Ece Industries Limited vs S.P.Real Estate Developers P.Ltd.& Anr

ECE Industries Limited ... Appellant

VERSUS

S. P. Real Estate Developers P. Ltd. & Anr. .... Respondents JUDGMENT

TARUN CHATTERJEE,J.

1. Leave granted.

2. These two appeals have been filed from a common order

passed by the High Court of Andhra Pradesh at

Hyderabad, by which the High Court had affirmed an

order of the Second Additional City Civil Judge at

Hyderabad, disposing of an application for injunction filed

at the instance of the plaintiff-appellant on two

applications for injunction in a suit for recovery of

possession and damages. The plaintiff/appellant alleged

in their plaint that they are the owner of 67,824.50 sq.

yards of land, situated at Borabanda, Fathenagar, Ashok

1 Marg, Hyderabad (hereinafter referred to as the suit

property). The plaintiff-appellant as well as the

defendants/respondents executed a Development

Agreement cum Power of Attorney on 21st of September,

2007. Under the said Agreement, the

defendants/respondents agreed to pay an aggregate sum

of Rs. 30.50 crores in the following manner :-

i) Rs. 13.50 crores by way of non-refundable amount.

ii) Rs. 16.72 crores for utilizing the consultations, advice and

services of the petitioner over the suit property along with

service tax o the said amount for which invoices had been

raised by the plaintiff/appellant.

iii) Rs. 28,36,525/- towards the cost of land.

3. It is the case of the plaintiff-appellant that since the

defendants/respondents had acted in breach of the agreement,

the same was duly terminated. Some of the breaches of the

agreement in question, as alleged by the plaintiff/appellant, are

as follows :-

i) The respondent No. 1 issued 12 post dated cheques for a total sum of Rs. 16.72 crores -

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11 post dated cheqeus for Rs. 1.40 crores each and one post-dated cheque for a sum of Rs. 1.32 Crores.

ii) The respondent did not furnish a Bank Guarantee for the amount of Rs. 16.72 crores and also did not pay the service tax payable on the said amount.

iii) Out of the 12 post dated cheques given by the Respondent, 2 cheques were honoured, 4 of Rs. 1.4 crores each were dishonoured on presentation and balance cheques were not presented.

iv) The respondent no. 1 did not carry out construction in accordance with the sanctioned scheme.

v) The respondents entered into agreement with third parties without furnishing any details thereof.

vi) The respondents were selling dwelling units to persons who cannot be termed as members of the weaker sections of the society."

4. Since the agreement was terminable and when it was found

by the plaintiff-appellant that the defendants/respondents were

proceeding to change the nature and character of the suit

property, a suit has been filed by the plaintiff/appellant for

recovery of possession and damages.

5. In the aforesaid suit, two applications for injunction under

Order 39 Rule 1 and 2 read with Section 151 of the Code of

3 Civil Procedure were filed by the plaintiff-appellant. In one

application, the main relief that was claimed by the plaintiff-

appellant was to restrain the defendants/respondents from

alienating or transferring the suit property including the

structures coming up thereon and in the other, for injunction

over the suit property from changing the nature and character

thereof pending disposal of the suit.

6. While dealing with the applications for injunction, the

Second Additional City Civil Judge at Hyderabad had appointed

an Advocate Commissioner to find out the extent of

construction raised by the defendants/respondents in the suit

property as the plaintiff-appellant sought to contend that there

was no construction at all in the suit property. The Advocate

Commissioner appointed by the trial Court submitted his report,

which is already on record. While deciding the applications for

injunction, the said report was taken into consideration by the

trial Court and after hearing the learned counsel for the parties,

the trial Court was prima facie satisfied that substantial

construction was undertaken and completed by the

4 defendants/respondents, which had required them to invest

crores of rupees. The trial Court, considering this fact that

substantial construction was completed, refused to grant an

order of injunction in favour of the plaintiff-appellant from

making any further construction in the suit property but the

applications for injunction were, however, disposed of with the

following conditions :-

"1) That the defendants/respondents shall deposit the balance value of the property, which comes to around Rs. 28,00,000/- into Court within one month.

2) That it shall furnish bank guarantee for the value of the unrealized post dated cheques, and pay/deposit the value of four cheques, which were dishonoured, within one month from today.

3) That the defendants/respondents shall not claim equities over the construction made in the land and they are bound by the decision in the suit. The Defendants/respondents shall furnish the particulars of the prospective buyers of the residential units in advance to the Competent Authority/Urban Land Ceiling, and it must be made clear to the prospective buyers that their purchases are subject to the result of the suit by making a `specific recital' in the agreement of sale or sale deed, as the case may be."

7. Aggrieved by the order of the trial Court, two appeals

were preferred by the plaintiff/appellant before the High Court of

Andhra Pradesh at Hyderabad, which by the impugned order,

5 had affirmed the order of the trial Court on the question of

construction in the suit property, but set aside the directions

given by the trial Court so far as Clause Nos. 1 and 2, as

mentioned above, are concerned in the order of the trial Court.

It is these concurrent orders, which are now under challenge

before us in these appeals.

8. At the time of admission of this matter, caveat had

already been filed by the defendants/respondents. In that view

of the matter, we fixed the hearing of the matter on 22 nd of July,

2009. While hearing the petitions on merits, Mr. R. F. Nariman,

learned senior counsel appearing for the plaintiff/appellant,

invited us to the report of the Advocate Commissioner and after

taking us through the same, sought to contend that in fact, no

construction has been made by the defendants/respondents

and, therefore, in view of the admitted fact that the agreement,

having been already cancelled, the defendants/respondents

cannot be permitted to proceed with the construction on the suit

property and the application for injunction, therefore, must be

allowed. On the other hand, Dr. A. M. Singhvi, learned senior

6 counsel appearing for the defendants/respondents also took us

to the report of the Advocate Commissioner and other materials

on record and at the same time, also had produced recent

photographs, which were not produced in the Courts below and

contended that the High Court was fully justified in affirming the

orders of the trial Court inter alia holding prima facie that a

substantial construction has already been made in the suit

property, for which the defendants/respondents have invested

huge sum of money and in that view of the matter, the question

of grant of injunction at this stage could not arise at all.

9. After hearing the learned senior counsel for the parties

and after going through the Advocate Commissioner's report

and the impugned order of the High Court as well as of the trial

Court, application for injunction and counter filed to the same,

we were of the prima facie view that before deciding these

appeals finally on merits, it would be for ends of justice to find

out the actual position of the suit property and for that reason,

we appointed an Advocate Commissioner from this Court by

our Order dated 23rd of July, 2009, who would inspect the suit

7 property and submit a report by 27th of July, 2009 on the

following points :-

i) Whether constructions have been made on the

different blocks of the suit property and how many

blocks are still remaining vacant ?

ii) If constructions have been made, what is the nature

and extent of such constructions ?

iii) Whether such constructions can be said to be

substantial constructions or not ;

iv) Whether constructions have been completed in some

blocks of the suit property and the flats constructed in

such blocks are ready for use and occupation ;

v) Also to see the local features.

10. Accordingly, the learned Advocate Commissioner visited

the spot and submitted his report, which was also taken up for

consideration along with the main matter. The report of the

Advocate Commissioner may be kept on record.

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11. On behalf of the plaintiff-appellant, Mr. Nariman, learned

senior counsel, submitted that even from the report submitted

by the Advocate Commissioner appointed by this Court, it

would be clear that substantial construction has not been made

in the suit property, whereas Dr. Singhvi, learned senior

counsel, also has drawn our attention to the report of the

Advocate Commissioner of this Court and submitted that there

cannot be any doubt that a substantial construction has already

been made by the defendants/respondents, for which a huge

sum of money has already been invested. On the question of

extent of construction made by the defendants/respondents in

the suit property, we have, therefore, considered the findings of

the High Court as well as of the trial Court and also the report

submitted by the learned Advocate Commissioner in this Court.

The High Court as well as the trial Court concurrently found,

after going through the report of the Advocate Commissioner,

which was appointed by the trial Court, that substantial

construction has already been made in the suit property. Since

no objection was raised by either of the parties to the report of

the learned Advocate Commissioner, we accept the same

9 without any objection and direct that the same may be kept on

record.

12. It is well settled now by catena of decisions of this Court

that when two Courts concurrently rejected the application for

injunction, it would not be open for the third Court to interfere

with the said concurrent findings until and unless it is brought to

the notice of the third Court that such findings are perverse or

arbitrary. So far as the findings of the trial Court regarding

construction on the suit property is concerned, let us look into

its said findings on the question of construction, which are as

follows :-

"In the light of the above circumstances, I find that,

already as per the report of the commissioner and

also as per the photographs produced by him,

major construction work was undertaken and

completed, it must have required the respondent to

invest crores of rupees."

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13. So far as the findings of the High Court on the question of

extent of construction is concerned, it is also the finding of the

High Court that the defendants/respondents have already taken

over possession and made substantial construction, as would

be evident from the record and also from the report of the

Advocate Commissioner, who was appointed by the trial Court.

These are the two concurrent findings of fact arrived at by the

High Court as well as by the trial Court on the question of

extent of construction on the suit property. Still, in order to be

satisfied on the question of construction in the suit property, as

noted herinearlier, we appointed an Advocate Commissioner,

who submitted its report.

14. We have carefully examined the report of the Advocate

Commissioner appointed by us, from which, following points

may be noted :

"4. The Defendants/respondents' Counsel had supplied the layout of the site plan of the project. Principally, the entire project is divided into 8 Blocks. The plan for construction of 8 Blocks is approved by the authorities. A photocopy of the approved site plan of the project is annexed as Annexure C-2. Each Block is divided into various Rows. There is no evenness in the number of Rows for each Block. Some Blocks have more Rows

11 and some Blocks have less Rows. The Blocks are numbered in the site plan attached herewith as Annexure C-3. For better understanding and for better description of the areas in the Blocks, I had given numbers for the Rows in each Block separately in the site plan. The layout is as under :

1 Block - I 2 Rows (60 Apartments) 295 . Apartments

2. Block - II 2 Rows (150 Apartments) in the

3. Block - III 2 Rows (85 Apartments) Triangular area. Work has not been started.

4. Block - IV 6 Rows (330 Apartments)

5. Block - V 7 Rows (385 Apartments) 1,555

6. Block-VI 2 Rows (240 Apartments) Apartments

7. Block-VII 6 Rows (300 Apartments) in the

8. Block-VIII 6 Rows (300 Apartments) Rectangula r area.

Work in progress at various stages.

5. It is stated that each Block will have ground floor (car park) + 5 floors."

15. A perusal of the report of the learned Advocate

Commissioner therefore shows that out of 1800 flats to be

constructed in the suit property in 8 Blocks, only in 295

apartments in the Triangular area, work has not been started,

whereas in the rest 1,555 apartments in 5 Blocks, work is in

progress at various stages. Therefore, it is evident from the

perusal of the report of the Advocate Commissioner filed in this

12 Court that substantial progress has been made in the matter of

construction on the suit property as it is evident that such

substantial construction has been completed at least 50% in the

rectangular pieces of the suit property whereas work for Blocks

IV to VIII are going on except Row Nos. 3 to 6 in Block No. VII

where there is a mound of soil to a height of about 2 floors and

also boulders of granite rock cut into rectangular pieces of

identical sizes lying in the area. It is also found from the report

that the constructions have been completed in Row Nos. 1 and

2 in Block No. VIII.

16. Apart from that, 98% of the work is also completed on 1st,

2nd and 3rd floors of Row Nos. 1 and 2 of Block No. VIII. Since

the roads have not been laid and the parking has not been

made available, according to the learned Advocate

Commissioner, the purchasers would not be in a position to

occupy the flats. So far as other Blocks are concerned, the

learned Advocate Commissioner was of the view that huge

construction activity on a war-footing basis is under-way in

respect of the disputed area which includes Blocks- IV to VIII.

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17. Therefore, in view of the concurrent findings of the Courts

below and also from the findings arrived at by the Advocate

Commissioner appointed by this Court in his report, we cannot

but hold that substantial construction has been made and

therefore, the submission of Mr. Nariman that substantial

construction has not been made, cannot be accepted.

18. Keeping this in mind, let us now proceed to consider

whether substantial injury would be faced by the plaintiff-

appellant in the event an order of injunction is not granted to

them. As noted hereinearlier, the Development Agreement-

cum-General Power of Attorney was entered into by the

defendants/respondents with the plaintiff-appellant and as per

the terms and conditions, parties agreed that a sum of Rs.

13.50 crores had to be paid besides 16.72 crores for the

service of consultancy and Rs. 28,36,175/- was the cost, which

comes to Rs. 30.50 Crores. It was further agreed that it was

only after the payment of the amount agreed upon, necessary

documents were to be executed. That apart, under the

14 Agreement, the defendants/respondents had to furnish bank

guarantee in regard to the amount stated to have been paid in

four cheques. In the plaint as well as in the application for

injunction, it was alleged by the plaintiff-appellant that the

defendants/respondents, after paying first installment, had

failed to pay the balance installments as agreed upon by them

because of an order of injunction obtained by the

plaintiff/appellant against the defendants/respondents in a writ

petition filed by them in the High Court of Andhra Pradesh at

Hyderabad. It is true that the defendants/respondents, after

paying the first installment, had failed to pay the other

installments payable within the time specified, under the

Agrement, but it is an admitted position that although, the

deposits were belatedly made but the entire amount under the

Agreement has already been deposited and in compliance with

the Agreement, a Bank Guarantee has also been furnished.

19. Such being the state of affairs, i.e. substantial

construction has been made on the suit property in respect of

which crores of money have been invested by the

15 defendants/respondents and since the defendants/respondents

have already paid/deposited the amount payable in terms of the

agreement, although belatedly, to the plaintiff/appellant, we do

not think that the plaintiff-appellant will suffer any substantial

injury if the construction work is not stopped by an order of

injunction. It is well settled that when construction has been

made on a land, which is of considerable magnitude, and when

the plaintiff shall not face any substantial injury, if no order of

injunction is granted because of payment/deposit of the entire

amount payable by the defendant to the plaintiff under the

Agreement, though belatedly, we are of the view that the Court

will not, as a matter of course, pass an order of injunction

against the other party restraining the other party from raising

any construction on the suit property till the disposal of the suit.

If ultimately, the suit filed by the plaintiff-appellant is decreed,

he can be compensated in damages or the

defendants/respondents may be directed to pull down the

construction and deliver vacant possession to the

plaintiff/appellant when no equity can be claimed for such

construction by the defendants/respondents. On the other

16 hand, in our view, if at this stage, an order of injunction is

granted against the defendants/respondents from proceeding

with further construction in the suit property, it will undoubtedly

destroy the constructions already made by the

defendants/respondents and the defendants/respondents will

suffer irreparable loss and injury for not allowing them to make

construction on the suit property. That apart, in view of our

discussions made hereinabove, the entire amount payable by

the defendants/respondents having been paid/deposited in

favour of the plaintiff/appellant, there is no reason to pass an

order of injunction against the defendants/respondents when

the plaintiff/appellant would not face substantial injury for

permitting the defendants/respondents to proceed with the

construction in the suit property.

20. Accordingly, in view of our discussions made hereinabove,

we are, therefore, of the view that the balance of convenience

lies against granting an order of injunction, which, if granted,

will substantially and irreparably injure and prejudice the

defendants/respondents. For the reasons aforesaid, we are,

17 therefore, of the view that the High Court was fully justified in

affirming the order of the trial Court refusing to grant any order

of injunction in favour of the plaintiff/appellant.

21. That apart, in our view, when the High Court as well as the

trial Court had refused to grant injunction in favour of the

plaintiff/appellant based on consideration of materials on record

and after considering the balance of convenience and

inconvenience of the parties and when such findings of the

High Court as well as of the trial Court do not suffer from any

perversity or arbitrariness, it is not open for this court to

interfere with such order of the High Court as well as of the trial

Court.

22. However, there is one another aspect of the matter. As

noted hereinearlier, the trial Court, while refusing to grant

injunction in favour of the plaintiff/appellant, has given certain

directions to the defendants/respondents, which have already

been noted hereinearlier. In view of the fact that the Clause

Nos. 1 and 2 have already been complied with by the

defendants/respondents, those clauses need not remain. So

18 far as Clause No. 3 is concerned, it appears to us that the said

clause should remain, that is to say, the

defendants/respondents shall not claim equities over the

construction made in the suit property and they would be bound

by the decision in the suit. Furthermore, the

defendants/respondents, as directed by the trial Court, shall

furnish particulars of the prospective buyers of the residential

units in advance to the Competent Authority/Urban Land Ceiling

as it must be made clear to the prospective buyers that their

purchases are subject to the result of the suit by making a

`specific recital' in the agreement of sale or sale deed, as the

case may be.

23. In view of our discussions made hereinabove, we do not

find any merit in these appeals.

24. We, however, make it clear that whatever observations

we have made while deciding these two appeals, would not

stand in the way of the Courts below from deciding the merits of

the suit and it is also made clear that the trial Court shall not be

19 influenced by any of the observations or findings made in this

order or of the High Court, while deciding the application for

injunction.

25. Considering the facts and circumstances of the present

case, we direct the trial Court to dispose of the suit at an early

date, preferably within six months from the date of filing the

written statement by the defendants/respondents. The

defendants/respondents are directed to file their written

statement within four weeks from this date, if not filed in the

meantime.

26. The appeals are thus dismissed. There will be no order

as to costs.

..................................J [ TARUN CHATTERJEE ]

NEW DELHI .................................J. AUGUST 06, 2009 [ R. M. LODHA ]

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