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TMI Blog2018 (10) TMI 1822X X X X Extracts X X X X X X X X Extracts X X X X ..... ta - 700 006. The agreement recites that the owners had approached the Appellant for construction of a building on the land and that the following terms, inter alia, were agreed upon by and between the parties: a) The Appellant agreed to apply at his own costs and expenses for sanction of the plan of a proposed building complex on 14 cottahs 5 chittacks and 40 square feet, to the Calcutta Municipal Corporation (Clause-1 of the agreement); b) The plan of the building complex would be prepared and submitted by the Appellant to the Calcutta Municipal Corporation, after the approval of the Respondent (Clause -2 of the agreement); c) The Appellant shall deposit with the Respondent an amount of ' 4,00,000/- without interest which shall be refundable upon the completion of the building (Clause-3 of the agreement); d) If for any reason after the plan is sanctioned or for any act or omission on the part of the Appellant, the construction cannot take place, the Appellant shall refund the deposit in addition to all costs, charges and expenses incurred by the Respondent (Clause-22 of the agreement); e) The Respondent shall retain 42% of the total constructed area as 'sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement by the Respondent was invalid and a permanent injunction restraining the Respondent from entering into any agreement with a third party for sale of the premises. On 28 September 2005 the City Civil Court allowed an amendment of the plaint, by which a prayer for specific performance was included. 7. On 28 February 2007, the City Civil Court dismissed the Suit with the following observation: No tangible evidence is forthcoming in the instant suit by which it can be said that the Plaintiff (developer) obtained possession of the suit property i.e. the possession of the suit property is/has handed over to him after the execution of the agreement in question. The City Civil Court relied on a judgment of a Division Bench of the High Court of Calcutta in Vipin Bhimani v. Smt. Sunanda Das (2006) 2 CHN 396, that a suit for specific performance of a development agreement at the instance of a developer is barred by the provisions of Section 14(3)(c) of the Specific Relief Act 1963 ("the Act"). Upon examining various clauses of the agreement, the City Civil Court concluded that the Appellant had agreed to apply at his own cost and expense to the Calcutta Municipal Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing contracts cannot be specifically enforced, namely - (a) a contract for the non-performance of which compensation in money is an adequate relief; (b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms; (c) a contract which is in its nature determinable; (d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise. (2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit. (3) Notwithstanding anything contained in Clause (a) or Clause (c) or Clause (d) of Sub-section (1), the court may enforce specific performance in the following c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veloped in precedents. The judge must exercise the discretion in a judicious manner. Circumstances bearing on the conduct of the Plaintiff, such as delay, acquiescence and breach or some other circumstances outside the contract, may render it inequitable to enforce it. The position as elucidated in Halsbury's Laws of England7 is thus: ... the court does not normally order specific performance of a contract to build or repair. However, this Rule is subject to important exceptions, and a decree for specific performance of a contract to build will be made if the following conditions are fulfilled: (1) that the building work is defined by the contract between the parties; (2) that the Plaintiff has a substantial interest in the performance of the contract of such a nature that he cannot be adequately be compensated in damages; (3) that the Defendant is in possession of the land on which the work is contracted to be done. 13. This principle was followed by the Court of Appeal in Wolverhampton Corporation v. Emmons [1901] 1 K.B. 515, where the Plaintiff, the urban sanitary authority, in pursuance of a scheme of street improvement, sold and conveyed to the Defendant a plot of lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns; (ii) the Plaintiff has a substantial interest in the performance of the contract of such a nature that damages would not compensate him for the Defendant's failure to build; and (iii) the Defendant is in possession of the land so that the Plaintiff cannot employ another person to build without committing a trespass. 16. The expression "development agreement" has not been defined statutorily. In a sense, it is a catch-all nomenclature which is used to be describe a wide range of agreements which an owner of a property may enter into for development of immovable property. As real estate transactions have grown in complexity, the nature of these agreements has become increasingly intricate. Broadly speaking, (without intending to be exhaustive), development agreements may be of various kinds: (i) An agreement may envisage that the owner of the immovable property engages someone to carry out the work of construction on the property for monetary consideration. This is a pure construction contract; (ii) An agreement by which the owner or a person holding other rights in an immovable property grants rights to a third party to carry on development for a monetary consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of the thing has the right to exclude all others from its possession and enjoyment. The right to ownership of a property carries with it the right to its enjoyment, right to its access and to other beneficial enjoyments incidental to it. (B. Gangadhar v. BG Rajalingam (1995) 5 SCC 239 at para 6). Ownership denotes the relationship between a person and an object forming the subject matter of the ownership. It consists of a complex of rights, all of which are rights in rem, being good against the world and not merely against specific persons. There are various rights or incidents of ownership all of which need not necessarily be present in every case. They may include a right to possess, use and enjoy the thing owned; and a right to consume, destroy or alienate it. (Swadesh Ranjan Sinha v. Haradeb Banerjee (1991) 4 SCC 572). An essential incident of ownership of land is the right to exploit the development, potential to construct and to deal with the constructed area. In some situations, under a development agreement, an owner may part with such rights to a developer. This in is essence is a parting of some of the incidents of ownership of the immovable property. There cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for sale of an immovable property. An Agreement of the first type normally is not enforceable as compensation in money is an adequate remedy. An Agreement of the third type would normally be specifically enforceable unless the contrary is proved. A mere agreement for development, which creates no interest in the land would not be specifically enforced. 19. The judgment of the Bombay High Court in Della Developers Private Limited v. Noble Organics Private Limited (2010) 2 Bom CR 13, deals with a case where a development agreement was executed between the Petitioners and the Respondents. A dispute arose between the parties and arbitration proceedings were initiated. An order was passed by the Arbitrator Under Section 17 of the Arbitration and Conciliation Act 1996 against which an appeal was filed Under Section 37. Before the High Court, the findings of the sole arbitrator Under Section 17 were challenged. Upon examining the agreement, the High Court held that the agreement created a right or interest in immovable property. On the issue of the maintainability of a proceeding initiated by the developer against the owner Under Section 14(3)(c), the court reiterated the require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say that only the owner can maintain a suit against the developer for enforcing his rights and not vice-versa. If the developer has a right under the contract he must be having a remedy in the form of approaching a forum for appropriate redressal. A question of maintainability of a suit is completely different from the question of whether the suit will succeed or not on the facts of the case and in the light of the applicable law. Section 14(3)(c) of the Act can in no manner be interpreted as debarring a developer from approaching the legal forum for redressal of his grievance. 21. In the present case, the Respondent agreed to pay the Appellant the costs and expenses along with the agreed remuneration upon completion of the construction. If the Respondent failed to pay, the Appellant was entitled to realise its money by selling 58% of the total constructed area. Clauses 6, 10 and 11 of the agreement indicate that the Respondent would retain 42% of the total constructed area and the balance 58% would remain secured for due payment of the construction costs. It was further agreed, that the total construction costs shall not exceed 58% of the constructed area. The intention of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest should be of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and c) the Defendant should have, by virtue of the agreement, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed. 23. The issue before this Court is whether Section 14(3)(c)(iii) is a bar to a suit by a developer for specific performance of a development agreement between himself and the owner of the property. The condition Under Section 14(3)(c)(iii) is that the Defendant has, by virtue of the agreement, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed. If the Rule of literal interpretation is adopted to interpret Section 14(3)(c) (iii), it would lead to a situation where a suit for specific performance can only be instituted at the behest of the owner against a developer, denying the benefit of the provision to the developer despite an interest in the property having been created. This anomaly is created by the use of the words "the Defendant has, by virtue of the agreement, obtained p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicability in a situation where the developer who has an interest in the property, brings a suit for specific performance against the owner. The developer will have to satisfy the two conditions laid out in sub Clause (i) and (ii) of Section 14(3)(c), for the suit for specific performance to be maintainable against the owner. This will ensure that both owners and developers can avail of the remedy of specific performance under the Act. A suit for specific performance filed by the developer would then be maintainable. Whether specific performance should in the facts of a case be granted is a separate matter, bearing on the discretion of the court. 25. Having dealt with the first aspect of the matter, it is now necessary to determine whether, in the facts of the present case, the agreement between the Appellant and the Respondent is capable of specific performance. For this purpose, it would be necessary to consider the terms and conditions of the agreement between the parties. 26. The condition Under Section 14(3)(c)(i) is that the building or other work described in the contract is sufficiently precise to enable the court to determine the exact nature of the building or work. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be found in the agreement. The agreement between the parties is vague. The court cannot determine the exact nature of the building or work. The first condition in Section 14(3)(c)(i) is not fulfilled. 27. Another condition Under Section 14(3)(c)(ii) is that the Plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non-performance of the contract is not an adequate relief. The intent of the Section is to make a distinction between cases where a breach of an agreement can be remedied by means of compensation in terms of money and those cases where no other remedy other than specific performance will afford adequate relief. Therefore, before granting the remedy of specific performance, we need to analyse the extent of the alleged harm or injury suffered by the developer and whether compensation in money will suffice in order to make good the losses incurred due to the alleged breach of the agreement by the owner. From the facts of the case, it is clear that the case of the developer is that he incurred an expenditure o f ' 18,41,000/- towards clearing outstanding dues, security deposit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. The above case has no applicability to the facts of the present case and is of no relevance as the issue in relation to the maintainability of a suit for specific performance by the builder against the owner has not been discussed. 30. The Appellant has also placed reliance on the decision in Faqir Chand Gulati v. Uppal Agencies Private Limited (2008) 10 SCC 345, where the issue before this Court was whether a landowner, who enters into an agreement with the builder, for construction of an apartment building is a "consumer" entitled to maintain a complaint against the builder as a service provider under the Consumer Protection Act, 1986. The Court held: We may notice here that if there is a breach by the landowner of his obligations, the builder will have to approach a civil court as the landowner is not providing any service to the builder but merely undertakes certain obligations towards the builder, breach of which would furnish a cause of action for specific performance and/or damages. On the other hand, where the builder commits breach of his obligations, the owner has two options. He has the right to enforce specific performance and/or claim damages by approaching t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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