High Court

Legal Reasoning

1 AO10.24 judgmentIN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT AURANGABADAPPEAL FROM ORDER NO. 10 OF 20241.Padam @ Suresh s/o Raising KudaleAge; 51 years, Occ;Agri,R/o; Gut No. 61, in front of Kamalnayan BajajHospital, Satara, Aurangabad.2.Charan s/o Padam KudaleAge; 28 years, Occ;Agri,R/o; As above.3.Puja D/o Padam KudaleAge; 20 years, Occ; Education,R/o; As above. ...APPELLANTS (Original Defendant Nos. 1, 2 &4)) VERSUS1.Kiran s/o Prabhakar DeshmukhAge; 57 years, Occ; Business,R/o; Flat No. 1, Sumangal Park,Osmanpura, Aurangabad.2.Sow. Asha w/o Shivaji Nawale,Age; 50 years, Occ; Business,R/o; Plot No. 20, Shivneri, Bhagyanagar,Aurangabad. ...RESPONDENT NOS. 1 & 2 (Original Plaintiffs )3.Shubham s/o Padam Kudale,Age; 22 years, Occ; Business,R/o; Gut No. 61, in front of Kamalnayan Bajaj Hospital, Satara, Aurangabad.4.Yogesh s/o Baburao Kadam,Age; 32 years, Occ; Business,R/o; N-4, CIDCO, Aurangabad. ...RESPONDENT NOS. 3 & 4 (Orig. Defendant Nos. 3 & 5) 2 AO10.24 judgment…………….Mr.N.P. Runwal : learned Advocate for AppellantsMr. Pushpak U. Gujrathi h/f Mr.V.P. Latange : learned Advocate forRespondent No.1Respondent Nos. 2 & 3 are servedMr. D.L. Pallod : learned Advocate for Respondent No.4…………... CORAM : S. G. CHAPALGAONKAR, J. Date :- 08.04.2025JUDGMENT : 1.Appellants impugn order dated 06.01.2024 passed by CivilJudge, Senior Division, Aurangabad in Special Civil Suit No. 462 of2022, below Exhibit 5, by which appellants/Original Defendant Nos.1, 2 & 4 have been restrained from obstructing possession ofplaintiffs, alienating or otherwise encumbering property described inparagraph No. 10.2.Respondent Nos. 1 and 2/ Original Plaintiffs institutedSpecial “Civil Suit No. 412 of 2022 seeking relief of specificperformance of contract and perpetual injunction. Plaintiffs contendthat defendants are owners of plot Nos. 17 to 28 ad-measuring 17493Sq. feet situated at Gut No. 61 at Satara, District Aurangabad.Defendants approached plaintiffs and expressed their desire todelvelop suit property. Plaintiffs accepted proposal and consented fordevelopment of property. It was decided to register developmentagreement and to start actual construction. Initially, on 18.10.2016 at 3 AO10.24 judgmentthe time of oral agreement, plaintiff No. 1 received an amount of Rs.2,00,000/-. Tentative construction plan of apartments was prepared.As per plan, 28 flats are to be constructed and out of that 9 flats weredecided to be given to defendant No. 1. Entire expenses ofconstruction including development charges, construction permission,Architectural charges, leveling of land, construction of road were to beborne by land owners and developers were to construct entireApartment building at their costs. Plaintiffs had agreed to pay anamount of Rs. 25,00,000/- at the time of registered developmentagreement to defendant Nos. 1, 2 and 4. Accordingly, registeredagreement for development of suit property was to be executed.3.In pursuance to aforesaid agreement Mr. PradeepRaosaheb Patil was engaged as an Architect. On the basis of tentativelay out plan, Architect fixed boundaries. Total amount of Rs.8,10,000/- has been released in favour of defendants. They hadagreed to execute registered development agreement and GeneralPower of Attorney (for short “G.P.A.”) after receiving constructionpermission. Plaintiffs are put into possession by defendant Nos. 1 to 4for further development. Plaintiffs have leveled entire land for makingconstruction and demarcated property. They invested amount of Rs.4,00,000/- for that purpose. They paid Architect fees of Rs.3,00,000/-, appointed workmen and paid their salary. Amount of Rs.5,00,000/- has been incurred for construction of site office. They alsomade expenses of Rs. 20,000/- for advertisement. Plaintiffs requested 4 AO10.24 judgmentdefendants to accept balance deposit amount and execute registereddevelopment agreement and G.P.A. so that they can proceed to depositdevelopment charges and obtain construction permission, however,defendants sought time under pretext that they had some dispute withVanmala Wankhede. According to plaintiffs, aforesaid litigation ispending vide Regular Civil Suit No. 988 of 2019 which is kept pendingwithout progress. Meanwhile, plaintiffs came across news papernotification dated 30.08.2020 published in Daily ‘Lokmat and ’‘DivyaMarathi’ as regards suit property which depicts that suit property hasbeen agreed to be sold by defendant Nos. 1 to 4 to some prospectivepurchaser. Plaintiffs raised objection dated 02.09.2020 and found thatdefendants executed registered partition deed dated 28.06.2018 andpartitioned Gut No. 61 as shown in suit property. As such,defendants have committed Criminal breach of trust after makingplaintiffs to invest huge amount and also they are also trying toalienate property.4.Plaintiffs have also filed an application below Exh. 5 underOrder XXXIX Rule 1 & 2 of Code of Civil Procedure for grant oftemporary injunction against defendants thereby praying to restraindefendant Nos. 1 to 4 from alienating suit property and creating thirdparty interest or causing obstruction into peaceful possession ofplaintiffs over suit property.5.Defendant Nos. 1, 2 and 4 filed Written Statement. They 5 AO10.24 judgmentadmitted execution of Memorandum Of Understanding (for short“M.O.U.”) dated 14.07.2017 and payment of Rs. 8,10,000/- byplaintiffs, however, raised objection as to jurisdiction of Civil Court inview of provisions of Commercial Courts Act 2015 (Amendment Act2018). According to them, since M.O.U. is un-stamped and un-registered, plaintiffs cannot claim relief of specific performance.Similarly, agreement to enter into another agreement does not createenforceable rights under provisions of Specific Reliefs Act. Accordingto defendants since 2017, plaintiffs failed to carry forward work as perM.O.U. Present suit is filed only with intention to create false disputebefore the Court of law and to prevent sale or development of property.6.Learned trial Court after considering rival contentionsrecorded prima-facie findings that Civil Court has jurisdiction to tryand entertain suit. Defendants have entered into M.O.U./agreementas claimed by plaintiffs. Defendants have received a sum of Rs.8,10,000/-. Plaintiffs are in possession of suit property for purpose ofcarrying development and there is reasonable apprehension thatdefendants may create third party interest in suit property.Accordingly partially allowed application below Exh. 5 and restraineddefendant Nos. 1 to 4 from alienating or creating third party interestover suit property, so also cause obstruction or interference inpossession of plaintiffs till final disposal of appeal.7.Mr. N.P. Runwal, learned Advocate appearing for 6 AO10.24 judgmentappellants vehemently submits that tenor of development agreementdated 14.07.2017 depicts that it is commercial transaction. Suit isvalued at Rs. 4,27,00,000/-. Therefore, dispute in suit is Commercialwithin meaning of Commercial Courts Act, therefore, as per expressionused in Section 2 (1) (c) (7) with Explanation-A, dispute in present suitought to have treated as commercial dispute and plaint ought to havebeen returned for presentation to Commercial Court or suit ought tohave been transferred to Commercial Court. He would further submitthat development agreement requires to be properly stamped andregistered. In present case M.O.U. has been entered between parties.Plaintiffs cannot assert any right on the basis of such document. Hewould further submit that defendant No. 5 was also party to theagreement along with plaintiffs but now he withdrew from agreement.Therefore, plaintiffs cannot seek execution of same as one of partnerhas withdrawn and declared that he is no more interested indevelopment of property. According to Mr. Runwal, trial Courtcommitted serious error of law and fact while appreciating nature ofdispute and contents of document dated 14.07.2017 and restrainedappellants/original defendant Nos. 1 to 4 from disturbing allegedpossession of plaintiffs or creating third party interest over suitproperty. 8. Per Contra, Mr. V.P. Latange, learned Advocate appearingfor respondents/Plaintiffs supports impugned order. 7 AO10.24 judgment9.Having considered submissions advanced following pointsarose for consideration in this appeal :(i) Whether dispute in suit is of commercial naturewithin meaning of Commercial Court Act, 2015, assuch Civil Court lacks jurisdiction. ?(ii) Whether suit is barred by limitation since reliefis claimed on the basis of M.O.U./agreement dated14.07.2017. ?(iii) Whether M.O.U./ agreement dated 14.07.2017can be enforced in absence of registration or paymentof stamp duty. ?(iv) Whether plaintiffs have made out prima-faciecase for grant of relief as prayed. ?10.Perusal of M.O.U./agreement dated 14.07.2017 depictsthat it is a notarized document whereby plaintiffs and defendantssettled terms with intention to develop suit property and distributeconstructed tenements amongst them. At initial stage, developers/plaintiffs agreed to pay sum of Rs. 25,00,000/- to defendant Nos. 1, 2and 4 and then enter into registered development agreement withG.P.A. A tentative lay out plan has been already sanctioned as regardssuit property. It was decided that plaintiffs developers would completebasic ground work to bring property at development stage and obtaindevelopment permission to construct apartments. After gettingconstruction permission a registered development agreement was to beexecuted between parties. Execution of M.O.U. is not in dispute. Evenparting of Rs. 8,10,000/- by plaintiffs in favour of defendants is also 8 AO10.24 judgmentnot in dispute.11.It is true that plaintiffs and defendants entered intoM.O.U. with an intention to develop suit property as apartment butdevelopment agreement was to be executed after getting constructionpermission and same was to be registered. The M.O.U. dated14.07.2017 is an agreement between parties, however, it cannot begiven status of development agreement at this stage. In this background it is apposite to refer relevant provisions of Commercial Act,2015 to find out whether suit involves commercial dispute.12.Section 2 (1) (c) (vii) of the Commercial Courts Act definesCommercial dispute as under :“(2) Definitions – (1) In this Act, unless the contextotherwise requires :-(c) “Commercial dispute” means a dispute arisingout of -(vii)Agreements relating to immovable propertyused exclusively in trade or commerce; “13.Section 5 of the Act deals with constitution of CommercialAppellate Division. Section 15 deals with transfer of pending casesand further provides that all matters will fall under jurisdiction ofCommercial Court Act and Commercial Division of High Court when itinvolves commercial dispute within the meaning of Section 2 (1) (c) ofthe Act and for specified value as per Section (2) (i) of the Act. 9 AO10.24 judgment14.As is discernible from statement of objects and reasons ofCommercial Courts Act, the Commercial Courts have been establishedto deal with high value commercial disputes having complex facts andquestion of law and aimed for early resolution of commercial disputesto create a positive image before investor world about the independentand responsive Indian legal system.15.Supreme Court of India in case of Ambalal SarabhaiEnterprises Ltd. Vs. K.S. Infraspace LLP & Anr.,1 while dealing withdispute wherein parties had executed memorandum of understandingdepicting deed of conveyance of land. After considering relevantprovisions of commercial Court Act observed thus :“It appears that the trial court has proceeded underthe footing that the parties to the suit moreparticularly, the appellant-plaintiff seems to becarrying on business as Estate Agent and to manageland, building, etc. and the very object asenumerated in Memorandum and Articles ofAssociation of the appellant-plaintiff companyestablished that the property in question are beingused exclusively in trade or commerce rather in thebusiness of the plaintiff. As rightly pointed out by theHigh Court, there is nothing on record to show thatat the time when agreement to sell came to beexecuted in 2012, the property was being exclusivelyused in trade and commerce so as to bring disputewithin the ambit of sub-clause (vii) of Section 2 (1) (c)of the Act. Merely because, the property is likely to be used inrelation to trade and commerce, the same cannot be the ground toattract the jurisdiction of the Commercial Court.”1 2010 (15) SCC 585 10 AO10.24 judgment16.Similarly this Court in case of J.P. Realities Pvt. Ltd Vs.Mahesh Chandrabhan Kingrani,2 relied upon law laid down bySupreme Court in the case of Ambalal Sarabhai Enterprises Ltd.(supra) observed as under :“Dispute relating to immovable property which isactually used or being used in trade of commercewould come within the sweep of commercial disputeas enumerated in Clause (vii) of Section 2 (1) (c) of theAct, 2015. The suit for specific performance ofcontract of immovable property, without reference tothe actual use of the immovable property in trade orcommerce as on the date of the suit will not be a suitrelating to a commercial dispute.”17.Keeping in mind aforesaid exposition of law, it can beobserved in facts of present case that parties are yet to reach at stageof development agreement. Just a M.O.U. has been entered by themsetting primary terms before entering into development agreement soas to bring suit land to a stage of development. Parties agreed thatproposed developer would take necessary steps for leveling of land,prepare building plan, obtain necessary sanction permission,construct drainage etc. Plaintiffs paid certain amount to defendantsin lieu of agreement. Amount of Rs. 25,00,000/- was to be paidbefore entering into registered development agreement and G.P.A. infavour of plaintiffs. Apparently at the time of execution of M.O.U. suitproperty was not ready for commercial use, nor it was used forcommercial purpose. As observed by Supreme Court in case of2 2024 (3) ABR 498 11 AO10.24 judgmentAmbalal Sarabhai Enterprises Ltd. (supra) unless property is in actualuse or being used in trade or commerce, dispute of such immovableproperty cannot be treated as commercial dispute. Even from readingof prayers incorporated in plaint, plaintiffs are seeking specificperformance of M.O.U. and to execute development agreement, henceit is difficult to hold that dispute raised in suit is commercial disputewithin expression used in Section (2) (1) (iii) (vii) of the CommercialCourts Act. Therefore, this Court hold that Civil Court has jurisdictionto entertain present suit or suit need not be transferred to CommercialCourt as mandated under Section 15 of the Commercial Courts Act.18.So far as, issue as to limitation is concerned, essentially itwould be mixed question of law and fact. However, from prima-facieconsideration of pleadings and contents of M.O.U. dated 14.07.2017,it can be observed that no specific period for execution of developmentagreement has been fixed by parties. Even period for development ofproperty has not been fixed. Therefore, limitation for claiming relief ofspecific performance would start from date when defendants refusedto act upon agreement. Plaintiffs have pleaded cause of action to filesuit when defendants attempted to take possession of suit property on26.04.2022. Therefore, at this stage contention of appellants that suitis barred by limitation cannot be accepted. Issue can be adjudicatedonly after recording of evidence by parties along with other issues attrial. 12 AO10.24 judgment19.It is argued that in absence of registration of document,M.O.U. cannot enforced. Although such argument is advanced noprovisions from Indian Stamp Act or Registration Act brought tonotice of this Court which mandates document in the form of M.O.U.to be compulsorily registered. As observed in earlier paragraphs, onmeaningful reading of M.O.U. it is an agreement to enter intodevelopment agreement which itself does not constitute developmentagreement, in strict sense. It is true intention of parties and proposedterms for development agreement are stipulated, which creates rightsand obligations between parties. As observed by this Court in case ofArun P. Gorada Vs. Manish Jaisukhalal Shah and Others, 3 anagreement would be enforceable which creates interest in favour ofplaintiffs in proposed development of property. 20.This Court in case of Chheda Housing Development ... vsBibijan Shaikh Farid And Ors.,4 set out instances of agreementswhich are enforceable and which are not enforceable. It stipulates thatif no rights are created in favour of developers who has been entrustedwork of development, agreement may not be enforceable. However,once right is sought to be created in favour of developers upondevelopment of property an agreement would be enforceable. In lightof aforesaid exposition of law, if stipulations in agreement/M.O.U. inpresent case are considered, this Court prima-facie hold that plaintiffs3 2009 (1) Mh.L.J. 6114 2007 (4) AIR Bom. R 54 13 AO10.24 judgmentare entitled to maintain suit for specific performance on the basisof agreement, as certain rights are created infavour of plaintiffs.However, it is made clear that trial Court upon recording ofevidence can delve into intention of parties at time of execution ofagreement and rule on enforceability of M.O.U. by way of suit forspecific performance of contract.21.So far as last point as to whether plaintiffs makes outprima-facie case to grant relief as claimed. Again contents ofagreement are required to be appreciated along with pleadings ofparties. Execution of M.O.U. dated 14.07.2017 is not in dispute.Parting of amount of Rs. 8,10,000/- by plaintiffs to defendants is alsonot in dispute. Stipulation in paragraph No. 4 (c) of agreement makesit clear that Rs. 25,00,000/- was to be paid by developers beforehanding over possession and entering into registered developmentagreement with G.P.A. Although developers were given entry over plotfor propose of work of leveling of land, fixing boundaries and bringingland at stage of development, developers cannot claim that they wereput into possession of land. Unless development agreement isexecuted and possession is handed over to developers, developerscannot claim exclusive possession over suit property in exclusion oftrue owner. However, fact remain that developers are entitled to seekexecution of development agreement, as per terms of M.O.U. aftercomplying with their part of contract. In such situation, if defendantstransfers property or creates third party interest, plaintiffs are likely to 14 AO10.24 judgmentsuffer irreparable loss, therefore keeping in mind basic principles forgrant of temporary injunction, plaintiffs have certainly made out acase to temporary restrain defendants from transferring or creatingthird party interest over suit property till adjudication of dispute insuit. However, plaintiffs cannot seek injunction againstdefendants/owners restraining them from entering into suit propertyor claim their exclusive possession over suit property.22.In result, order passed by trial Court needs to be modifiedby partly allowing appeal.23.Hence following order :ORDER(i)Appeal Against Order is partly allowed.(ii)Impugned order dated 06.01.2024 passed byCivil Judge, Senior Division, Aurangabad, belowExh. 5 in Special Civil Suit No. 462 of 2022 ishereby partly modified.(iii)Pending hearing and final disposal of SpecialCivil Suit No. 462 of 2022, defendant Nos. 1 to 4,through their agents, servants or anybody claimingthrough them are temporarily restrained fromalienating or otherwise encumbering propertydescribed in paragraph Nos. 1 of the plaint.(iv)Order to the extent of direction against 15 AO10.24 judgmentdefendant Nos. 1 to 4 restraining them fromobstructing plaintiffs possession over suit propertyis quashed and set aside.(v)Appeal Against Order/Application standsdisposed off in above terms. ( S. G. CHAPALGAONKAR ) JUDGEmahajansb/