Bombay High Court: In a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’), a Single Judge Bench of Sandeep V. Marne, J., held that termination of the Development Agreement and Power of Attorney executed with the developer was justified. The Court noted that the project had remained stagnant for over 11 years, observed that the society and its members could not be made to wait endlessly, and emphasised that the rights of tenants to secure redevelopment must prevail over the developer’s commercial interests. Interim relief was therefore refused.
Background:
The land belonged to the municipal corporation and comprised 28 tenanted structures occupied by municipal tenants. A cooperative housing society was formed, which appointed a developer in 2014 through a resolution, followed by execution of a Development Agreement and Power of Attorney. The developer submitted a redevelopment proposal under Regulation 33(7) of the Development Control Regulations, 1991. However, delays occurred in tenancy verification, consent verification, and issuance of Annexure-2.
The developer contended that delays were attributable to municipal authorities’ errors in tenancy records and failure to issue Annexure-2 despite repeated correspondence. It was argued that the termination was mala fide and influenced by another developer, and that the Development Agreement was capable of specific performance. The developer also claimed to have demonstrated financial capacity and obtained irrevocable consents from tenants.
The society and its members argued that the developer failed to make progress for over a decade, did not register the Development Agreement, and lost the confidence of tenants. They emphasised that the municipal corporation had accepted termination, and that the rights of tenants to redevelopment outweighed the developer’s commercial interests. The municipal corporation supported this position, pointing to repeated defaults and failure to demonstrate financial capacity.
Analysis and Decision:
The Court observed that the redevelopment proposal remained stuck at the initial stages for 11 long years. It was emphasised that the developer was solely responsible for the delay in the conduct of consent verification for over two years, and thereafter did precious little for the issuance of Annexure-2. The Court noted that the society and its members cannot be made to wait endlessly for the developer to take necessary steps in the redevelopment process, and further highlighted that the developer, being a professional, was expected to possess the necessary expertise and liaise with municipal officials to ensure the expeditious issuance of Annexure-2.
The Court further observed that the principles laid down in the earlier Division Bench judgment Huges Real Estate Developers LLP v. Khernagar Adarsh Coop. Housing Society Ltd., 2025 SCC OnLine Bom 2921 are to be applied squarely, reiterating that when the rights of residents of dilapidated buildings to reside in safe houses are pitted against the rights of the developer to earn profits through redevelopment contracts, the latter must yield to the former.
The Court highlighted that the developer is using the project only for the purpose of securing profits by selling the same to another developer and has grossly delayed even its commencement, therefore, no interim measures deserve to be granted in its favour. It was further observed that the society had lost faith in the developer, and that equitable relief could not be granted in such circumstances.
Ultimately, the Court held that the termination of the Development Agreement was justified and that no interim measures under Section 9 of the Arbitration Act could be granted.
[ISON Builders LLP v. Om Sai Ram Cooperative Housing Society (Proposed), Commercial Arbitration Petition (L.) No. 36533 of 2025, decided on 23-01-2026]
Advocates who appeared in this case:
For the Petitioner: Karl Tamboly with Rohan Savant, Chirag Sarawagi and Yash Sinha i/by. Tushar Goradia
For the Respondent: Prateek Seksaria, Senior Advocate with Rohit Agarwal, Nishant Chothani and Yash S. Jain, Pooja Yadav i/b. Komal Punjabi