respondent on 26 December 2007 in the sum of
Rs.4,46,40,000/-.
Asmita
.. 5 .. ARBPL-1999
(d) It is the case of the appellant that since the respondent did not consider the proposed second
runway in MIHAN, petitioner was requested to obtain height clearance from Airport Authority of
India on account of proposed second runway. It was necessitated in view of the anticipated
reduction of height of the buildings. It is the case of the appellant that vide letter dated 4 th March
2008, appellant informed the respondent that the appellant would not be able to adhere to the time
schedule stipulated in the development agreement and requested for extension of time for

completion of the project.
On 3 April 2008 respondent agreed to allocate additional land of 11.644 acres to the petitioner @
Rs.80 lacs per acre. It is the case of the petitioner that the petitioner was not compensated by the
respondent in respect of the loss suffered by the petitioner in view of the reduction of height but the
said allotment was at the prevailing market value. The petitioner agreed to develop the additional
land of 11.644 acres. On 29 April 2008, the petitioner paid 4th installment to the respondent in the
sum of Rs. 4,46,40,000/- for 31 acres of land.
(e) On 12 May 2008, the appellant and the respondent entered into co-development agreement
which entitled the petitioner to identify customers and unit holders for occupying the units in the
project. On 12 May 2008, petitioner paid a sum of Rs.4,46,40,000/- towards land
costs/development to Asmita 5/53 .. 6 .. ARBPL-1999/13 the respondent in respect of the additional
land of 11.644 acres. On 17 th June 2008, the petitioner paid Rs. 2.20 crores towards land
costs/development in respect of the additional land of 11.644 acres.
(f) On 27 October 2008 Airport Authority of India issued height clearance only up to 43.3 meters
thereby reducing the height by 17.7 meters.
On 13 February 2009, the respondent issued second Commencement Certificate to the petitioner
and granted development permission to construct the buildings with 13 floors with built up area of
213303.560 sq. meters. On 18 November 2009, the petitioner submitted construction schedule for
36 months to the respondent. On 16 February 2010, the petitioner made a request to the respondent
for extension of time to complete the construction and for adjustment of the balance amount
payable by the petitioner towards land costs/development fee in respect of the two lands against the
consideration/purchase price payable by the respondent to the petitioner in respect of the Low
Income Group (LIG) Units to be constructed by the petitioner in view of the alleged loss of about
Rs.80 crores suffered by the petitioner owing to the height reduction by the Airport Authority of
India. On 29 March 2010, the respondent entered into a development agreement and further
executed Power of Attorney in favour of the petitioner for development of the additional land of
11.644 acres on the terms and conditions recorded Asmita 6/53 .. 7 .. ARBPL-1999/13 therein. On 13
July 2010 in the 41 st meeting of Board of Approval on account of objection from Department of
Revenue about sale of residential units of the township to general public, Board of Approval granted
approval for transfer of authorized portion in the non processing area in favour of co-developer
subject to the condition that condition of sale was removed from the agreement between the
developer and co-developer as well as from Power of Attorney granted by the respondent.
(g) On 14 July 2010, the petitioner borrowed term loan of Rs.105 crores from the Vijaya Bank for
completion of the modern township. The sanction terms were further modified on 22 nd September
and 3rd June 2011.
On 14 July 2010, the respondent executed a Letter of Guarantee (Counder Guarantee) of Rs.105
crores in favour of Vijaya Bank and permitted the petitioner to offer the said land of 31 acres and the
additional land of 11.644 acres as security to the bank.

(h) On 22 July 2010, the Airport Authority of India revised the approved height of the buildings in
the modern township by increasing the height from 43.3 meters to 54.3 meters. It is the case of the
petitioner that in the local newspapers at Nagpur an article was published defaming the project and
the petitioner. Objections were raised about the legality of the project by the local media and such
articles published till December 2011. On 24 July Asmita 7/53 .. 8 .. ARBPL-1999/13 2010, the
petitioner and the respondent executed fresh development agreement for development of 31 acres of
land. On 26 July 2010, the development agreement dated 24 July 2010 was registered with the Sub
registrar of Assurances, Nagpur. On 4 August 2010, the Board of Approvalrd of approval
communicated its decision about removal of condition of sale, which necessitated correction in the
development agreement dated 24 July 2010 by way of replacement of term 'sale' with the term
'lease' which correction came to be carried out by executing correction deed on 14 August 2010. The
said correction deed and fresh Power of Attorney were duly registered on 17 August 2010. On 23
August 2010 the petitioner obtained confirmation from the respondent whether the petitioner can
lease the flats in the modern township to general public/persons outside SEZ area anywhere around
the world i.e. for leasing the flat, area/state/country was not restricted.
It is the case of the petitioner that on 30 September 2010 respondent sought to cancel the allotment
of additional land of 11.644 acres to the petitioner and offered the refund of payment made by the
petitioner with interest.
(i) On 27 October 2010, Guidelines came to be issued for development of Special Economic Zone
which restricted sale of units only to persons related to SEZ. On 24 November 2010 the petitioner
submitted drawings for 16 floors as a result of height revision by Airport Authority of Asmita 8/53 ..
9 .. ARBPL-1999/13 India as on 13 January 2011. Based on the progress report it is the case of the
petitioner that the petitioner completed the overall physical work of about 34% in the First City
Project.
(j) On 25 March 2011, Board of Approval directed the Development Commissioner, MIHAN-SEZ to
take strict action against the petitioner for its proposal to sell flats to general public. On 7 April 2011,
the Development Commissioner issued a show cause notice to the respondent for issuing letter
dated 23 August 2010 to the petitioner allowing them to sell the units to general public/persons
outside SEZ. It is the case of the petitioner that that on 6 June 2011, Vijaya Bank granted its
approval for takeover of loan by Indiabulls and assignment & transfer of the security interest in
favour of the Indiabulls. On 17 June 2011, Indiabulls issued sanction note for sanction of loan of
Rs.155 crores to the petitioner. On 18 June 2011, the petitioner requested the respondent to give
consent to the said takeover of the loan by Indiabulls and to transfer the existing counter guarantee
in favour of Indiabulls. On 18 July 2011, the respondent addressed a letter to the Deputy
Commissioner, MIHAN-SEZ and confirmed that imposing the provisions of guidelines on a project
that was started much earlier, appeared to be unfair.
On 26 July 2011, Director, Ministry of Commerce & Industry issued a show cause notice to the
respondent for issuing letter dated 23 August 2010 to the Asmita 9/53 .. 10 .. ARBPL-1999/13
petitioner and calling upon to explain in writing to Board of Approval as to why the letter of
approval granted to them for whole of the area established as MIHAN-SEZ should not be suspended

for a period of one year and why administrator be not appointed to discharge the function of the
Developer.
(k) On 18 August 2011 and 2nd September 2011, petitioner requested the respondent for consent to
Indiabulls and transfer of counter guarantee of Rs.105 crores to Indiabulls. It is the case of the
petitioner that on 13 September 2011 Vijaya Bank certified the construction value of the project
completed so far to be at Rs.213.44 crores. On 14 October 2011, the repayment schedule of term loan
of Vijaya Bank started. On 18 November 2011, petitioner once again requested the respondent to
give consent to Indiabulls for transfer of counter guarantee.
(l) On 2 January 2012, Vijaya Bank conveyed to the petitioner about the term loan account of Rs.105
crores turning non performing asset (NPA). On 21st February 2012, the Vijaya Bank issued a notice
under Section 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest, 2002 calling upon the petitioner to pay the amount due along with interest. On 21
February 2012, the said Vijaya Bank freezed the account of the petitioner at Mumbai branch. In the
month of February 2012, the said Vijaya Bank invoked counter guarantee submitted by Asmita
10/53 .. 11 .. ARBPL-1999/13 the respondent for encashment. It is the case of the respondent that
the said Vijaya Bank has frozen the Fixed Deposits of the respondent lying with the said bank in the
sum of Rs.157 crores. The said Vijaya Bank has also filed proceedings before the Debt Recovery
Tribunal against the petitioner and the respondent in respect of said loan transaction. The petitioner
requested the bank to withdraw the notice vide letter dated 10 April 2012 and by another letter of
even date requested the respondent for giving consent to Indiabulls and to transfer the counter
guarantee. It is the case of the petitioner that on 12 April 2012, the Vijaya Bank granted its approval
for takeover of loan by Indiabulls and assignment and transfer of the security interest in favour of
Indiabulls. It is the case of the petitioner that vide letter dated 18 April 2012, the Vice Chairman and
Managing Director of the respondent forwarded the proposal to its Chairman for sanction of
consent to transfer the counter guarantee from Vijaya Bank to M/s Indiabulls Financial Services
Ltd. This letter was not on record before the arbitral tribunal and is sought to be relied upon by the
petitioner in this proceedings.
(m) On 23 April 2012, Vijaya Bank issued possession notice to the petitioner and obtained symbolic
possession of the three plots which was subject matter of the development agreement. On 28 April
2012, the petitioner requested the Vijaya Bank to restrain from taking any further steps Asmita
11/53 .. 12 .. ARBPL-1999/13 and to withdraw the notices. On 14 May 2012, respondent issued
termination notice to the petitioner calling upon the petitioner to deposit a sum of Rs.121 crores
with the respondent for payment to the bank within seven days. On 17 May 2012, petitioner replied
to the termination notice.
According to respondent, the petitioner did not give any reply on merits of the termination notice
and did not dispute the correctness of the reasons of termination notice issued by the respondent.
On 18 May 2012, petitioner filed writ petition (L) No.1414 of 2012 in this Court impugning the
termination notice dated 14 May 2012. The petitioner obtained ex-parte status quo order by making
an application before the vacation Court on 21 May 2012. On 23 May 2012, Vijaya Bank freezed
accounts of the petitioner at Nagpur branch.

On 1 June 2012 name of the petitioner was changed from Reatox Builders & Developers Pvt. Ltd. to
Chourangi Builders & Developers Pvt. Ltd.
(n) On 25 June 2012, Division Bench of this Court passed an order in the writ petition filed by the
petitioner that the order of status-quo shall not prevent either of the parties from issuing notices. On
16 July 2012 respondent addressed two letters both dated 16 July 2012 and terminated letter of
intent dated 22 September 2005, agreement dated 22 June 2006, Power of Attorney dated 24
August 2007, Agreement dated 24 July 2010, Correction deed dated 14 August 2010 and Power of
Attorney dated 14 August Asmita 12/53 .. 13 .. ARBPL-1999/13 2010 in respect of 31 acres of land
and called upon the petitioner to pay a sum of Rs.5.96 crores and terminated agreement dated 29
March 2010 and Power of Attorney dated 29 March 2010 in respect of additional land of 11.644
acres and called upon the petitioner to pay Rs.3.65 crores. On 21 July 2012, petitioner replied to two
termination letters and denied the allegations. It is the case of the petitioner that joint meeting was
held between the petitioner, officers of bank and the respondent in which the proposal to regularize
term loan of the bank was discussed.
(o) On 10 September 2012 petitioner submitted a fresh proposal to Vijaya Bank to regularize the
term loan of the bank and to issue fresh sanction of Rs.155 crores. On 10 December 2012, Vijaya
Bank rejected the said proposal of the petitioner. On 6 May 2013, Division Bench of this Court
dismissed writ petition No.2850 of 2012 as withdrawn and granted liberty to the petitioner to take
recourse to Dispute Resolution Mechanism provided in Clause 19 of the agreement dated 24 July
2010 and continued ad interim relief for a period of six weeks from the said date to enable the
petitioner to take the appropriate steps. On 17 May 2013, petitioner filed arbitration petition (L)
No.640 of 2013 under Section 9 of the Arbitration Act for interim measures. On 13 May 2013,
petitioner invoked arbitration clause under two development agreements and issued a letter to the
learned arbitrator who was named under the Asmita 13/53 .. 14 .. ARBPL-1999/13 development
agreement who agreed to act as sole arbitrator and gave his consent vide letter dated 15 May 2013.
On 31 May 2013 petitioner filed a statement of claim and application under Section 17 of the
Arbitration Act before the learned arbitrator. On 7 June 2013, learned arbitrator passed an ad
interim order in application filed under Section 17 for a period of six weeks from 7 June 2013. By an
order dated 7 June 2013, then learned arbitrator recused himself from the arbitration proceedings.
On 9 July 2013, this Court passed an order in arbitration petition (L) No.640 of 2013 and appointed
Shri Justice S. P. Kurdukar, former Judge of Supreme Court as the substituted arbitrator by consent
of parties. Both the parties filed their pleadings before the learned arbitrator. Learned arbitrator
continued the order of status quo till 19 August 2013. By an order dated 12 November 2013, learned
arbitrator passed a detailed order refusing to grant the interim measures in favour of the petitioner
and rejected the application filed under Section 17 of the Arbitration Act. Learned arbitrator stayed
the operation of said order dated 12 November 2013 till 25 November 2013 and directed the
petitioner to issue 48 hours notice to the respondent before moving this Court for ad interim order
or interim reliefs. Being aggrieved by the said order dated 12 November 2013, petitioner has filed
this appeal under Section 37 of the Arbitration Act.
Asmita

.. 15 .. ARBPL-1999
(p) On 25 November 2013, the respondent through the learned senior counsel made a statement
that no further action would be taken pursuant to the order passed by the learned arbitrator till 28
November 2013.
In view of the difficulties of the learned senior counsel appearing for the petitioner on 28th
November 2013, learned senior counsel for the respondent extended the statement made by him till
29 November 2013. On 29 November 2013, this Court heard both the learned senior counsel
appearing for parties at length.
3. Mr R. S. Apte, learned senior counsel appearing on behalf of the petitioner made following
submissions :
(a) petitioner has submitted tender on the premise that the height of the buildings which would be
permitted to be constructed on the plots in question was 61 meters. petitioner had submitted plans
accordingly. Height of a building was however reduced by the Airport Authority of India on 27
October 2008 from 61 meters to 43.3 meters and subsequently increased on 27 February 2010 to
54.3 meters. It is submitted that by virtue of reduction of such height from 61 meters to 43.3 meters,
the petitioner who had proposed to construct the buildings consisting of 18 floors was required to
construct buildings consisting of 13 floors only. petitioner had entered into various Asmita 15/53 ..
16 .. ARBPL-1999/13 agreements in respect of the flats proposed to be constructed beyond 13 floors
and had received various amounts from the flat purchasers. In view of the reduction of height by the
Airport Authority of India, several such flat purchasers were required to be accommodated in the
portions from the first floor to 13th floor. Some of the flat purchasers had cancelled their bookings
which were required to be refunded by the petitioner the amounts paid by them. It is submitted that
the additional land allotted by the respondent to the petitioner was at market price and not in lieu of
the compensation demanded by the petitioner due to reduction of height by the Airport Authority of
India.
(b) It is submitted that there was no reference to SEZ in the first agreement entered into between
the parties. In view of the notification issued by the SEZ subsequently imposing restriction on sale,
their sale of flats constructed and proposed to be constructed was seriously affected. The petitioner
was informed for the first time on 7 th April 2011 that such decision was taken by SEZ as far back as
on 8 August 2007. There was negative media campaign against the petitioner during the period
between 23 July 2010 and 18 December 2011 which seriously affected the project of the petitioner
and also financially. petitioner had already invested Rs.300 crores and had already constructed 550
flats which comprise of 34% of the total work awarded. It is submitted that petitioner was not
responsible because of such notification Asmita 16/53 .. 17 .. ARBPL-1999/13 issued by SEZ which
was conveyed to the petitioner for the first time on 7 April 2011 that is much after making huge

investments by the petitioner and completion of about 34% work.
(c ) It is submitted that under the terms of the development agreement, the respondent agreed to
issue counter guarantee in favour of the Vijaya Bank from whom the petitioner borrowed Rs.105
crores. In view of the breaches committed by the respondent, petitioner could not complete the
construction and could not sell the flats and could not repay the loan amount of the Vijaya Bank and
as a result thereof the said account with Vijaya Bank declared the account of the petitioner as NPA.
Vijaya Bank also issued notice under Section 13(2) of the Securitization Act against the petitioner
and took symbolic possession of the plots handed over to the petitioner/developer by the
respondent.
(d) Learned senior counsel then placed reliance on Clause 3.7 of development agreement and
submits that in view of such clause, respondent could not have created any obstruction against the
petitioner from performing their obligation under development agreement and could not have
terminated the agreements. It is submitted that under clause 19.3 read with Clause 20.1 of the
development agreement, no action for termination of development agreements could be taken by
the respondent at all. It is submitted that there Asmita 17/53 .. 18 .. ARBPL-1999/13 is no provision
for termination of development agreements under those agreements. Claim for damages was not an
adequate remedy. The learned arbitrator has rejected the application under Section 17 contrary to
the provisions of the contract by wrong interpretation of the provisions. It is submitted that
respondent ought to have allowed the petitioner to perform their part of contract and ought to have
issued the counter guarantee in favour of M/s Indiabulls. Reliance is placed on clause 3.7 which
provides for furnishing counter guarantee by the respondent. It is submitted that since no counter
guarantee was issued by the respondent in favour of Indiabulls though Vijaya Bank had agreed for
transfer of loan, Vijaya Bank took coercive steps against the petitioner, freezed the accounts of the
petitioner, declared the account of the petitioner as NPA and took symbolic possession of the plots.
(e ) Learned senior counsel submits that in view of the violation of SEZ norms committed by the
respondent, SEZ has issued show cause notices to the respondent. Learned senior counsel submits
that the SEZ withdrew the embargo only on 28 November 2011. It is submitted that the respondent
has committed fraud upon the petitioner by suppressing the notification issued by SEZ much earlier
and thus termination was bad and illegal on this ground alone. Learned arbitrator has
misunderstood the submissions of the petitioner regarding allegations of fraud in the impugned
order and has not considered Asmita 18/53 .. 19 .. ARBPL-1999/13 those submissions.
(f) Learned senior counsel placed reliance on a letter/note dated 18 April 2012 annexed at page 907
of the appeal paper book signed by the Vice Chairman and Managing Director of the respondent to
the Chief Minister/Chairman of the respondent recommending the proposal for approval. Learned
senior counsel submits that under the said proposal, the Vice Chairman of the respondent agreed
that it was worthwhile to consider the proposal of the petitioner to issue counter guarantee to M/s
Indiabulls Financial Services Ltd., otherwise the respondent was unable to pay Rs.105 crores to
Vijaya Bank which shall adversely affect the credibility of the respondent in the market and would
have repurcussion on the image of the respondent as well as the Government. The learned senior
counsel sought to place reliance upon some of the paragraphs of the said note dated 18 April 2012 in

support of his submission that the respondent has suppressed the said writing though the learned
arbitrator had directed the respondent to furnish inspection of the documents. The said writing was
relied upon to submit that the respondent has committed fraud upon the petitioner. Based on this
writing, learned senior counsel submits that even according to respondent, respondent would be
unable to pay even Rs.105 crores to Vijaya Bank and thus if petitioner succeeds in arbitration
proceedings, petitioner would not be Asmita 19/53 .. 20 .. ARBPL-1999/13 able to recover any
amount from the respondent and thus learned arbitrator ought to have stayed the termination. It is
submitted that the petitioner thus have good chances of succeeding in their claim for specific
performance before the learned arbitrator and for declaration that the termination effected by the
respondent is totally bad and illegal. Learned senior counsel submits that the petitioner had applied
for copy of the said writing under the provisions of Right to Information Act and has obtained a copy
thereof. Mr Khambatta, learned senior counsel for the respondent strongly opposed the reliance
placed by the petitioner on this writing on the ground that this writing was not part of the record
before the learned arbitrator and thus cannot be relied upon by the petitioner in this proceedings for
the first time. It is also opposed on the ground that the said writing is an opinion of the Vice
Chairman and admittedly the said opinion/proposal of the Vice Chairman of the respondent has not
been accepted or approved by the Chairman of the respondent.
(g) Mr Apte, learned senior counsel then submits that the arbitral tribunal has not considered the
entire matter in correct perspective and has rejected the arbitration application filed by the
petitioner without considering all the relevant submissions made by the petitioner. Learned senior
counsel sought to tender additional affidavit affirmed on 25 November 2013 for placing certain
additional facts on record. Mr Khambatta learned senior Asmita 20/53 .. 21 .. ARBPL-1999/13
counsel strongly opposes tendering of affidavit at this stage on the ground that though the said
affidavit was affirmed as far back as on 25 November 2013 and the matter was moved by the
petitioner before this Court on 25 November 2013, copy thereof was not served upon the respondent
which shows the malafide intention of the petitioner to somehow delay the outcome of this
proceedings. Learned senior counsel objected to this affidavit on the ground that no new facts can be
brought on record in this appeal filed under Section 37 of Arbitration Act for the first time which
was not part of the record before the learned arbitrator.
4. Mr Khambatta learned Senior Counsel appearing for the respondent made the following
submissions :
(a) Letter of intent was issued in favour of the petitioner on 22.9.2005 for development of the
modern Township. The petitioner was fully aware of the notification issued by SEZ. My attention is
invited to the Co-
Development Agreements entered into between the petitioner and the respondent on 12.5.2008 and
more particularly recital (f) which records that the petitioner had been granted formal approval for
setting up a multi product SEZ township by the Ministry of Commerce and Industries, Government
of India vide letter dated 6.11.2006 and by the Government of India, Ministry of Asmita 21/53 .. 22 ..
ARBPL-1999/13 Commerce on 29.5.2007 pursuant to the provisions of Special Economic Zone Act,
2005. The parties had agreed to develop the plots as per SEZ Act, 2005 and SEZ Rules 2006. Under

clause 1.1.1 it was agreed that the said agreement shall be Co-development agreement along with
Annexures attached thereto and shall include modifications, alterations, additions or deletion
thereto made in the agreement after the date of execution of the said agreement subject to the
provisions of SEZ Act 2005 and SEZ Rules,2006. Clause 2 provided that the Co-Developer would be
entitled to identity the customers for identifying the plots put up in units which was as per the
agreement and subject to obtaining all necessary permissions required in the meeting of obligations
of the SEZ Act, 2005 and SEZ Rules, 2006. It is submitted that the petitioner was thus fully aware
about their obligations that the lands were covered by SEZ areas and/or subject to notification
issued by the government under the provisions of SEZ Act and SEZ Rules.
(b) It is submitted that the Airport Authority of India had reduced the height and thereafter further
increased the height of the buildings. The petitioner continued to work and did not terminate the
agreements inspite of reduction of height by AAI. My attention is invited to the letter dated 3.4.2008
addressed by the respondent to the petitioner allotting additional land which worked down to11.644
acres to make good the area loss which had taken Asmita 22/53 .. 23 .. ARBPL-1999/13 place due to
change of height on various conditions recorded therein. The petitioner accepted the allotment of
the additional land admeasuring 11.644 acres and was satisfied with the said plot. It is submitted
that the petitioner was thus fully compensated in respect of the area loss due to change of height by
the Airport authority of India and thus could not make any grievance in respect of reduction of
height by the Airport Authority of India. The petitioner also did not make any further claim nor
referred the dispute in respect of the compensation and accepted the additional plot of land and
entered into a separate agreement in respect thereof. It is submitted that the petitioner has finally
entered into a Final Development agreement in respect of the said additional plot of land on
29.3.2010 and Final Development Agreement in respect of 31 acres on 24.7.2010. It is submitted
that the petitioner was fully aware of the restrictions imposed by the SEZ on sale of the tenements
when co-development Agreement was entered into between the parties.
(c) Learned Senior Counsel placed reliance on clause 2.5.1 of the Development Agreement and
submits that the petitioner was obliged to complete the construction within 24 months from the
date of signing of the power of attorney. It is submitted that even according to the petitioner, till the
month of January, 2011 the petitioner could complete only 34 % of the work.
Since January, 2011 the petitioner had stopped the work on the plot Asmita 23/53 .. 24 ..
ARBPL-1999/13 admeasuring 31 acres and has not commenced any work on the plot admeasuring
11.644 acres. The learned senior counsel placed reliance on clause 16 (i) (ii) (v) and (vi) which
provides for some of the events of default.
It is submitted that the petitioner had not paid the entire development fee and/or revenue share
payable in accordance with the provisions of the Agreement. The petitioner committed material
breach of the provisions of the agreement by repudiating the provisions by declaring themselves not
to be bound for enforcement and initiated measures to enforce the counter guarantee furnished by
the respondent and got freezed the fixed deposits of the respondent lying with Vijaya Bank. The
petitioner did not adhere to the schedule of construction and did not furnish to the respondent the
implementation of plans and programmes which the petitioner was under an obligation to furnish

regularly from time to time. Since the petitioner did not make any payment to Vijaya Bank the said
bank initiated measures under section 13 (4) of the Securitisation Act by taking possession of the
two plots on 23.11.2012 and filed proceedings before the Debt Recovery Tribunal against the
respondent also. The learned senior counsel submits that the respondent was thus, justified in
terminating the Development agreement. The petitioner did not give any reply controverting the
reasons recorded in the termination letter and gave a very vague and cryptic reply. My attention is
invited to clause Asmita 24/53 .. 25 .. ARBPL-1999/13 7.5 of the Development Agreement which
records that the developer shall be solely responsible for arranging of the funds and shall act in
accordance with the provisions of the Agreement and standards of reasonable and prudent
developer. It is submitted that the respondent was thus not liable to issue a fresh counter guarantee
in favour of Indiabulls.
(d) In so far as the submission of the petitioner that there is no right of termination provided under
the Development Agreement and thus the termination was bad and illegal on that ground alone is
concerned, Mr.Khambatta learned senior Counsel submits that in view of the events of default
having taking place and since the petitioner did not rectify the breaches, the respondent was
justified in terminating the Development Agreement. If according to the petitioner the respondent
was responsible for non-compliance of the terms of the contract, even the petitioner could have
terminated the Agreement. It is submitted that power to terminate the Agreement in case of breach
vests under the provisions of the contract Act and even if there was no specific power in the
Development Agreement,it did not preclude either of the party to terminate the contract in the event
of other party committing breaches. It is submitted that the learned Arbitrator was thus, right in
rejecting the application filed by the petitioner.
Asmita
.. 26 .. ARBPL-1999
(e) It is submitted by the learned senior counsel that the petitioner had proposed that the
respondent shall furnish the counter guarantee for 36 months. No work was re-started by the
petitioner after January, 2011. The petitioner was never ready and willing to carry out the work
within the stipulated period of time and even after November, 2011. My attention is invited to the
sanction note dated 17.6.2011 from M/s Indiabulls which records that the said company had
proposed to sanction loan in favour of the petitioner up to 155 crores in two trenches, the first trench
for not exceeding 36 months from the date of first disbursement of the said loan subject to
submission of corporate guarantee by the respondent and subject to mortgage of the lands of the
respondent on which the petitioner was required to carryout the entire construction. My attention is
drawn to the contract provisions which provides that the petitioner to carry out the entire
construction within 24 months from the date of issuance of power of attorney. It is submitted that
thus the respondent was not liable or obliged to issue fresh counter guarantee on the terms

proposed by the petitioner and M/s Indiabulls.
(f) Mr. Khambatta learned senior counsel invited my attention to the application filed by the
petitioner under section 17 of the Arbitration and Conciliation Act,1996 before the learned
Arbitrator and more particularly para 67 thereof. It is the case of the petitioner themselves that in
order to Asmita 26/53 .. 27 .. ARBPL-1999/13 successfully complete the modern township the
respondent was obliged to do various acts such as further extension of time for approval of the
project, renewal of technical approval of the petitioner and the validity for further 10 years,
submission of counter guarantee, to afford loan to the project give consent to transfer and to secure
the investors. It is submitted that petitioner's own pleadings filed before the learned Arbitrator
demonstrates that the petitioner was not ready and willing to comply with their part of the
obligations. The learned senior counsel also invited my attention to the Writ petition filed in this
Court (Writ Petition No.2850 of 2012) by the petitioner and in particular para 4 in which it is
averred by the petitioner that the petitioner had prepared for all the arrangements for projects and
required various compliance from the respondent that is withdrawal of termination orders
forthwith, renewal of the Development Agreement in respect of 31 acres and 11.644 acres for next 10
years to complete the project, renewal of fresh technical approvals having validity up to 10 years,
submission of counter guarantee to the bank for its loan to the project,Execution of tripartite
Agreement etc. Even in the rejoinder filed before the learned Arbitrator the petitioner contended
that the petitioner would require 10 years extention for completion of the project. Learned senior
Counsel submitted that the petitioner did not terminate the Development Agreement and was thus,
bound Asmita 27/53 .. 28 .. ARBPL-1999/13 to complete the construction as per the Development
Agreement and was not discharged with compliance of their obligations under those two
agreements.
(g) The petitioner admittedly has no money and was not in a position to arrange for any funds, when
petitioner stopped construction.
Learned senior counsel submit that in the arbitration proceedings the petitioner has already
quantified the claim of damages in the sum of Rs.68,69,67,9,188/-. It is submitted that the
petitioner cannot seek specific performance of these agreements. In any event if the petitioner
succeeds in the arbitration proceedings the petitioner would be compensated in terms of money.
(h) Mr. Khambatta learned Senior Counsel appearing for the respondent invited my attention to the
ad interim order passed by this Court in Writ Petition No.2850 of 2012 and submits that the said
order was obtained by the petitioner without issuing any notice to the respondent from the vacation
court. Status quo order passed by the vacation court continued from time to time. He placed reliance
on the order passed by this court in Arbitration Petition (L) No.629 of 2013 between he same parties
by which order this Court has prima facie held that termination of the contract cannot be stayed by
this Court under section 9 of the Arbitration and Conciliation Act, 1996.
(i) The learned Senior counsel placed reliance on the Judgment of Asmita 28/53 .. 29 ..
ARBPL-1999/13 the Supreme Court in COX AND KINGS INDIA LIMITED VS INDIAN RAILWAYS
CATERING AND TOURISM CORPORATION LIMITED reported in (2012) 7 Supreme Court Cases

587 and in particular para 26 in support of his submissions that remedy of the petitioner would lie
in an action for damages. Para 26 of the said Judgment of the supreme court in case of COX AND
KINGS LIMITED reads thus :
" It is no doubt true that the petitioner has invested large sums of money in the
project, but that cannot entitle it to pray for and obtain a mandatory order of
inunction to operate the train once the lease agreement arrangement had been
terminated. We are also unable to accept Mr.Rohatgi's submission that the joint
venture agreement was akin to a partnership. Such submission had been rightly
rejected by the Division Bench. As rightly pointed out by the Division Bench of the
High Court, the petitioner's remedy if any, would lie in an action for damages against
IRCTS for breach of any of the terms and conditions of the Joint venture agreement
and the memorandum of understanding. "
(j) Mr Khambatta learned Senior Counsel appearing for the respondent placed
reliance on the Judgment of this Court in case of MAYTAS INFRA LIMITED vs
UTILITY ENERGYTECH AND ENGINEERS PVT.LTD & ORS 2009 (4) Bom C.R.143
and in particular para 11 thereof in support of his submissions that the Court cannot
compel a party to continue with the contract. It is difficult for the Court to supervise
the performance of the contract based upon such type of public project. Para 11 of the
said Judgment reads thus :
" The Court cannot compel the respondent to continue with the contract. It is difficult
for the court even to supervise such performance of contract, based upon such type of
public project,I see there is no material and reason to grant interim injunction as
sought Asmita 29/53 .. 30 .. ARBPL-1999/13 by invoking section 9 of the Act. "
(k) Learned Senior counsel then placed reliance on the Judgment of this Court in the
case of MILAN COMMERCIAL VS ASIAN HEALTHCARE reported in (2010) 2
Bom.C.R. 295 and in particular paras 56 and 57 in support of his submissions that in
case of a commercial contract if parties had taken a decision based on commercial
wisdom and material available with them and terminated the contract and enter into
a fresh contract the Court cannot compel such party to continue with the
work/project only through the debarred party. The facet and importance of
completion of the project within the stipulated time just cannot be overlooked. Paras
56 and 57 of the said Judgment reads thus :
56. " Once in a commercial contract like this, if parties have taken decision based
upon the commercial wisdom and material available with them, and terminated the
contract and entered into fresh contract, the Court cannot compel such party to
continue with the work/project only through the debarred party. The facet and
importance of completion of the project within the stipulated time just cannot be
overlooked. The contract, as alleged, if terminated illegally and/or any breach of
various clauses the aspect of compensation/damages subject to proof and the

evidence need to be kept in mind while considering the case of the plaintiff or the
supporting defendants. (Maytas Infra Limited vs Utility Energytech and Engineers
Pvt.Ltd & ors) 2009 (4) Bom C.R. 143 (O.S.)
57. " Timely completion of the project was the object of the company and the JVA.
The plaintiff just cannot defend/support company's defaults and financial unstability
and breaches of the obligations, to claim injunction, interim relief in such fashion. All
these factors, in my view goes against the plaintiff and other supporting defendants."
(l) On the issue whether the contract could be terminated though Asmita 30/53 .. 31 ..
ARBPL-1999/13 there was no specific clause under those agreements for termination
is concerned, Mr. Khambatta learned senior Counsel placed reliance on the
Judgment of the Delhi High Court in case of RAJASTHAN BREWERIES LIMITED
VS STROH BREWERY COMPANY reported in AIR 2000 DELHI 450 in para 20 in
support of his submissions that even in the absence of specific clauses the parties
could terminate the agreement in the event of happening of the events specified
therein in the contract Para 20 of the said Judgment reads thus :
20. " Even in the absence of specific clause authorising and enabling either party to
terminate the agreement in the event of happening of the events specified therein
from the very nature of the agreement, which is private commercial transaction, the
same could be terminated even without assigning any reason by serving a reasonable
notice. At the most, in case ultimately it is found that termination was bad in law or
contrary to the terms of the agreement or of any understanding between the parties
or for any other reason, the remedy of the appellants would be to seek compensation
for wrongful termination but not a claim for specific performance of the agreements
and for that view of the matter learned single Judge was justified in coming to the
conclusion that the appellant had sought for an injunction seeking specifically
enforce the agreement. Such an injunction is statutorily prohibited with respect of a
contract which is determinable in nature. The application being under the provisions
of Section 9 (ii) (e) of the Arbitration and Conciliation Act, relief was not granted in
view of Section 14 (I) (c) read with Section 41 of the Specific Relief Act. It was rightly
held that other clauses of Section 9 of the Act shall not apply to the contract, which is
otherwise determinable in respect of which the prayer is made specifically to enforce
the same. "
(m) Mr Khambatta learned senior Counsel for the respondent then submitted that
the petitioner ought to have shown readiness and willingness all through out from the
beginning till the end for seeking specific performance of the agreement which the
petitioner failed to demonstrate before the learned Asmita 31/53 .. 32 ..
ARBPL-1999/13 Arbitrator in these proceedings.
(n) In so far as the internal note dated 18.4.2012 annexed at Exhibit-N to the Petition, is concerned,
it is submitted that the said document was not relied upon before the learned Arbitrator and cannot

be considered by this Court for the first time. It is submitted that in any event the respondent did
not take any action on the said opinion of the Vice-Chairman which was for approval of the
Chairman of the respondent. No action on the said note was taken by the respondent. It is submitted
that in any event since no decision was taken and was not conveyed to the petitioner, no reliance on
such internal note can be placed by the petitioner. If the said document would have been produced
by the petitioner before the learned Arbitrator by filing an Affidavit, respondent could have been
given an opportunity to explain the said note.
The petitioner cannot be thus permitted to rely upon the said note which is in the nature of opinion
expressed by the Vice-Chairman of the respondent on which no action is taken by the respondent.
The said proposal given by the Vice-Chairman does not give any right in favour of the petitioner.
(o) In so far as the proposal regarding counter guarantee in favour of M/s Indiabulls is concerned, it
is submitted by the learned Senior Counsel that the said proposal had already been rejected by the
respondent as far back as in the month of May 2012.
Asmita
.. 33 .. ARBPL-199
(p) it is submitted that the respondent is proposing to
counter claim against the petitioner before the learned Arbitrator. In view of the defaults committed
by the petitioner in not clearing the dues of Vijaya Bank the said Vijaya Bank has filed proceedings
against the petitioner as well as the respondent before the Debt Recovery tribunal by taking
possession of the lands which was handed over to the petitioner by the respondent for development.
The fixed deposits of Rs.117 crores which was deposited by the respondent with Vijaya Bank as and
by way of security has been freezed by the said Vijaya Bank. The petitioner thus cannot plead that
the respondent did not have funds to pay to the petitioner their alleged dues.
(q) In so far as the allegation of fraud made by the petitioner against the respondent are concerned,
it is submitted by Mr Khambatta learned senior Counsel that the petitioner first filed a Writ petition
in this Court and thereafter withdrew the said Petition with liberty to file arbitration proceedings
and got the Arbitrator appointed. In the written arguments filed before the learned arbitrator the
petitioner pleaded fraud and submitted that in view of such allegations of fraud involved, the matter
was required to be referred to the civil court. It is submitted that the petitioner thus deliberately
delayed the proceedings by raising all sorts of frivolous objections and got the status quo order

continued which is causing serious prejudice to the rights of the Asmita 33/53 .. 34 ..
ARBPL-1999/13 respondent. It is submitted that the learned Arbitrator has thus rejected the plea of
fraud raised by the petitioner.
(r) In so far as the affidavit filed on 25.11.2013 sought to be tendered by Mr Apte learned senior
counsel for the petitioner is concerned the learned senior Counsel for the respondent strongly
protested against tendering of such an affidavit at this stage. Learned senior counsel pointed out
that though the said Affidavit was affirmed on 25.11.2013 when this matter was on board, the
petitioner deliberately did not serve copy thereof and seeks to tender the affidavit today, after
completion of substantial arguments, with a view to further delay the outcome of these proceedings
and with a view to get the status quo order continued. It is submitted that in any event this Court
cannot permit the petitioner to rely upon the additional affidavit at this stage.
(s) It is lastly submitted by the learned senior counsel that the learned Arbitrator has dealt with each
and every issue at length and has taken a prima facie view that the termination cannot be stayed and
the order of the learned Arbitrator being not perverse, this court shall not interfere with such
reasoned order passed by the learned Arbitrator. Mr Khambatta invited my attention to the findings
recorded by the learned Arbitrator in the impugned order.
Asmita
.. 35 .. ARBPL-1999/
5. In the rejoinder, Mr Apte learned Senior Counsel appearing for the petitioner submits that if the
petitioner would not have been ready and willing to comply with their part of the obligations the
petitioner would not have invested more than Rs.300 crores. Since the petitioner has already
invested more than 300 crores and 34 % of the work was already completed it was not possible for
the petitioner to terminate the contract and to come out of the project. It is submitted that M/s
Indiabulls is a registered financial institution which had already sanctioned substantial amounts of
loans but in view of the respondent refusing to furnish bank guarantee in favour of M/s Indiabulls
the said transaction did not materialise. The counter guarantee furnished by the respondent in
favour of Vijaya Bank is without any time limit.
It is submitted that the respondent has not rejected the proposal of the petitioner to submit the
guarantee in favour of M/s Indiabulls on the ground that the said company was seeking counter
guarantee for a period of 36 months. It is submitted that the petitioner has not abandoned the work.
The meetings were held from time to time between the parties till September, 2012. It is submitted
that even today, various investors are ready to purchase the property and to lend various amounts
and the petitioner is ready and willing to recommence the project. It is submitted that the order thus
passed by the learned arbitrator deserves to be set aside and the status quo order shall Asmita 35/53

.. 36 .. ARBPL-1999/13 continue till the disposal of the arbitration proceedings.
6. Mr R. S. Apte learned senior Counsel for the petitioner placed reliance on the Judgment of the
Supreme Court in the case of S.P.CHENGALVARAYANAIDU VS. JAGANNATH reported in AIR
1994 SUPREME COURT 853 in support of his submissions that withholding vital documents which
are relevant to a litigation amounts to fraud on the Court. It is submitted that since the respondent
did not furnish the note submitted by the Vice Chairman of the respondent which clearly
demonstrates breach of the respondent and their proposal to issue counter guarantee in favour of
the M/s Indiabulls, the said document being vital documents having been suppressed by the
respondent thus in view of such fraud committed by the respondent, the impugned order be set
aside and the learned arbitrator be directed to consider the said documents of the respondent. In so
far as the judgment relied upon by Mr.Khambatta are concerned, Mr.Apte submitted that those
judgments are not applicable to the facts of this case and are not impermissible.
7. I have given my anxious consideration to the rival submissions made by both the learned Senior
Counsel.
Asmita
.. 37 .. ARBPL-199
REASONS AND CONCLUSIONS :
8. A perusal of the Development Agreements, entered into between the parties it is clear that the the
respondent had proposed to construct a modern township in order to meet housing requirements of
MIHAN and was a public project. The petitioner was issued a letter of intent. The petitioner was
required to develop the plots of land in accordance with the terms and conditions recorded in the
letter of intent and in the development agreement.
The petitioner was also under obligation to comply with all the provisions of law and the conditions
as may be imposed by the authorities. Airport authority of India Ltd had approved the height up to
61 meters of the buildings in the modern townships. Subsequently, the height was reduced by the
Airport Authority of India Ltd from 61 meters to 43.2 meters on 27.10.2008 and subsequently
increased on 27.2.2010 to 54.30ft. The petitioner had made a claim for compensation in view of the
area reduced due to reduction of height originally permitted. The respondent had considered such
representations and claim of the petitioner. Vide letter dated 3.4.2008 the respondent informed the
petitioner that the respondent had agreed to make the good loss which had taken place due to

change of height on various conditions set out therein. The petitioner was allotted exact area of land
which worked out to 11.644 acres on payment of Rs.80,00,000/- per acre. The petitioner accepted
the said Asmita 37/53 .. 38 .. ARBPL-1999/13 allotment made by the respondent and entered into
the Development Agreement in respect of that plot on the terms and conditions recorded therein.
The learned Arbitrator has considered this issue at length in para 13 to 15 of the impugned order.
The petitioner was fully aware of the topography of the project and were aware that as the said plot
was adjacent to the Airport at Nagpur, clearance from the Airport Authority of India Ltd was
necessary.
9. It is not in dispute that inspite of reduction of height, the petitioner accepted the additional plot of
land and chose to enter into final development agreement on 24.7.2010 and second Development
agreement on 29.3.2010. The learned Arbitrator has in my view, rightly rendered a prima facie view
that the petitioner could not attribute any delay to the respondent.
The petitioner had with open eyes and with full knowledge that certain approvals and permissions
would be necessary from the Airport Authority of India Ltd had entered into a Development
Agreement on 22.6.2006 as well as Final Development Agreement dated 24.7.2010 and has thus
rightly rejected the submissions of the petitioner that the delay was attributable on the part of the
respondent due to change of height by the Airport Authority of India Ltd.
10. As far as the submission of Mr.Apte learned senior Counsel for the Asmita 38/53 .. 39 ..
ARBPL-1999/13 petitioner that in view of the restrictions of sale introduced by SEZ during the
execution of the project by the petitioner and in view of the negative media campaign against the
petitioner during the period from 23.7.2010 to 18.12.2011, the respondent not having informed
about the notification to the petitioner the project of the petitioner got effected resulting in financial
problem is concerned, it is not in dispute that the Notification was issued by SEZ on 29.5.2007. A
perusal of the co-development agreement dated 12.5.2008 entered into between the parties clearly
indicates that the schedule lands proposed to be developed operated and maintained by the
Co-developer was under process of SEZ for the township, the developer had been granted formal
approval for setting up of multi-project by the Ministry of Commerce and Industry, Government of
India vide letter dated 6.11.2006 and further vide letter dated 29.5.2007 pursuant to the provisions
of Special Economic Zones, 2005 authorising the operations and known processing for residential
modern township project. The Co-developer had proposed that he should be permitted to apply to
the board of approval under section 3 (12) of the Special Economic Zone, 2005. The Board had
recognised the petitioner a Co-
Developer. The petitioner was described as the Co-Developer under the said Co-development
Agreement. The respondent was described as the developer.
Thus, it is clear that at least on the date of execution of the co-development Asmita 39/53 .. 40 ..
ARBPL-1999/13 agreement on 12.5.2008 the petitioner was fully aware of the notification issued by
the government.

11. I am inclined to accept the submissions made by Mr.Khambatta learned senior Counsel for the
respondent that the petitioner had knowledge about the applicability of the provisions of SEZ Act
and SEZ Rules and the notification issued by the Government from time to time which was made
applicable to the agreements entered into between the parties. The petitioner did not raise any such
issue even when the petitioner entered into two final development agreements on 29.3.2008 and
24.7.2010 in respect of the plots admeasuring 11.644 acres and 31 acres respectively. The learned
Arbitrator has dealt with this issue in paras 16 to 18 of the impugned order. The learned Arbitrator
has prima facie held that it was made clear to the petitioner about the status of the land and
consequently of the project they had agreed to complete the project within 24 months. The learned
Arbitrator rightly rejected the contentions of the petitioner that they were not knowing about the
SEZ Rules and such allegations were far from truth and an after thought attempt and was
accordingly rejected. In my prima facie view, the findings of the learned Arbitrator is correct and no
interference is warranted.
Asmita
.. 41 .. ARBPL-1999/13
12. In so far as the submission of Mr.Apte learned senior Counsel for the petitioner that it was
obligation on the part of the respondent to issue a counter guarantee in favour of the M/s Indiabulls
in terms of clause 3.7 is concerned, it is not in dispute that the respondent had furnished counter
guarantee in favour of Vijaya Bank to secure the loan of Rs.105 crores availed of by the petitioner.
The petitioner committed default in making repayment of the loan to Vijaya Bank as a result
whereof the said Vijaya bank declared the accounts of the petitioner as non-performing assets and
issued a notice under section 13 (2) of the Securitisation Act. The said Vijaya Bank also invoked the
counter guarantee issued by the respondent in the sum of Rs.105 crores and freezed fixed deposit of
Rs.117 crores which was given as a security to the Vijaya Bank by the respondent. It is not in dispute
that the said Vijaya Bank has already filed proceedings against the petitioner and the respondent
before the Debt Recovery Tribunal. On perusal of clause 3.7 of the Agreement dated 24.7.2010 it is
clear that the counter guarantee required to be furnished by the respondent was for loan as per
approved DPR and approved by the respondent and such a guarantee was to be valid till end of April
2012 unless further extended. On a perusal of sanction letter of M/s Indiabulls, it is clear that M/s
Indiabulls had proposed to sanction loans to the petitioner on the condition that the said loan was to
be in two trenches first trench to be for a period of 36 Asmita 41/53 .. 42 .. ARBPL-1999/13 months.
According to the said sanctioned note one of the conditions was that the respondent shall furnish
counter guarantee for the sum of the amounts sanctioned.
13. In my view, Mr.Khambatta learned Senior Counsel appearing for the respondent is right in his
submission that the respondent was not bound to furnish any counter guarantee on fresh terms and
conditions not agreed under the Development Agreement and also on the ground that the petitioner

had already committed default to Vijaya Bank as a result thereof counter guarantee already
submitted by the respondent was invoked and fixed deposits of Rs.117 crores lying with Vijaya Bank
was freezed. On perusal of the pleading filed before the learned Arbitrator by the petitioner and in
the Writ Petition filed in this Court which was forming part of the record before the learned
Arbitrator and in this court, it is clear that the petitioner wanted to seek various directions against
the respondent. It was averred by the petitioner that the petitioner would be able to complete the
project after various terms and conditions proposed by the petitioner including the submission of
counter guarantee for a period of 10 years was complied by the respondent. In my prima facie view,
the respondent was right in rejecting the proposal of the petitioner that the respondent shall submit
the counter guarantee in favour of Asmita 42/53 .. 43 .. ARBPL-1999/13 M/s Indiabulls on the terms
and conditions of loan approved by M/s Indiabulls.
14. A perusal of clause 7.1 of the Agreement indicates that the petitioner was solely responsible for
arranging the funds required for development in accordance with the provisions of the agreement
and in accordance with the standard of a reasonable prudent developer. The learned arbitrator has
dealt with this issue at length in para 19 to 26 of the impugned order. The learned arbitrator has
taken a prima facie view that the respondent was justified in exercising their discretion that no
counter guarantee be given afresh in favour of the financial company like M/s Indiabulls and the
learned arbitrator would thus not interfere with the discretion exercised by the respondent. The
learned arbitrator has interpreted clause 3.7 of the agreement and also clause 7.1 and has rendered a
prima facie finding that the petitioner was responsible for arranging for the funds. The proposal of
M/s Indiabulls was for Rs.155 crores and extension of time for 36 months from the date of sanction
was inconsistent and not compatible with the terms and conditions entered into between the parties.
It is held that no fault could be found with the respondent. It is held that respondent had committed
no default in carrying out their obligation under the contract. The respondent Asmita 43/53 .. 44 ..
ARBPL-1999/13 cannot be faulted on the ground that they have failed in their obligation under
clause 3.7 by not giving counter guarantee in favour of M/s Indiabulls. In my view the learned
arbitrator has rightly rejected the submissions of the petitioner and has rightly not interfered with
the exercise of discretion by the respondent in view of the provisions of the Agreement entered into
between the parties. The respondent had already landed into trouble in view of the petitioner not
repaying the loans availed from Vijaya Bank. The respondent in these circumstances were not
expected to issue a fresh counter guarantee and more particularly on the terms and conditions
proposed by M/s Indiabulls and were justified in rejecting the said proposals. In my prima facie
view, the prima facie findings of the learned Arbitrator is correct and no interference is warranted
with this finding.
15. Next submission of Mr.Apte learned senior counsel for the petitioner is that the petitioner was
discriminated by the respondent by giving unfair treatment in comparison with other developers
who were similarly situated and who had not completed the work. The Agreement with the
petitioner came to be terminated whereas no action was taken against other developers. It is not in
dispute that the petitioner had already filed a Writ Petition in this Court impugning the action on
the part of the respondent Asmita 44/53 .. 45 .. ARBPL-1999/13 which Petition was withdrawn by
the petitioner with liberty to file arbitration proceedings.

16. The learned Arbitrator has dealt with this issue in paras 27 to 29 of the impugned order and has
rightly rejected this submission upon considering the Judgment of the Supreme Court in case of
INDIA OIL CORPORATION vs. AMRITSAR GAS SERVICES reported in 1991 (1) SUPREME
COURT CASES 533. In my view, the agreement between the parties was commercial and Article 14
of the Constitution of India would not apply for consideration in a contractual matter and the same
has to be decided strictly in accordance with the terms and conditions of the agreement entered into
between the parties and also in accordance with the provisions of Specific Relief Act, 1963 and
Indian Contract Act. There is no merit in the submission of Mr Apte learned Senior Counsel for the
petitioner that action of the respondent was discriminatory.
17. In so far as the submission of Mr Apte learned Senior counsel that there was no provision under
the agreement entered into for termination of the agreement and thus the termination of the
agreement by the respondent was illegal and contrary to the provisions of terms of the agreement is
concerned it Asmita 45/53 .. 46 .. ARBPL-1999/13 is not in dispute that clause 16.1.1. of the
agreement provides for events of default. The petitioner did not pay the development fees, revenue
share payable to the respondent in accordance with the provisions of the agreement.
The petitioner had abandoned the work by themselves repudiating the contract. No work has been
carried out admittedly by the petitioner since January 2011. The petitioner did not adhere to the
schedule of construction and did not furnish to the respondent implementation plan and progress
report. In view of the default of the petitioner in making repayment to Vijaya Bank the counter
guarantee furnished by the respondent came to be invoked and fixed deposits of the respondent in
the sum of Rs.117 crores lying with Vijaya Bank came to be freezed. The project came to a standstill
since January 2011. The petitioner has no funds in hand and could not get any other arrangement.
The petitioner was demanding fresh terms and conditions for completing the project from the
respondent.
18. In these circumstances, in my prima facie view, the respondent was justified in terminating the
contract. In my view, even though there is no provision in the contract entered into between the
parties permitting either party to terminate the contract, since events of default on the part of one
party had already occurred, other party is entitled to terminate the contract under Asmita 46/53 ..
47 .. ARBPL-1999/13 the provisions of the Indian Contract Act. If the submission of Mr.Apte learned
Senior Counsel is accepted, in the absence of specific clause permitting either of the party to
terminate the contract even if breaches are committed is accepted, no contract can be terminated
even if one party has committed breach and the other party would have to continue his contractual
rights. In my view, in such a situation, the provisions of the Indian Contract Act would be attracted.
In my prima facie view, the respondent was thus justified in terminating the contract. I am in
agreement with the view expressed by the Delhi High Court in case of Rajasthan Breveries Ltd.
(supra).
19. The learned srbitrator has dealt with this issue in paras 30 and 31 of the impugned order and has
rendered a prima facie finding that the petitioner is neither ready nor willing to perform their part of
the contract due to financial difficulties and it was difficult to expect that the petitioner would
complete the project as per the Development Agreement and the respondent has thus taken into

account various circumstances relating to default on the part of the petitioner and has rightly
terminated the said agreements. In my view, the learned Arbitrator has rightly come to such a prima
facie conclusion based on the documents placed on record and interpretations of the terms and
conditions. No infirmity can be found in the findings rendered by the learned Asmita 47/53 .. 48 ..
ARBPL-1999/13 arbitrator.
20. In paras 32 to 37 of the impugned order, the learned arbitrator has considered the issue of
readiness and willingness on the part of the petitioner to perform the development agreement at
length. The learned Arbitrator has adverted to the judgment of the Supreme Court in case of His
Holiness Ganesh Acharya reported in 1996 (4) SCCs 5266 and judgment of COX AND KINGS INDIA
LIMITED VS. INDIAN RAILWAYS CATERING AND TOURISM CORPORATION LIMITED
reported in 2012 (7) Supreme Court Cases 587 and has rightly held that termination cannot be
stayed. The learned Arbitrator has followed the supreme court judgment in case of His Holiness
Ganesh Acharya (supra) in which it is held that readiness means capacity of a party to perform a
contract which includes his financial position to pay the purchase price.
21. In my prima facie view, the petitioner was not ready and willing to comply with their part of the
obligation. The petitioner has not carried out any work since January 2011. Even according to the
petitioner they have completed only 34 % work. The petitioner has no funds and their accounts with
Vijaya Bank are already freezed and Vijaya Bank has already taken Asmita 48/53 .. 49 ..
ARBPL-1999/13 symbolic possession of the lands on which the development was to be carried out
by the petitioner. In my prima facie view, the learned Arbitrator was right in rejecting the
Arbitration Application to stay the termination notice. No infirmity can be found with the
conclusions drawn by the learned Arbitrator.
I am in agreement with the view of the learned single Judge of this court in case of Maytas Infra Ltd
(supra) that court cannot compel a party to continue with the contract.
22. In so far as the issue of fraud canvassed by Mr.Apte learned senior Counsel for the petitioner is
concerned, a perusal of the record indicates that allegations are made in the rejoinder before the
Arbitral Tribunal. In the written arguments filed before the learned arbitrator, it was urged by the
petitioner that in view of the serious allegations of fraud, the matter is required to be referred to a
civil Court for adjudication. The petitioner sought liberty to withdraw Writ Petition and to file
arbitration proceedings. No such plea was raised by the petitioner while obtaining leave to withdraw
the Writ Petition.
After filing of the arbitration proceedings, the petitioner raised the issue of fraud to be referred to
the civil court. The learned arbitrator has dealt with this issue at length in paras no. 41 to 44 of the
impugned order. The learned arbitrator in my view has rightly rejected the submission of the
petitioner Asmita 49/53 .. 50 .. ARBPL-1999/13 regarding allegation of fraud. No such plea could be
raised for the first time in rejoinder. The learned arbitrator also considered the fact that there was
no specific pleading relating to fraud and misrepresentation and cheating in the statement of claim
and thus could not be permitted. In my view the learned Arbitrator is right in rejecting the plea of
fraud and no infirmity can be found with the impugned order on this issue. Conduct of the

petitioner would indicate that such a plea was raised out of frustration.
23. As far as internal note relied upon by the petitioner for the first time is concerned it is not in
dispute that the petitioner had not relied upon any such document before the learned arbitrator. By
such note submitted by the Vice Chairman of the respondent to the Chairman expressing his
opinion and sought approval. Such a proposal has not been neither accepted by the respondent nor
any decision thereon was conveyed to the petitioner. In my view, since no action was taken by the
respondent on such note, no cognizance could be taken of such opinion/note/proposal for seeking
approval.
In my view, Mr Khambatta learned Senior counsel appearing for the respondent is right in his
submission that if the petitioner would have produced such note before the learned arbitrator on an
affidavit, the petitioner would have opposed production of such a writing being taken on record or in
Asmita 50/53 .. 51 .. ARBPL-1999/13 any event would have explained the so called admission in
such writing on the part of the respondent before the learned arbitrator. In my view, this court
cannot take cognizance of such document in these proceedings for the first time. In any event since
no action was taken on such note by the respondent or no action was conveyed to the petitioner no
reliance thereon can be placed by the petitioner.
24. The Supreme Court in the case of COX AND KINGS LTD supra held that though a party had
invested a large sum of money in the project, but that cannot entitle it to pray for a mandatory order
to operate the contract once it is noted that the remedy of the petitioner would be if any in action for
damages against the respondent for beach of any of the terms and conditions of the Joint Venture
agreement and MOU. Similar view has been taken by the learned Single Judge of this Court in the
case of MILAN COMMERCIAL PVT.
LTD VS ASIAN HEALTHCARE (supra). In my view, the arbitrator has rightly not stayed the
termination of the agreement effected by the respondent. A perusal of the pleadings before the
learned arbitrator and in the writ petition which was on record before the learned arbitrator, it is
clear that the petitioner was pressing demand of the additional terms and conditions for completion
of the project. In my view, the readiness and willingness of a party has to be all Asmita 51/53 .. 52 ..
ARBPL-1999/13 throughout. The petitioner has not carried out any work since January 2011.
Neither the Court nor the learned arbitrator can rewrite the contract and direct a party to withdraw
the termination notice and enter into a fresh contract on the terms and conditions proposed by
another party.
25. In my prima facie view, in view of the status quo order passed by this Court which has been
continued form time to time the public project of this magnitude has been stalled for no fault of the
respondent and the learned arbitrator was thus justified in refusing to continue such status quo
order in favour of the petitioner. In the event of the petitioner succeeding in the arbitration
proceedings and if termination of the agreement is found to be illegal the petitioner can be
compensated in terms of money.

26. In my view, termination of the Agreement thus cannot be stayed.
There is no infirmity found by this Court in the order passed by the Arbitral Tribunal. The impugned
order is a reasoned order and is passed after considering the submissions of the parties at length,
documentary evidence and provisions of law and thus no interference is warranted by this court.
27. In my view, the Petition is devoid of merits and is accordingly Asmita 52/53 .. 53 ..
ARBPL-1999/13 rejected.
28. Mr. Apte learned senior Counsel appearing for the petitioner seeks continuation of the
statement made by Mr. Khambatta learned senior counsel appearing for the respondent. Mr.
Khambatta on instructions has opposed such a request. Application made by Mr. Apte for
continuation of the statement is accordingly rejected.
30. No order as to costs.
(R.D.DHANUKA, J.)
Asmita

Housing Society Ltd. Vs Maharashtra Airport Development On 29 November 2013

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Housing Society Ltd. Vs Maharashtra Airport Development On 29 November 2013

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Housing Society Ltd. vs Maharashtra Airport Development ...

Bombay High Court

IN THE HIGH COURT OF JUDICATURE AT BOMBAY.

ORDINARY ORIGINAL CIVIL JURISDICTION

ARBITRATION PETITION (L)NO.1999 OF 2013

Chaurangi Builders & Developers

of the Companies Act, 1956, having its

Housing Society Ltd., Bandra-Kurla Complex,

Maharashtra Airport Development Company

office at 8th floor, World Trade Centre, Cuffe Parade,

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Mr R. S. Apte, Senior Advocate a/w Ms Najakiyo i/b P.M.Havnur for petitioner.

Rahul Totla i/b M/s Nankani & Associates for respondent.

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On 30 March 2007, respondent issued a commencement certificate for construction of buildings up

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completion of the project.

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investments by the petitioner and completion of about 34% work.

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proposed by the petitioner and M/s Indiabulls.

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(p) it is submitted that the respondent is proposing to

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.. 36 .. ARBPL-1999/13 continue till the disposal of the arbitration proceedings.

REASONS AND CONCLUSIONS :

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26. In my view, termination of the Agreement thus cannot be stayed.

30. No order as to costs.

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