2024 (11) TMI 1172 - HC - Indian Laws

Termination of Agreements - specific performance of contract - Balance of Convenience - Irreparable Loss - Section 11 of the Arbitration and Conciliation Act 1996 - HELD THAT - The scope of interference with discretionary orders of injunction by the appeal Court is quite limited. The appeal Court will not interfere with the exercise of discretion of the Court of first instance and substitute its own discretion except where the discretion is shown to have been exercised arbitrarily, capriciously or perversely or where the Court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against the exercise of discretion is an appeal on principle. The appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the Court below solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial Court reasonably and in judicial manner, the fact that the appellate Court would have taken a different view may not justify interference with the trial Court s exercise of discretion. Any direction to treat the applications under Section 9 as Section 17 applications would involve complications, though it might save paper. Subsequent developments might be difficult to record. Therefore, it would be appropriate to grant the parties leave to file applications under Section 17, which could then be decided without being influenced by this interim arrangement. The above arrangement will operate as an ad-interim arrangement. The parties may file their applications under Section 17 within four weeks from today. The above ad- interim arrangement shall operate until the Arbitral Tribunal disposes of Section 17 applications, if filed or until the Arbitral Tribunal may direct. The Arbitral Tribunal must decide the applications under Section 17 without being influenced by any observations in the impugned judgments and orders dated 20 September 2024 or this judgment and order. The ad-interim orders granted in these Appeals are vacated since now the parties would have to abide by the ad- interim arrangement now indicated. Appeal disposed off.

Issues Involved:

1. Termination of Agreements and Breach Allegations
2. Interim Relief and Specific Performance
3. Prima Facie Case, Balance of Convenience, and Irreparable Loss
4. Status of Construction and Impact on Purchasers
5. Undertakings and Allegations of Cash Transactions
6. Jurisdiction and Arbitration Proceedings

Detailed Analysis:

1. Termination of Agreements and Breach Allegations:

The primary issue revolves around the termination of agreements by WMPL, which alleged several breaches by M/s AC, including failing to maintain the average sales price of flats as stipulated in the agreements. WMPL argued that M/s AC, being merely a contractor or developer, had no right, title, or interest in the property and thus could not claim specific performance. Instead, M/s AC could only seek damages for any improper termination. M/s AC contended that it had invested significantly in the project and that the agreements created an interest in the immovable property, allowing it to sell apartments and appropriate sale proceeds.

2. Interim Relief and Specific Performance:

WMPL challenged the interim relief granted to M/s AC, arguing that M/s AC's claims were merely monetary and did not warrant specific performance. The court had to consider whether the agreements were specifically enforceable, given that they were development or construction agreements. The court noted that while the prima facie case regarding specific performance was arguable, the balance of convenience and irreparable loss aspects were crucial in deciding the interim relief.

3. Prima Facie Case, Balance of Convenience, and Irreparable Loss:

The court emphasized that for a temporary injunction, a prima facie case, balance of convenience, and irreparable loss must coexist. While WMPL asserted that the agreements did not create any right or interest in the property, M/s AC argued that the agreements allowed it to sell apartments and consume additional FSI. The court found that despite the arguable nature of the prima facie case, the balance of convenience and irreparable loss favored M/s AC, given the project's status as a RERA-registered project and the interests of purchasers.

4. Status of Construction and Impact on Purchasers:

The court considered the construction progress, noting that Towers "A" and "B" were completed, and substantial work on Towers "C" and "D" was underway. Halting construction would severely prejudice M/s AC and the purchasers, who had already invested in the project. The court highlighted the importance of adhering to RERA regulations and the potential penalties M/s AC could face if construction was obstructed.

5. Undertakings and Allegations of Cash Transactions:

WMPL alleged that M/s AC engaged in cash transactions, breaching the agreed sales price. The court acknowledged the prima facie evidence of cash transactions but concluded that this did not justify halting construction. M/s AC provided an undertaking not to sell apartments below Rs. 9500 per sq. ft., aligning with WMPL's asserted market rate. The court accepted this undertaking as a condition for allowing construction to proceed.

6. Jurisdiction and Arbitration Proceedings:

The judgment noted the existence of an arbitration clause in the agreements and the appointment of a sole arbitrator to resolve disputes. The court outlined an interim arrangement to operate until the arbitrator decides on interim relief under Section 17 of the Arbitration and Conciliation Act, 1996. This arrangement aimed to maintain the status quo and protect the interests of both parties and the purchasers until the arbitration proceedings could address the substantive issues.

In conclusion, the court balanced the competing interests of WMPL, M/s AC, and the purchasers, focusing on maintaining project continuity while ensuring compliance with legal obligations and protecting the rights of all parties involved.

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