Merely Obtaining Municipal Approvals Does Not Establish Developer's Readiness To Perform Contract: Bombay HC

The Bombay High Court has refused to grant interim relief to Jaycee Homes Private Limited in its plea to restrain Kurla Moon Rock Municipal Employee Cooperative Housing Society Ltd. from appointing another developer and to appoint a Court Receiver over the society's property.

It held that obtaining municipal approvals under a registered development agreement, by itself, does not establish that a developer was ready and willing to perform its contractual obligations.

Justice Amit Borkar observed, "Except obtaining the municipal approvals, no material is pointed out to show that the petitioner was in a position to commence the work. Merely obtaining approvals may not establish that the petitioner remained ready and willing to perform its obligations under the agreement."

The dispute arose from a registered development agreement dated August 16, 2014, under which Jaycee Homes was appointed to redevelop the society's property in Kurla (West), Mumbai.

Jaycee Homes claimed it paid 12.64 lakh towards corpus, obtained an Intimation of Disapproval (IOD) in June 2015 and secured the required approvals. It alleged the society failed to hand over possession and later sought to appoint another developer, prompting it to invoke arbitration and seek interim protection under Section 9 of the Arbitration and Conciliation Act, 1996.

The society argued that the developer had failed to fulfil its contractual obligations, including payment of transit rent, brokerage and shifting charges. It also contended that Jaycee Homes assigned its development rights in 2016, the agreement was terminated in 2018 and arbitration was invoked only after nearly five years.

The court found that Jaycee Homes had produced no material to show it had fulfilled its contractual obligations before seeking possession. It also noted that the developer's assignment of its development rights, the termination of the agreement and the delay in invoking arbitration supported the society's case at the prima facie stage.

The court held that while rights created under a registered development agreement deserve protection, such protection is not automatic and depends on the facts, the parties' conduct and compliance with contractual obligations.

"There is no difficulty in accepting the proposition that rights created under a registered Development Agreement deserve protection. However, such protection cannot be granted in every matter as a matter of routine," the court ruled.

The court also held that preventing the society from appointing another developer would further delay redevelopment of its old and dilapidated building and prejudice members awaiting rehabilitation. It declined to appoint a Court Receiver, finding no material to justify such an order.

Holding that Jaycee Homes had failed to establish a prima facie case and that the balance of convenience favoured the society, the court dismissed the petition. It clarified that its findings were only prima facie and would not influence the arbitral proceedings.

For Petitioner (Jaycee Homes Private Limited): Advocates Sahil Mahajan, Saurabh Godbole.

For Respondent (Kurla Moon Rock Municipal Employee Cooperative Housing Society Limited): Advocates Amrut Joshi, Pooja Batra, Pratik Amin, Harsh Agarwal.