Holding

The Court held that specific performance of the 2006 development agreement is unjustified; the appellant must deposit Rs 20 crore to obtain possession, and any additional damages are to be determined by arbitration.

Summary

The appellant, Yusuf Khan, owned a 2412 sq. yard property in Mumbai and entered into a development agreement on 23 June 2006 with two developers to construct a building, granting the developers a 50% share of the development potential. The developers failed to commence or complete construction within the stipulated 24‑month period, prompting the appellant to terminate the agreement in 2015 and demand possession of the property. The developers, now represented by Prajita Developers as assignee, sought specific performance of the agreement and filed arbitration applications under Sections 9 and 11 of the Arbitration and Conciliation Act, 1996, which were dismissed by the High Court. The appellant appealed, arguing that specific performance of a decade‑old contract was unjust and that he should be allowed possession upon payment of Rs 20 crore. The Supreme Court held that specific performance was not justified, directed the appellant to deposit Rs 20 crore and hand over possession, and referred any claim for additional damages to arbitration. The appeal and related applications were disposed accordingly.

Issues considered

Whether specific performance of the 2006 development agreement can be granted after more than a decade of non‑performance.
Whether the appellant is entitled to possession of the property upon payment of a stipulated sum.
Whether any further damages beyond the Rs 20 crore are payable and if such dispute falls within the arbitration clause of the agreement.
Whether the termination clause precludes arbitration of the dispute.
Whether the arbitration applications under Sections 9 and 11 of the Arbitration and Conciliation Act, 1996, were maintainable.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11, s. 9
Code of Civil Procedure, 1908s. Order XL Rule 1

Subjects

development agreementspecific performancetermination clausearbitrationArbitration and Conciliation Actpossessiondamagescivil appeal

Judgment

[2017] 7 S.C.R. 687

YUSUF KHAN @ DILIP KUMAR A
THROUGH POWER OF ATTORNEY
v.
PRAJITA DEVELOPERS PVT. LTD. & ANOTHER
(Civil Appeal No.11093 of 2017)
B
AUGUST 30, 2017
[J. CHELAMESWAR AND S; ABDUL NAZEER, JJ.I
Specific Pe1formance :
·Grant of development rights of property in question - By c
appellant vide agreement dated 23.6.2006 - Jointly to predecessor-
in-interest of respondent No. 1 and to respondent No. 2 - As per
terms of the agreement, if developers failed to complete the
construction within stipulated period,the appellant was entitled to
get the construction completed at the cost of developers and on
developers' failure to deposit such cost, appellant was further D
entitled to terminate the agreement -Application u/s. 9 ofArbitration
and Conciliation Act by respondent No. 1 (for restraining the
appellant from dispossessing respondent No. 1 and for restraining
the appellant from creating third party right in the property) dismissed ·
upto Supreme Court - Application uls. 11 of Arbitration Act before E
High Court withdrawn by respondent No. 1 with liberty to file a suit
- In the meantime agreement dated 23.06.2006 terminated by the
appellant - Suit by respondent No. I seeking specific performance
of the agreement dismissed by High Court - On appeal, held: There
is no justification for the demand of specific performance of the
· agreement - In the ends of justice appellant is directed to deposit F
an amount of Rs. 20 crores with the Supreme Court to be collected
by respondent No. I - Respondent No. I is directed to hand-over
the possession of the property to appellant - The question as to
whether respondent No. I _was entitled to any damages over and
above Rs. 20 crores to be resolved in arbitration proceedings - G
Arbitration and Conciliation Act, 1996 - ss. 9 and II.
Disposing of the appeal and miscellaneous application, the
Court

H
687
688 SUPREME COURT REPORTS [2017] 7 S.C.R.

A HELD: 1. There is no justification for the demand of
respondent No. 1 for the specific performance of the agreement
dated 23.6.2006. In the circumstances of the case, permitting
the continuance of the suit for specific performance of the
agreement which is more than a decade old against a person from
whom respondent No. 1 secured the development rights of the
B
property in dispute which ultimately would enable respondent
No. 1 to 25 per cent of the monetary value of the development
potential as against the right of the appellant who is entitled for
75 per cent of the monetary value of the development potential
would be unjust. [Para 21) [697-D-EJ
c 2. Having regard to the totality of the circumstances, .the
ends of justice would be met in this case by directing that the
appellant shall deposit an amount of Rs. 20 crores by demand
draft to the Registry of this Court within a period of four weeks
from today and intimate the same to respondent No. 1. Upon the
D receipt of such intimation, respondent No. 1 .shall withdraw all
the security personnel deployed by it and hand over possession
of the property in question within a period of seven days from the
date of the receipt of the above-mentioned intimation to the
appellant. [Para 201 [696-G-H; 697-AJ
3. In the background of the facts and circumstances of the
E
case whether respondent No. 1 would be entitled for any damages
apart from receiving the above-mentioned amount of Rs. 20
crores from the appellant, is a matter which requires some
examination. Therefore, the said question is rejected for
resolution by arbitration between the appellant and respondent
F No. 1. The parties are directed to submit the above-mentioned
dispute for arbitration in accordance with law. [Para 221 [697-E-
FJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No.11093
of 2017.
G From the impugned Final Judgment and Order dated 25 .07.2016
and modified Judgment and Order dated 05.08.2016 of the High Court
of Judicature at Bombay in Arbitration Application No.292 of2015
WITH
H M.A. No.629/2017 in S.L.P(C) Nos.7483-7484 of2016.
YUSUF KHAN @ DILIP KUMAR THR. P.O.A. v. PRAJITA 689
DEVELOPERS PVT.. LTD. & ANR

Mukul Rohtagi, P. Chidambaram, Shyam Divan, Sr. Advs., Rahul A
Chitnis, Shashibhushan P. Adgaonkar, Chirag Shah, Rana Sandeep Bussa,
Aurupdas Gupta, Ms. Vandana Sehgal, Hardeep Singh Anand, Anand
Daga, Muhammad Ali Khan, Gaurav Gupta, Divyam Agarwal, Akhil
Bhardwaj, Omar Honda, Ms. Sakshi Kotiyal, Vikram Aditya Singh,
Hardeep Singh Anand, R.N. Karanjawala, Ms.Ruby Singh Ahuja, Utsav
B
Trivedi, Anupam Prakash, Arvind Chari, Shubham Saigal, Ms.Manik
Karanjawala, M/s Karanjawala & Co., Mahesh Agarwal, Abhinav
Agrawal, Aaditya Pan de, E. C. Agrawala, Advs. for the appearing parties.
The Judgment of the Court was delivered by
CHELAMESWAR, J. 1. Leave granted m ~pecial Leave c
Petition (Civil) No. 18912 of2017.
2. The ' 11ellant aged about 95 years is also the applicant in
· Interlocutory . }Jlication No.75003 of2017 in Miscellaneous Application
No.629 of2017 1 filed in SLP(C) Nos.7483-7484/2016 filed by the l''
respondent herein, which stood dismissed by an order of this court dated D
16.03.2016. For the sake of convenience, he is referred to hereafter as
the appellant.
3. The appellant owns landed property admeasuring 2412 sq. yards
in Plot No.16 of Pali Hill in the village of Dand, Bandra in the city of
Bombay, now called Mumbai. E

1 Prayer: It is, therefore, most respectfully prayed that this Hon'ble Court may be pleased
to:

a) That pending the special leave petition, the Respondent No. I by themselves,
their servantS, agents and/or otherwise howsoever, be ordered and directed to
forthwith remove the security guards posted by them on the said property and F
to permit the petitioner to freely enter upon the said property as and when
desired by tb.e Petitioner and Respondent No.2;
b) That pending the special leave petition, the Respondent No. I by themselves,
their servants, agents and/or otherwise howsoever, be permanently restrained
form entering upon or remaining on or using or occupying the said property.
c) That pending the special leave petition, the Court Receiver, High Court, Bombay
or some other fit or ·proper person be appointed receiver in respect of the said
property, with all power under Order XL Rule I of the Code of Civil Procedure,
1908, including the power to re1nove the security guards, agents, servants of the
Respondent No. I from the said property, with the help of police, if necessary;
and ·
d} Pass such further and other orders and/or directions as may be deemed fit and
property by this Hon'ble Court in the facts and ci~u1nstanccs of the case and in
the interest of justice.
H
690 SUPREME COURT REPORTS [2017] 7 S.C.R.

A 4. The appellant entered into an agreement dated 23.6.2006
(hereafter referred to as AGREEMENT) with two companies namely
Mis Sharyans Resources Private Limited (hereinafter referred to as
"SHARYANS") and the 2nd respondent herein, Goldbeam Construction
Private Limited, both companies incorporated under the Companies Act,
1956 (hereafter collectively referred to as DEVELOPERS).
B
5. The substance of the AGREEMENT is that the appellant agreed
to "grant to the DEVELOPERS the right to develop the said property"
and the DEVELOPERS agreed to develop the property on various terms
and conditions specified under the AGREEMENT. It appears from the
c record that there is some single venture partnership agreement between
the two companies (DEVELOPERS). From the huge mass of documents
filed in these appeals, it appears that there are two documents witnessing
such partnership agreement. They are dated 16.6.2006 and 10.12.2008.
The language and content of both the documents is substantially similar
and an interesting fact which is required to be taken note of is that the
D 16th June 2006 document refers to the AGREEMENT dated 23.6.2006.
The complete details of the terms and conditions of the AGREEMENT
are not necessary for the purpose of this appeal.

For the present, it must be noted that under the AGREEMENT,
E the DEVELOPERS agreed to an amount of Rs. I 0 crores in three
installments as detailed in the AGREEMENT. It is agreed under clause
4 of the AGREEMENT that "the owner shall permit the DEVELOPERS
to enter upon the said property and to commence the development
thereof.... " It is agreed under clause 6 that all the necessary permissions/
NOCs/orders which are required to be obtained shall be obtained by the
F DEVELOPERS. The appellant is obliged to cooperate by executing
appropriate documents for the said purpose. Under Clause 172 of the
AGREEMENT, it is stipulated that the "DEVELOPERS shall have the
license to enter upon the said property''.

G 'Clause 17. Upon payment of the balance of monetary consideration by the Developers
to the Owners as provided in Clause 3(b) the Owner shall permit and the Developers
shall have the license to enter upon the said Property to develop the said Property to
carry on construction on the said property and for that purpose to do all acts, deeds,
matters and things as may be necessary.

H
YUSUF KHAN @ DILIP KUMAR THR. P.0.A. v. PRAJITA 691
DEVELOPERS PVT. LTD. & ANR [CHELAMESWAR, J.]

6. Under Clause 31 3 of the AGREEMENT, it is provided that the A
· DEVELOPERS shall commence development of the said property and
the construction of the building thereof within 30 days from the date of
the final amended building plan and complete the construction within a
period of 24 months from the date of issue of the commencement
certificate.
B
7. The various legal consequences that would flow from the failure
on the part of the DEVELOPERS to discharge the obligations under the
AGREEMENT are provided under Clause 32 of the AGREEMENT.
The crux of the Clause 324 is that in the event of the DEVELOPERS
not performing their part of the obligations of completing the constmction · C
within the period stipulated in the AGREEMENT, the appellant is entitled
to get the,construction completed at the cost of the DEVELOPERS.
Parties also agreed that such cost be determined by an independent
architect of the appellant's choice. Once the cost is determined the
appellant is entitled to call upon the DEVELOPERS to deposit such cost
D
. with the appellant's advocates and solicitors within a period of three
months from the date of receipt of intimation of the cost. If the
DEVELOPERS make such a deposit, the appellant is entitled to have
the construction completed through "independent contractors" "at the
risk and cost of the DEVELOPERS". In the event of the
DEVELOPERS failing to make such a deposit, the owner is entitled to E
terminate the AGREEMENT.

3 Clause 31. The Developers shall commence the development of the said property and

construction of buildings thereon within thirty days from the date of sanction of the
finai amended building plans and complete the development and construction of all
buildings in all respects as provided herein and make the buildings fit and ready for F
occupation and the Developers shall apply for issue of Building Completion Certificate
and pending the issue thereof for issue of Occupancy Certificate of each of the buildings
within a period of 24 months from the date of issue of commencement certificate of
development.

4
Clause 32(A)(a). If the Developers failed to complete within the item stipulated G
. hereinabove the construction of the Owner's lot of premises in any building under
construction, the Owner shall be entitled to get the cost of completion of the alliance
work of construction of such entire building including the Developer's Lot of premises
determined by an independent Architect and thereafter the owner shall intimate to the
Developers the estimated cost so determined by such independent Architect for
completing the construction of such entire building as aforesaid.
H
692 SUPREME COURT REPORTS [2017) 7 S.C.R.

A 8. By clause 335 of the AGREEMENT, the parties agreed that
any dispute arising out of the breach of any one of the various clauses
enumerated thereunder shall be resolved by arbitration. It is further
provided that any dispute arising out of the termination of the
AGREEMENT invoking Clause 32(A), shall not be the subject matter
of any arbitration.
B
9. Mis Prajita Developers Private Limited, the petitioner in the
disposed ofSLP(C) Nos.7483-748412016 and the 1st respondent in the
present appeal (hereafter PRAJITA) claims to be the assignee of Mis
Sharyans Resources Private Limited. The terms of the assignment are
said to be evidenced by the document "Deed of Assignment" dated
c 20.4.20 I 0 confirmed by the appellant and the 2"d respondent.
I 0. A number of complicated arrangements were entered into in
different combinations at different points of time between the appellant,
the DEVELOPERS and some third parties to the AGREEMENT, who
are otherwise said to be related to the appellant, the details of which we
D do not propose to mention in this order.
11. The first respondent filed an application (No.829 of 2015)
under Section 9 of the Arbitration & Conciliation Act, 1996 (hereafter
referred to as ARBITRATION ACT) for an injunction restraining
appellant from dispossessing respondent no.I and also an injunction
E restraining the appellant from creating any third party right, title or interest
in the said property. Initially some ad-interim orders were passed in the
said application, but the application itself was eventually dismissed on
14.01.2016.
12. PRAJITA carried the matter in an intra-court appeal
F (No.7412016) which also came to be dismissed by a judgment dated
04.03.2016. It is recorded therein;

5 Clause 33. The provisions contained in Clauses IA, 2, 7, 8, 12, l 3(A), 8c(B), 16, 17,
18, 20, 21, 23, 24(a) to{c) 25, 26, 27, 28, 29, 31, 32(A)(B), 34, 35, 35(B), Sc 37 hereof
G the basic and essential terms of this Agreement and in case of any breach of the same it
shall be referred to Arbitration as provided in Clause No.40 before termination of this
Agreement on account of such breach. The termination on account of breach of this
Development Agreement as provided nuder Clause 32(A) above shall not be the
subject matter of any arbitration as aforesaid and the parties will be entitled to
exercise their respective rights under the said Clause 32(A) above.

H
YUSUF KHAN @ DILIP KUMAR THR. P.0.A. v. PRAJITA . 693
DEVELOPERS PVT. LTD. & ANR [CHELAMESWAR, J.]

"Para 7 ... Admittedly, as per the agreement, the development A
was supposed to commence within 30 days and should be
completed within a time period of 12 months from the date of
!OD/Commencement Certificate. The plans were approved
on 2 January 2008 and CC was obtained 22 September
2008. No steps to initiate even construction were taken. B
Admittedly the development of the remaining was not completed
before September 2011 - even the foundation was not laid, except
some piling work with two columns. The position remained
same till the year 2013-2014. The said position of 2013 and
2014 still remained same till this date. In the background,
such construction/development contract so entered into by C
Respondent No. I/owner to develop his property as a owner within
his lifetime considering his age. The agreement clause itself shows
that time was an essence of the contract to complete the
development so that all the parties including the Appellants/
Petitioners would get his 25% share after completion of D
the construction at this costs. The Appellants/Petitioners
entitlement was only after completion of the development. The
remaining 25% was admittedly of Gold Beam. In the remaining
50% area, the Appellants and/or Gold Beam and/or Sharyans had
no right whatsoever. Their rights/interest/entitlement was also
subject to the development and construction for the development E
potential area. The Developers could not even obtain permission,
NOC, though obtain re-validation of CC till the year 2013. The
Sharyans and his assignee/Petitioner/Prajita, therefore,
failed to develop the property further as per the
agreement." 6
F
Aggrieved thereby, PRAJITA carried the matter in SLP (No. 7483-
7484 of2016) to this Court which was dismissed on 16.03.2016.
13. During the pendency of the abovementioned proceedings, on
14.09.2015, PRAJITA filed an appli(lation (No.292 of 2015) under
Section 11 of the ARBITRATION ACT praying that the dispute between G
the parties be referred to a Sole Arbitrator to be appointed by the High
Court.

6
Para 7 of the judgment of the High Court in Arbitration Appeal (L) No.74 of2016 at
page 208 of the Special Leave Petition (Civil) No.l 8912 of 2017.
H
694 SUPREME COURT REPORTS [2017) 7 S.C.R.

A 14. The Arbitration Application No.292 of2015 was disposed of
as withdrawn by an order of the Bombay High Court dated 25th July,
2016. Subsequently, another order dated 5th August, 2016 came to be
passed in the said matter. The relevant portion of the order reads as
follows:
B "The learned Advocate appearing for the Applicant on instructions
seeks to withdraw the above Arbitration Application as the
Applicant is desirous of filing a Suit. The Arbitration Application
is disposed of as withdrawn with liberty as sought. However, it is
clarified that if the Applicant files a Suit, the same shall be decided
on its oWlrmerits and all contentions of the Respondents including
c their contention that the Suit would not be maintainable, are kept
open".
Aggrieved by the order, the instant Civil Appeal (arising out of
SLP (Civil) No.18912 of2017) is filed.

D 15. On 8.10.2015, the appellant terminated the AGREEMENT
and informed the same to PRAJITA by issuing a notice through his
lawyer. Relevant part of the notice is as follows:
"In view of the above, we hereby terminate the development
agreement dated 23rd June 2006. And we call upon you to remove
E yourself from the said property, with immediate effect, otherwise,
our client will be taking appropriate action against you.
Our client reserves his right to claim damages for not carrying out
the activity of the construction on the said property and/or
completing the work of construction within the stipulated time
F and causing severe hardship to our client."
We are informed that subsequently PRAJITA filed a Suit bearing
No.295 of2016 on 28th September 2016 in the Bombay High Court on
its Ordinary Original Civil Jurisdiction praying inter alia:-
"a) That this Hon'ble Court be pleased to declare that the
G Development Agreement dated 23rd June 2006 (being Exhibit
"C" hereto) is valid subsisting and binding upon the Defendant
No.I;
b) That this Hon ;ble Court be pleased to declare that the
purported termination notice dated 8th October 2015 issued
H
YUSUF KHAN @ DILIP KUMAR THR. P.O.A. v. PRAJITA 695
DEVELOPERS P. LTD. & ANR [CHELAMESWAR, J.]

by the Defendant No. l (being Exhibit "HH" hereto) is bad in law . A
and contrary to and precluded by the specific terms of the
Development Agreement dated 23rd June 2006;
c) That this Hon'ble Court be pleased to pass a Decree
directing the Defendant No.I to specifically perform his
obligations under the Development Agreement dated 23"' B
June 2006.:
it is not necessary to mention the various other prayers made in
this Suit except to note that there are some more prayers.
16. It appears that another two arbitration petitions are pending
before the Bombay High Court. It is stated in Para 17 of the Interlocutory C
Application No. 75003/2017:
"As on date, tlie Petition (under Section 9 of the said Act) filed by
the Respondent No.1/Applicant, before the Bombay High Court,
being Arbitration Petition No.697 of 2016, and the Application
(under Section 11 of the said Act), filed by the Respondent No. I/ D
Applicant, before the Bombay High Court, being Arbitration
Application No.234 of 2016, are pending hearing and final
disposal."
The details of those petitions are not readily available from the
record placed before us. E
17. The following undisputed facts emerge:
1. The appellant granted to the DEVELOPERS under the
AGREMEENT of 23rd June 2006 the "right to develop" the
property in question;
F
2. Under the AGREEMENT, the appellant is entitled to 50% of
the "Development potential" and the DEVELOPERS jointly
are entitled to the balance 50% of the "development potential".
3. Between the two companies which jointly constituted the
DEVELOPERS, each company is entitled to 50% of that G
portion of the "development potential" which falls to the share
of the DEVELOPERS;
In other words, the share of SHARYANS is only 25% of the
"development potential";
H
696 SUPREME COURT REPORTS [20i7] 7 S.C.R.

A 4. It is agreed between the parties that the construction must be
completed within 24 months from the date of the issue of the
commencement certificate of development, subject to some
exceptions;
5. Mis PRAJITA is not the original party to the AGREEMENT
B but stepped into the shoes ofM/s SHARYANS on20.04.2010
under a deed of assignment.
6. As on date, no construction worth mentioning at all is made,
not to mention about completing the construction;
18. The background of the above-mentioned facts; When these
C · matters were initially listed before us on 31st July, 2017 while adjourning
the matter to 21st August, 2017, we called upon the learned senior counsel
appearing on either side Shri Mukul Rohatgi, appearing for the appellant
and Shri P. Chidambaram, appearing for PRAJITA to explore the
possibility of an out of court settlement to give a quietus to the entire
D litigation. When the matter was listed on 21st August, 201 7, on behalf
of the appellant, it is stated by Shri Rohatgi that the appellant has in fact
received so far an amount of Rs. 8.5 crores approximately from PRAJITA
and its predecessor in intere&t. The appellant is willing to pay an amount
of Rs. 20 crores to PRAJITA in order to have an undisturbed possession
and peaceful enjoyment of the property in question. According to the
E appellant, PRAJITA has posted armed guards around the property in
question preventing the appellant from entering the property.
19. On the other hand, Shri Chidambaram appearing for PRAJITA
submitted that PRAJITA is not agreeable for the settlement of the dispute
on the terms offered by the appellant and since PRAJITA has rights
F acquired by the deed of assignment etc. referred to earlier in the property
in question, it posted guards to protect the property in question from
encroachment but not to prevent the appellant in any manner from visiting
the property.
20. Having regard to the totality of the circumstances, we are of
G the opinion that the ends ofjustice would be met in this case by directing
as follows:-
The appellant shall deposit an amount of Rs. 20 crores by demand
draft to the Registry of this Court within a period of four weeks from
today and intimate the same to PRAJITA. Upon the receipt of such
H
YUSUF KHAN@ DILIP KUMAR THR. P.O.A. v. PRAJITA 697
DEVELOPERS PVT. LTD. & ANR [CHELAMESWAR, J.]

intimation, PRAJITA shall withdraw all the security personnel deployed A
by it and hand over possession of the property in question within a period
of seven days from the date of the receipt of the above-mentioned
intimation to the appellant in the presence of the Commissioner of Police,
Mumbai or any other senior police officer subordinate to the Commissioner
of Police, Mumbai to be nominated by the Commissioner of Police.
B
The Commissioner of Police or his nominee shall draw a
Panchnama of the fact of the handing over of the property by PRAJITA
·to the appellant and file the same in the Registry of this Court within a
week from the date of the handing over of the possession.
Upon the filing of the Panchnama with the Registry of this Court, C
PRAJITA shall be at liberty to withdraw the amount of Rs. 20 crores
deposited by the appellant pursuant to this order.
21. We do not also see any justification for the demand of the
PRAJITA for the specific performance of the agreement dated 23.6.2006.
In the circumstances of the case, we are of the opinion that permitting
the continuance of the suit for specific performance of the AGREEMENT D
which is more than a decade old against a person from whom PRAJITA
secured the development rights of the property in dispute which ultimately
would enable PRAJITA to 25 per cent of the monetary value of the
development potential as against the right of the appellant who is entitled
for 75 per cent of the monetary value of the development potential would E
be unjust.
22. The background of the facts and circumstances of the case
whether PRAJITA would be entitled for any damages apart from
receiving the above-mentioned amount of Rs. 20 crores from the appellant .
is a matter which requires some examination. We therefore, deem it F
appropriate to refer the said question for resolution by arbitration between
the appellant and PRAJITA. We, therefore, direct that the parties shall
submit the above-mentioned dispute for arbitration by Hon 'ble Shri Justice
P. Venkatarama Reddy, former Judge of this Court in accordance with
law. Registry is directed to communicate this Order to Hon'ble Shri
Justice P. Venkatarama Reddy. G
Civil Appeal and Miscellaneous Application are disposed of
accordingly. ·

Kalpana K. Tripathy Matten; disposed of.