Visit our parent website: www.redevelopmentofhousingsocieties.com



Follow me on

        

        


HC RULES TO CONSIDER CHEATING CASES BY BUILDERS ARE CRIMINAL OFFENCES AND NOT CIVIL CASES

Today, the redevelopment in real estate industry is one most flourishing features in India. The demand for redevelopment of residential and commercial property is increasing constantly and so is the number of Builders and Developers who offer special features to attract the prospective housing societies where a very important role is played by Builders and Developers. However, there are numerous cases where the Builders and Developers have either taken more than the required time to finish projects while leaving home buyers to suffer financial loss or such projects have been abandoned on a half way.

The Bombay High Court in a landmark judgement recently told City Police that cases where a Developers or Builder cheats his customers, must be considered as criminal offenses rather than civil suits. The statement by Justice came when he was hearing a case where a one of the housing societies accused the Developers of cheating.

While slamming senior officers of the Malad police station for failure to file an FIR in the case, the Justice said that he had repeatedly recorded in his orders that the complaints filed by the public alleging that they have been cheated by the Developers cannot be termed as disputes of a civil nature. Yet the police officials are not ready to assist the common man when he seeks police assistance against fraud Developers and instead, he is show the door by police terming the complaint as being civil disputes.

The Justice's statement comes at a crucial time as Indian States gear up to implement the Real Estate Regulation Act (RERA) across the country. While RERA has been put into effect in the state of Maharashtra, the case illustrates how home buyers in the country are largely unaware of their rights, some of which are easy to understand and important to know.

The relevant judgment is reproduced hereunder:

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

IN ITS COMMERCIAL DIVISION

CONTEMPT PETITION NO.20 OF 2018

IN

ARBITRATION PETITION NO.247 OF 2017

 Liberty Garden Co-op. Housing Soc. Ltd.          Petitioner

Versus

K.T. Group and Ors                                         Respondents

Mr. Tushar Gujjar with Mr. Deepak Singh i/by M/s. Solicis Lex, for Petitioner

Mr. U.S.Upadhyay, AGP for State.

Mr. Sudhir Mahadik, Sr. P.I., Malad Police Station present.

Mr. Sandeep Sheth and Mr. Dhairya Sheth, Ms. Hema Sheth present

CORAM:  S.J. KATHAWALLA, J.

DATE: 4th MAY, 2018

P.C.:

1.   The Petitioner is a Co-Operative Housing Society whose building was constructed in the year 1968. On 19th December, 2013, Respondent No.1 – K.T. Group through its three partners Dhairya Sheth, Sandeep Sheth and Dhruv Sheth entered into a Development Agreement with the Petitioner-Society. On 13th July, 2014, IOD was issued and possession was obtained by the Respondents-Developers from the members on 30th September, 2014. On 21st January, 2015, Commencement Certificate (CC) was issued and the partners of K.T. Group agreed to complete the project i.e. on or before 22 months + 6 months grace period. The Respondents failed to complete the project within a stipulated period and also failed and neglected to make payments towards compensation agreed to be paid to the members since April, 2017.

2.          Though the Senior Inspector of Malad Police Station received a complaint from the Petitioner-Society against the Respondents – K.T. Group, as far back as on 23-09-2017 that the members of the Society have been cheated by the Developers, the Senior Inspector has failed and neglected to take any action in the matter. Instead, he has written a letter to the complainant Society stating that their complaint is in the nature of a civil dispute.

3.          I have in the past repeatedly recorded in my orders that the complaints filed by the members of the public alleging that they have been cheated by the Developers cannot be termed as disputes of a civil nature, yet the Police Officials, In-Charge of the Police Stations are not ready to assist the common man when they seek police assistance and instead show them the door by terming their complaints as being civil disputes. Despite the above observations in my orders, I find that there is no improvement in the approach/conduct of the Senior Police Officers. When the concerned officer/s are directed to remain present before the Court and questioned as to what steps they have taken qua such complaints, they simply tender a mechanical apology. The Senior Inspector of Malad Police Station now states that he shall forthwith look into the complaint and take necessary steps. A copy of this order shall be forthwith forwarded to the Commissioner of Police, Greater Mumbai and the Deputy Commissioner of Police, Zone XI.

Stand over to 13th June, 2018.

(JUSTICE S.J.KATHAWALLA)

********************

Bombay High Court on Termination of Development Agreement without Termination Clause

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

ARBITRATION PETITION (LODGING) NO.219 OF 2015

The Jal Ratan Deep Co-operative Housing Society Limited, Plot No.13-B of Survey No.161 (PT), Bangur Nagar, M.G. Road, Goregaon (West), Mumbai – 400 104 - Petitioner

Versus 

Kumar Builders Mumbai Realty Private Limited, a company incorporated under The Companies Act, 1956, having its office address at Office No.7, Ground Floor, Suryodaya Estate, Tardeo, Mumbai – 400 034.
Respondent

Mr.Rohan Cama with Mr.Prakash Shinde and Mr.Chirag Bhavsar i/b MDP & Partners for the Petitioner.

Mr.Amir Arsiwala with Mr.Sameer Khedekar for the Respondent.

CORAM : R.D. DHANUKA, J.
RESERVED ON : 12TH JUNE, 2015
PRONOUNCED ON : 24TH JUNE, 2015.

 

JUDGMENT

1. By this petition filed under section 9 of the Arbitration & Conciliation Act, 1996 (for short the said “Arbitration Act”), the petitioner seeks permission to appoint a new developer to develop the property of the petitioner and/or to deal with the said property pursuant to the liberty granted by this Court vide order dated 23rd December, 2014 and also seeks an injunction restraining the respondent from advertising and dealing with in any manner pursuant to the development agreement and to advertise such redevelopment project of the petitioner in any manner whatsoever. Some of the relevant facts for the purpose of deciding this petition are as under :

2. The petitioner society was formed and registered in 1974 and comprises of 97 members in five buildings. The petitioner passed a resolution at the special general body meeting on 14th February, 2010 to carry out demolition of the existing buildings and for construction of the flats for the members through a professional developer. The petitioner and the respondent entered into an agreement on 12th January, 2011 for the purpose of redevelopment of the buildings of the petitioner on the terms and conditions recorded therein. Under the said agreement, the respondent was required to take various steps such as obtaining IOD with full TDR FSI to be loaded within three months from the execution of the development agreement, to furnish the bank guarantee of Rs.18.00 crores, indemnity bond and payment of hardship compensation, rent, brokerage and shifting / re-shifting charges etc. The respondent had agreed to complete the development project within 29 months from the date of execution of the development agreement. Several other obligations of the respondents were also recorded in the said development agreement.

3. It is the case of the petitioner that there was gross delay on the part of the respondent in obtaining IOD with 2 TDR FSI loaded by the end of August, 2011. The petitioner though, at the request of the respondent granted extension of 16 months on 12th June, 2011, the respondent however, could not obtain IOD with full FSI TDR within the extended period which expired on 12th September, 2011.

4. The respondent on 9th February, 2012 forwarded a proposal for reduction of an area offered to the petitioner i.e. proposal of 773 sq. ft. and 580 sq. ft. on the pretext of the amendment to the Development Control Rules and Regulations.

5. It is the case of the petitioner that only on 28th March, 2013, i.e. after 26 months from the execution of the development agreement and after 10 months from the approval of the revised plans by the petitioner, IOD was received by the respondent. According to the petitioner, the said IOD was defective as it covered only the flats for 56 members and not 97 members. The said IOD was in the name of Kumar Urban Development and not in the name of the society.

6. On 25th July 2013, the respondent requested the petitioner for further flexibility to load TDR. The petitioner agreed to the proposal made by the respondent in the special general body meeting held on 10 th August, 2013 and approved the draft of supplementary agreement and Alternate Accommodation Agreement. The petitioner thereafter called upon the respondent to inform the dates for executing the Supplementary Agreement, Alternate Accommodation Agreement and the date of notice to vacate about the corpus, TDR and the bank guarantee. It is the case of the petitioner that the

respondent served a notice on 30th September, 2013 to the petitioner asking the members to vacate the premises by 31st December, 2013 however, completely ignoring the conditions in clause 15 of the development agreement. It is the case of the petitioner that the representative of the respondent informed the members of the petitioner about the financial problem faced by the respondent. The respondent apologized to the petitioner for the delay and informed that the respondent would be sending the revised plans for approval by the first week of January, 2014.

7. On 31st December, 2013, the petitioner informed the respondent about the vicarious condition of the buildings and forwarded the photographs showing the cracks in the buildings.

8. On 9th May, 2014, the respondent sent an e-mail showing three plans thereby proposing the size of the flats of 700 sq. ft., 710 sq. ft. and 810 sq. ft. for consideration of the members of the petitioner. On 17th October, 2014, the respondent came up with the feasibility report of the project claiming that the project was making loss of Rs.16.00 crores if the petitioner was offered 773 sq. ft.

9. In the general body meeting of the petitioner held on 14th November, 2014, all the members of the petitioner unanimously agreed to invoke clause 26 of the development agreement for imposing liquidated damages on the respondent and recorded their dissatisfaction and hardship that had taken place due to gross delay in execution of the project by the respondent. The petitioner accordingly sent a notice on 16th November, 2014 to the respondent calling upon to pay the liquidated damages amounting to Rs.18,80,00,000/- within seven days from the date of receipt of the said notice.

10. On 15th December, 2014, the petitioner issued a notice on the respondent calling upon to rectify the breaches enumerated in the said notice within 30 days making it clear that in case of non-compliance, development agreement shall stand automatically terminated.

11. The respondent filed a petition under section 9 of the Arbitration Act in this Court (Arbitration Petition (Lodging) No.1892 of 2014). By an order dated 23rd December, 2014 this Court referred the disputes and differences between the parties arising out of the development agreement to the sole arbitration of Mr.Sanjay Kothari, advocate with a direction to make an endeavour to pass his award within a period of 12 weeks from the date of the first meeting held by him with the parties and their advocates. It was however, made clear that pending the arbitration proceedings, if the petitioner herein was desirous of appointing a developer to develop the property of the society and/or to deal with the said property in any manner whatsoever, the petitioner herein shall after giving 15 days clear notice to the respondent for the respondent herein move this Court and obtain permission of this Court in that regard. It was also clarified that the said direction would not preclude the society or its members to carry in sale / transfer of flat/s in the society premises. All the contentions of the parties are kept open. The said petition was disposed of.

12. On 7th January, 2015, the petitioner issued a notice to the respondent's advocate informing that the petitioner was desirous of appointing a new developer to develop the property of the society and to proceed in accordance with the order dated 23rd December, 2014. The petitioner called upon the respondent to forthwith stop advertising the redevelopment project of the petitioner through their website. The petitioner thereafter filed this petition on 2nd February, 2015, inter-alia praying for permission to appoint the new developer. By an ad-interim order dated 8th May, 2015, this Court permitted the petitioner to initiate and implement tender processing but not to appoint a new developer

13. Mr.Cama, learned counsel for the petitioner invited my attention to the various documents annexed to the petition, reply and re-joinder, including the photographs of the buildings showing dilapidated condition of the buildings. It is submitted that the parties are proceeding with the arbitral proceedings which would take time for final disposal. He submits that since the respondent did not show any progress for the last several years from the date of the execution of the agreement and there were no chances of such progress even in future, the members of the petitioner passed a resolution for termination of the development agreement after giving 30 days notice to the respondent to rectify the breaches. The respondent however,did not take any steps inspite of the said notice dated 15th December, 2014.

14. Learned counsel submits that there was no stay of the termination notice granted by this Court in the arbitration petition filed by the respondent. This Court thus granted liberty to the petitioner to apply for permission to appoint a developer to develop the property and/or to deal with the said property in any manner whatsoever after giving 15 days notice to the respondent. He submits that the members of the society have lost confidence in the respondent and considering the dilapidated condition of the buildings, it became absolutely necessary to take steps to appoint another developer to develop the property of the society.

15. Learned counsel for the petitioner submits that the respondent has been facing financial problems and has committed gross delay in taking steps under the said development agreement which resulted in gross hardship to the members of the petitioner society. The respondent kept on requesting the petitioner for granting permission for various changes proposed to be made by the respondent and for extension of time to comply with the obligations of the respondent. He submits that though the petitioner had granted such indulgence, the respondent still could not show any progress.

16. Learned counsel submits that since this Court has not granted any stay on termination of the development agreement, the petitioner is entitled to appoint another developer for the purpose of carrying out redevelopment of the buildings. He submits that if the respondent ultimately succeeds before the learned arbitrator in proving that the termination effected by the petitioner was illegal and unlawful, the respondent can be compensated by awarding damages by the learned arbitrator. There is no question of granting any specific performance of such contract in favour of the respondent.

17. Learned counsel for the petitioner submits that pursuant to the liberty granted by this Court for seeking permission to appoint a new developer, the petitioner had invited tenders. 20 developers had collected the tender. 5 developers have submitted their tender. He submits that this Court thus be pleased to grant permission to the petitioner to proceed with awarding of the contract to a new developer and to proceed with the construction in the interest of justice. He also presses prayer (b) of the petition.

18. In support of this submission, learned counsel for the petitioner relied upon the following judgments :

(i) In the case of Maytas Infra Limited vs. Utility Energytech & Engineers Pvt. Ltd. & Ors. 2009 (4) Bom.C.R. 143
(ii)Order dated 25th July, 2013 in Notice of Motion No.595 of 2013 in Suit No.265 of 2013 in the case of M/s.Rushab Developers & Ors. vs. Mahavir Chhaya CHS Ltd. & Ors.
(iii) Judgment of this Court dated 29th November, 2013 in Arbitration Petition (Lodging) No.1999 of 2013 in the case of Chaurangi Builders & Developers Pvt. Ltd. vs. Maharashtra Airport Development Company Ltd.
(iv) Judgment of this Court delivered on 21st January, 2014 in Arbitration Petition No.600 of 2013 in the case of M/s.Heritage Lifestyle & Developers Ltd. vs. M/s.Cool Breeze Co-operative Housing Society Ltd. & Ors.
(v)Judgment of this Court delivered on 1st December, 2014 in Notice of Motion No.961 of 2013 in Suit No.262 of 2012 and other connected matters in the case of Vaidehi Akash Housing Pvt. Ltd. vs. New D.N. Nagar Co-operative Housing Society Union Ltd. & Ors

19. Learned counsel for the respondent on the other hand opposed this petition on the ground that the reliefs claimed in this petition for permission to appoint the new developer to develop the property of the petitioner and/or to deal with the said property cannot be granted under section 9 of the Arbitration Act, 1996. He submits that the respondent has already filed a statement of claim before the learned arbitrator and has prayed for grant of specific performance of the development agreement executed between the parties and also in the alternate for damages. He submits that if reliefs as claimed in the petition is granted, the prayer for specific performance of the development agreement claimed by the respondent would become infructuous. He submits that the arbitral proceedings are going on before the learned arbitrator and are at the evidence stage. In support of his submission that no relief under section 9 can be granted the effect of which would make the reliefs claimed by the respondent infructuous, learned counsel placed reliance on the judgment of the Supreme Court in the case of N. Srinivasa vs. Kuttukaran Machine Tools Limited, (2009) 5 SCC, 182 and in particular paragraphs 25 to 28.

20. Learned counsel for the respondent then submits that the respondent had modified the plan only once when the petitioner had agreed to accept lesser area. The respondent had forwarded all the requisite documents to the petitioner from time to time. He submits that the allegations of the petitioner that the submission of the plans by the respondent was in breach of the Development Control Rules is totally vague. Since the petitioner agreed to accept the lesser area than what was agreed under the development agreement, there was no breach committed by the respondent. He submits that since the members of the petitioner did not vacate their respective tenements, the respondent who had agreed to provide the bank guarantee in favour of the petitioner before vacating the flats by the members of the petitioner was not submitted by the respondent. There was thus no breach insofar as the submission of the bank guarantee is concerned.

21. Insofar as the payment of the hardship compensation is concerned, it is submitted that the respondent had already paid all the installments of such compensation to the members of the petitioner. He submits that the copy of the IOD obtained by the respondent had been already provided to the petitioner. Insofar as the issue of indemnity bond raised by the petitioner is concerned, it is submitted that the form of such indemnity bond was already provided in the agreement at page 52 and in any event no such issue was raised earlier by the petitioner.

22. Learned counsel for the respondent then submits that since the petitioner had by conduct granted extension of time to the respondent to comply with its all the obligations, the time was not an essence of the contract. In support of this submission, learned counsel placed reliance on the judgment of the Supreme Court in the case of M/s.Hind Construction Contractors .vs. State of Maharashtra, (1979) 2 SCC 70.

23. Learned counsel for the respondent submits that the learned arbitrator has power to consider the reliefs for specific performance claimed by the respondent. Since the said relief is already claimed in the arbitration proceedings, this Court cannot permit the petitioner to appoint another developer to carry out redevelopment and to create third party rights in respect of the properties in favour of a third party. He submits that the respondent has already spent huge amount in taking various steps under the said development agreement and if the petitioner is allowed to redevelop the said property through some other developer and to sell the property in question, the respondent would not be able to recover any amount from the petitioner or its members. He submits that no case is made out for grant of any interim measures as prayed by the petitioner.

24. In rejoinder, learned counsel for the petitioner submits that the Municipal Corporation of Greater Bombay had already rejected the application for IOD submitted by the respondent in the month of March, 2011. The respondent obtained an IOD much later and not in accordance with the provisions of the development agreement. The respondent had assured the petitioner to give the bank guarantee and load TDR before the members of the petitioner vacating the premises. He submits that the members of the petitioner were ready and willing to vacate their respective premises however, since the respondent did not comply with its various obligations, the stage of the members of the petitioner vacating their premises did not arise. He submits that though the petitioner agreed for various concessions requested by the respondent such as to load limited TDR, the respondent could not load even the limited TDR.

25. Learned counsel for the petitioner distinguished the judgment of the Supreme Court in the case of N. Srinivasa (supra) on the ground that the facts before the Supreme Court in the said judgment are totally different. In this case the petitioner has already terminated the development agreement. There is no stay granted by this Court in favour of the respondent and as against the petitioner from taking any steps pursuant to the said letter of termination. On the contrary, this Court has permitted the petitioner to invite tenders and to take further steps however, not to appoint a new developer until a suitable direction that behalf is sought from this Court. Even the respondent has been directed to maintain status-quo until further orders. He submits that the respondent has not challenged the ad-interim order passed by this Court directing the respondent to maintain status-quo and permitting the petitioner to initiate tendering process.

26. A perusal of the record indicates that the development agreement was executed between the parties on 12th January, 2011. It is not in dispute that prior to the date of termination of the development agreement, the respondent had not commenced the construction on the plots. The respondent had not furnished the bank guarantee and had not taken various steps required to be taken before the members of the petitioner could be asked to vacate their respective tenements. The status-quo order is granted by this Court against the respondent which is not challenged by the respondent. While disposing of Arbitration Petition (Lodging) No.1892 of 2014 which was filed by the respondent herein, this Court did not grant any stay of the termination effected by the petitioner. On the contrary, this Court granted liberty to the petitioner herein to move this Court and obtain permission from this Court if the petitioner was desirous of appointing a developer to develop the property of the society and/or to deal with the said property in any manner whatsoever. It was also clarified by the said order that the said direction would not preclude the society or its members to carry on sale/transfer of the flats in the society premises.

27. Insofar as the submission of learned counsel for the respondent that no relief as claimed in this petition under section 9 can be granted is concerned, in my view there is no merit in this submission of learned counsel for the respondent. The present petition is filed pursuant to the liberty granted by this Court on 23rd December, 2014 in arbitration petition filed by the respondent itself under section 9. The said order has not been impugned by the respondent. In my view, the reliefs claimed in this petition inter-alia praying for permission to appoint another developer is thus maintainable and can be considered under section 9 of the Arbitration Act.

28. A perusal of the record prima-facie indicates that the respondent has made various suggestions from time to time for various changes in the plan, including reduction in the area of the flats though the respondent had agreed to provide the flats of larger area. The IOD was obtained by the respondent after a period of more than two years and that also partial. The respondent itself had submitted feasibility report on 17th October, 2014 of the project claiming that the project was making loss of Rs.16.00 crores if the petitioner was offered 773 sq. ft. as agreed under the development agreement. It is not in dispute that the buildings of the petitioner are in dilapidated condition. The members of the petitioner society in my prima-facie view have lost confidence in the respondent. The members of the petitioner society have therefore, passed a unanimous resolution initially to recover the liquidated damages from the respondent and thereafter by terminating the development agreement after giving 30 days notice for rectification of projects.

29. In my prima-facie view the petitioner has good chances of succeeding in the arbitral proceedings. The respondent not having been able to obtain any relief from this Court in its favour in the petition filed under section 9 of the Arbitration Act of stay of the termination and of stay restraining the petitioner from inviting any fresh tenders for the appointment of the new developer, the petitioner has rightly applied for permission to appoint a new developer pursuant to the liberty granted by this Court. Even if the respondent succeeds in the arbitration proceedings and if it is held that the termination of the agreement was illegal, the respondent would be entitled to claim compensation. The judgment of the Supreme Court thus relied upon by learned counsel for the respondent in the case of N. Srinivasa (supra) does not apply to the facts of this case and would not assist the respondent.

30. Insofar as several other submissions made by the respondent about the respondent not having committed any breaches as canvassed by the petitioner is concerned, in my prima-facie view, there is no substance in any of those submissions made by the respondent. A perusal of the record prima-facie indicates that the respondent has committed various breaches on its part and committed gross delay. Though the letter of intent was issued in favour of the respondent by the petitioner, as far back as on 16th May, 2010, till the said agreement was terminated, no steps were taken by the respondent to get the respective flats of the petitioner vacated by complying with its part of obligation. In this situation, in my prima-facie view, the respondent even otherwise would not be entitled to seek specific performance in view of section 14 of the Specific Relief Act, 1963.

31. This Court has taken a consistent view, including in the judgments referred to and relied by Mr.Cama, learned counsel for the petitioner, that if a society has lost confidence in the developer, the society cannot be forced to continue the contract with such developer. I am respectfully bound by the judgments of this Court which are relied upon by Mr.Cama, learned counsel for the petitioner which squarely applies to the facts of this case.

32. In view of the fact that the buildings of the petitioner are in dilapidated condition, it would be in the interest of justice and the balance of convenience being in favour of the respondent, that before any untoward incident takes place, the petitioner be permitted to take steps to appoint another developer and to go ahead with the redevelopment of its properties. On the other hand, if the respondent succeeds in the arbitration proceedings, the respondent would be entitled to compensation. No prejudice thus would be caused to the respondent.

33. I, therefore, pass the following order :-

a) The arbitration petition is made absolute in terms of prayer clauses (a) and (b). The petitioner is permitted to appoint a new developer to develop the property of the petitioner and to deal with the said property as the petitioner desires.
b) The arbitration petition is disposed of in the aforesaid terms. There shall be no order as to costs.
(R.D. DHANUKA, J.)

 

Oral application of learned counsel for the respondent for stay of operation of this order is rejected. (R.D. DHANUKA, J.)

**********

Legal profession is not a commercial activity - Running of office by an Advocate in a building cannot be termed as Commercial activity - Electricity rates fixed for Commercial user cannot be charged

SUPREME COURT OF INDIA

Before: - Arijit Pasayat & H.K. Sema, JJ.
Civil Appeal No. 1065 of 2000 Dated 24.8.2005

 

Chairman, M.P. Electricity Board and Ors - Appellants
Versus
Shiv Narayan and Anr - Respondents

 

For the Appellants: - Sakesh Kumar and D.K. Sinha,
Advocates.
For the Respondents: - Ex-parte

 

JUDGMENT

Arijit Pasayat, J. - An interesting question is raised in this appeal i.e. whether the legal profession is a commercial activity or is it a trade or business. The Madhya Pradesh Electricity Board (hereinafter referred to as the 'Board') and its functionaries charged the respondent No. 2-Advocate for electricity consumption at the rate applicable for commercial consumers. The demand was questioned by filing a writ petition before the Madhya Pradesh High Court which by the impugned judgment held that the legal profession does not involve a commercial activity and, therefore, the rate applicable to commercial consumers was not applicable to him. The judgment is questioned by the Board in this appeal.

2. There is not much dispute on the factual aspect. Respondent No. 1 was at the relevant point of time the landlord of the house where respondent No. 2- G.D. Padraha, Advocate was staying as a tenant. He was occupying the tenanted premises till 1981. Thereafter, he shifted to his own house, but he maintained his office in the tenanted premises. There was an electricity service line in that house and it was in the name of the landlord who was paying at the rate applicable to domestic consumers. In January, 1986 some officials of the Board inspected the service meter and served a notice to the landlord alleging that he is using the service connection for commercial purposes instead of domestic purposes. The landlord replied stating that he had never used the premises for commercial purposes. However, the respondent No. 2 had his office in the premises. Notice of demand was raised after considering the reply and it was held that the rate applicable to the commercial consumers was applicable, on the basis of a circular issued by the Board laying down different types of connections for domestic purposes and commercial purposes. The validity of the circular classifying office of an advocate as a commercial establishment was questioned in the writ petition. The High Court as noted above held that the office of a lawyer or a firm of lawyers is not a 'commercial establishment' and therefore rates applicable to commercial consumers cannot be charged. Learned counsel for the appellant-Board and its functionaries submitted that the High Court has not considered the relevant aspects. When a lawyer has his office-cum-residence in particular premises the domestic rate is applicable. Where however only the chamber is functioning, clearly commercial activities are being carried out and therefore commercial rate was rightly applied. According to him, the two categories of consumers have to be classified as domestic consumers and non domestic consumers. Those who are not domestic consumers fall to the second category and merely because for the sake of convenience the description has been given as "commercial" it does not make a difference. When one is not a domestic consumer, as a natural consequence the rate applicable to the other category has to be charged. Nobody appears on behalf of the respondents.

3. The circulars on which reliance was placed by the Board clearly show that a distinction was made between domestic consumers and commercial consumers. There is no substance in the plea that the classification was domestic and non domestic as the residual category. The Board's notification which formed the foundation for the Board's action reads as follows:

"Madhya Pradesh Electricity Board
Rampur: Jabalpur
No. 5/GA/44/126/23256/356
Dated 30th November, 76

To,
The Divisional Engineer,
M.P. Electricity Board

Reference is invited to this office circulars No. 5/121/5/111/49-A dated 21.7.1971 and 5/11/5/111/49-A/54/4506 dated 8.7.1975 wherein the categories of consumers which could be classified as 'Commercial' were indicated. Points have been raised in regard to the tariff which shall be applied to the consumption in the house a part of which is used for professional purpose by Advocate, Doctors, etc.

The Board has considered the matter and has decided that the energy consumed in the residential premises of following persons, shall be treated as domestic purposes, even though these persons carry out some professional work in the residence.

(i) Advocate, Vakils.
(ii) Doctors.
(iii) Writers, poets and artists.

However, consumption in the premises which are away from the residential premises and are exclusively used for the professional purposes even by the Advocate, Vakils, Doctors, Writers, Poets and Artists and shall be billed at Board L.T. Tariff applicable.

Director, Commercial
M.P. Electricity Board
Jabalpur."

4. List of consumers who are treated as belonging to the commercial category clearly shows that there is an element of commerce involved in them as would be evident from the Notification dated 8th July, 1975.

5. The word 'commerce' is a derivative of the word 'commercial'. The word 'commercial' originates from the word 'commerce' which has been defined in Black's Law Dictionary, Sixth Edition as under:

"Commerce - The exchange of goods, productions, or property of any kind, the buying, selling, and exchanging of articles. Anderson v. Humble Oil and Refining Co., 226 Ga. 252, 174 S.E.2d 415, 417 The transportation of persons and property by land, water and air. Union Pacific R. Co. v. State Tax Commissioner, 19 Utah 2d 236, 429 p. 2d 983, 984

Intercourse by way of trade and traffic between different people or States and the citizens or inhabitants thereof, including not only the purchase, sale, and exchange of commodities, but also the instrumentalities and agencies by which it is promoted and the means and appliances by which it is carried on, and transportation of persons as well as of goods, both by land and sea. Brennan v. Titusville, 153 U.S. 289, 14 S. Ct. 829, 38 L. Ed. 719; Railroad Co. v. Fuller, 84 U.S. (17 Wall.) 568, 21 L. Ed. 710; Hoke v. United States, 227 U.S. 308, 33 S. Ct 281, 57 L. Ed. 523. Also interchange of ideas, sentiments, etc. as between man and man.

The term 'commerce' means trade, traffic, commerce, transportation or communication among the several States, or between the District of Columbia or any Territory of the United States and any State or other Territory, or between any foreign country and any State, Territory, or the District of Columbia, or within the District of Columbia or any territory, or between points in the same State but through any other State or any Territory or the District of Columbia or any foreign country. National Labour Relations Act 2......"

The word 'commercial' has been defined to mean:

"Commercial. - Relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce. Anderson v. Humble Oil & Refining Co., 226 Ga.252: 174 S.E. 2d 415, 416 (supra) Generic term for most all aspects of buying and selling".

The expression 'commerce' or 'commercial' necessarily has a concept of a trading activity. Trading activity may involve any kind of activity, be it a transport or supply of goods. Generic term for most all aspects is buying and selling. But in legal profession, there is no such kind of buying or selling or any trading of any kind whatsoever. Therefore, to compare legal profession with that of trade and business is far from correct approach and it will totally be misplaced.

Similarly, in the Advanced Law Lexicon 3rd Edition 2005, Volume 1 at page 878 by P. Ramanatha Aiyar, word 'commerce' has been defined as under:

'Commerce' is a term of the largest import. It comprehends intercourse for the purposes of trade in any and all its forms, including transportation, purchase, sale, and exchange of commodities between the citizens of one country and the citizens or subjects of other countries, and between the citizens of different provinces in the same State or country. Walton v. Missoury, 91 US 275: 23 L Ed. 347.

Buying and selling together, exchange of merchandise especially on a large scale between different countries or districts; intercourse for the purpose of trade in any and all its forms (Section 2(13), Income Tax Act)'

6. The word 'profession' has been defined in Black's Law Dictionary, Sixth Ed. as under:

'Profession - A vocation or occupation requiring special, usually advanced education, knowledge, and skill; e.g. law or medical professions. Also refers to whole body of such profession.

The labour and skill involved in a profession in predominantly mental or intellectual, rather than physical or manual.

The term originally contemplated only technology, law and medicine, but as applications of science and learning are extended to other departments of affairs, other vocations also receive the name, which implies professed attainments in special knowledge as distinguished from mere skill.

Act of professing; a public declaration respecting something. Profession of faith in a religion"

7. The word 'profession' has also been defined in the Advanced Law Lexicon Volume-3 at page 3764 which reads as under:

"Profession - A 'profession' involves the idea of an occupation requiring either purely intellectual skill or any manual skill, as in painting and sculpture or surgery, skill controlled by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production or sale or arrangements for the production of sale of commodities.C.I.T. v. Manmohan Das, (1966)59 ITR 699, 710 (SC) Income Tax Act, 1961. Section 28"

At page 3765 it has been further stated as follows:

"One definition of a profession is an employment, especially an employment requiring a learned education, as those of law and physics (Worcest Dict.). In the Century Dictionary the definition of profession is given, among others, as a vocation in which a professional knowledge of some department of science or learning is used by its practical application to the affairs of others, either in advising, guiding, or teaching them, or in serving, their interest or welfare in the practice of an art founded on it."

"The word implies professional attainment in special knowledge as distinguished from mere skill; a practical dealing with affairs as distinguished from mere study or investigation; and an application of such knowledge to use for others as a vocation as distinguished from its pursuits for its own purposes."

"The term is applied to an occupation or calling which requires learned and special preparation in the acquirement of scientific knowledge and skill.

1. The occupation which one professes to be skilled in and to follow; any calling or occupation by which a person habitually earns his living (Section 2(36), Income Tax Act and Section 150, Indian Evidence Act); 2. Section 7, North Eastern Hill University Act."

"An activity to be a profession must be one carried on by an individual by his personal skill, intelligence and an individual by his personal skill, intelligence and dependent on individual characteristics. Sakharam Narayan Kherdekar v. City of Nagpur Corporation, (AIR 1964 Bombay 200, 210) (Bombay Shops and Establishment Act (79 of 1948, Section 2(4))

The multifarious functions call for the exercise of integrity; intelligence and personal skill by the Chartered Accountant in the service of his client and so the preamble of the Chartered Accountant Act, 1949 describes the avocation of a chartered accountant as a profession. N.E. Merchant v. State, (AIR 1968 Bombay 283,287) Bombay Shops and Commercial Establishment Act (76 of 1948)"

"A profession or occupation is carried on for the purpose of earning a livelihood and a profit motive does not underline such carrying of profession or occupation. L.M. Chitala v. Commissioner of Labour, (AIR 1964 Madras 131, 133) (Constitution of India, Article 19(6))"

"Profession as distinguished with 'commercial' means a person who enters into a profession. It involves certain amount of skill as against commercial activity where it is more of a matter of things or business activity. In profession, it is purely use of skill activity. Therefore, two are distinct concepts in commercial activity - one works for gain or profit and as against this, in profession, one works for his livelihood."

8. This Court in V. Sasidharan v. M/s Peter and Karunakar, (AIR 1984 SC 1700) held as under:

".........It does not require any strong argument to justify the conclusion that the office of a lawyer or a firm of lawyers is not a 'shop' within the meaning of Section 2(15). Whatever may be the popular conception or misconception regarding the role of today's lawyers and the alleged narrowing of the gap between a profession on one hand and a trade or business on the other, it is trite that, traditionally, lawyers do not carry on a trade or business nor do they render services to 'customers'. The context as well as the phraseology of the definition in Section 2(15) is inapposite in the case of a lawyer's office or the office of a firm of lawyers."

9. In Harendra H. Mehta & Ors. v/s Mukesh H. Mehta & Ors., (1999(5) SCC 108) it was noted as follows:-

"1. Of, engaged in, or concerned with, commerce. 2. Having profit as a primary aim rather than artistic etc. value; philistine" (The Concise Oxford Dictionary) In the Black's Law Dictionary, "commercial" is defined as: "Relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce. Anderson v. Humble Oil and Refining Co., (226 Ga 252: 174 SE 2d 415), "A broad and not a restricted construction should be given to the word "commercial" appearing in Section 2 of the Foreign Awards Act. In R.M. Investment and Trading Co. (P) Ltd., (1994(4) SCC 541), the terms of the agreement required the petitioner to play an active role in promoting the sale and to provide "commercial and managerial assistance and information" which may be helpful in the respondents sales efforts. It was held that the relationship between the appellant and the respondents was of a commercial nature. The Court said that the word "commercial" under Section 2 of the Foreign Awards Act should be liberally construed."

10. In Stroud's Judicial Dictionary (5th Edition) the term "commercial" is defined as "traffic, trade or merchandise in buying and selling of goods".

11. A professional activity must be an activity carried on by an individual by his personal skill and intelligence. There is a fundamental distinction, therefore, between a professional activity and an activity of a commercial character. Considering a similar question in the background of Section 2(4) of the Bombay Shops and Establishments Act (79 of 1948), it was held by this Court in Dr. Devendra M. Surti v. The State of Gujarat, (AIR 1969 SC 63) that a doctor's establishment is not covered by the expression "Commercial establishment".

12. In the above background, we would have dismissed the appeal. But we notice that in New Delhi Municipal Council v. Sohan Lal Sachdev, 2000(1) RCR (Rent) 313 (SC): (2000(2) SCC 494) certain observations are made, with which we do not agree. In Para 12 it was observed as follows:-

"The two terms "domestic" and "commercial" are not defined in the Act or the Rules. Therefore, the expressions are to be given the common parlance meaning and must be understood in their natural, ordinary and popular sense. In interpreting the phrases the context in which they are used is also to be kept in mind. In Stroud's Judicial Dictionary (5th Edition) the term "commercial" is defined as "traffic, trade or merchandise in buying and selling of goods". In the said dictionary the phrase "domestic purpose" is stated to mean use for personal residential purposes. In essence the question is, what the character of the purpose of user of the premises by the owner or landlord is and not the character of the place of user. For example, running a boarding house is a business, but persons in a boarding house may use water for "domestic" purposes. As noted earlier the classification made for the purpose of charging electricity duty by NDMC sets out the categories "domestic" user as contradistinguished from "commercial" user or to put it differently "non- domestic user". The intent and purpose of the classifications as we see it, is to make a distinction between purely "private residential purposes" as against "commercial purpose". In the case of a "guest house", the building is used for providing accommodation to "guests" who may be travellers, passengers, or such persons who may use the premises temporarily for the purpose of their stay on payment of the charges. The use for which the building is put by the keeper of the guest house, in the context cannot be said to be for purely residential purpose. Then the question is, can the use of the premises be said to be for "commercial purpose"? Keeping in mind the context in which the phrases are used and the purpose for which the classification is made, it is our considered view that the question must be answered in the affirmative. It is the user of the premises by the owner (not necessarily absolute owner) which is relevant for determination of the question and not the purpose of which the guest or occupant of the guest house uses electric energy. In the broad classification as is made in the Rules, different types of user which can reasonably be grouped together for the purpose of understanding the two phrases "domestic" and "commercial" is to be made. To a certain degree there might be overlapping, but that has to be accepted in the context of things."

13. Even if it is accepted that the user was not domestic, it may be non- domestic. But it does not automatically become "commercial". The words "non- domestic" and "commercial" are not inter-changeable. The entry is "commercial". It is not a residual entry; unless the user is commercial the rate applicable to be commercial user cannot be charged merely because it is not considered to be domestic user, as has been held in New Delhi Municipal Corporation's case (supra).

14. The view expressed in the said case does not appear to be correct. We, therefore, refer the matter to a larger Bench. Place the records before the Hon'ble Chief Justice of India for necessary orders.

Order accordingly.
ARIJIT PASAYAT, JUSTICE

**********

CONTRADICTORY JUDGMENTS OF BOMBAY HIGH COURT IN CASE OF MINORITY OPPOSING REDEVELOPMENT : DOES THE JUSTICE PREVAIL?

 

***********************************

 

COURT RELIEF FOR 3 MEMBERS OF KHAR HSG SOCIETY

 

Mumbai: June 19, 2010

In what comes as a relief to the handful of dissenting members of a Co-Operative Housing Society in Khar, the Bombay High Court refused to grant any interim relief to a Builder who wanted to have them evicted so that he could go ahead with redevelopment work on the building. A Division Bench headed by Justice F I Rebello admitted an appeal filed by M/s Acknur Constructions Pvt Limited against a December 2009 judgement of a Single Judge that held that even a single dissenting member of a Society cannot be thrown out by a Builder based on a mere Development Agreement executed with the society and a majority of the flat owners though agreeing for redevelopment of the building.

The Appeal Bench wondered in open court whether the said Builder had the locus standi to seek eviction of the members who were in minority and opposed to the redevelopment project. The Appeal Bench ruled that if anyone, it was the Society who had to file an application for eviction of dissenting member, the Judges remarked while denying the appointment of a Court Receiver over the prime property in Khar (W). But the Builder’s lawyer pointed out that a Division Bench headed by the Chief Justice of the Bombay High Court had held that a Builder did have the right to seek removal of the dissenting minority flat owners.

The judgment, which is under challenge by the Builder, had held that any redevelopment activity should not compromise the rights of members and must safeguard the existence of the Society. The 2009 judgment passed by Justice S C Dharmadhikari had also stated that Builder had no higher right than the Society and that the Builder is a mere contractor. While observing that any relief granted now would mean disposal of the plea, the High Court expedited the matter and granted liberty to the Builder to apply for an early date for the final hearing.

The case involves the Builder M/s Acknur Constructions Pvt Limited and Fardoon Apartment Co-operative Housing Society. The Builder, Deepak Rao, was seeking eviction of the owners of two shops and one flat as they were stalling the redevelopment work agreed to by the Society last January in a General Body Meeting.

Of the 12 members in the 39 years old four storey building, three opposed the redevelopment on the grounds that it was neither in their interest nor that of the Society.

AUTHOR’S COMMENTS : As per the law, the Builders cannot initiate process of evicting the dissenting members under the shelter of the Development Agreement as this Agreement never establishes privity of contract with any individual dissenting member/s and hence for getting peaceful possession of the Society’s property, it is the Society who shall take appropriate action against the dissenting member/s as the doctrine of privity in the common law of contract provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the Parties to it. The premise is that only parties to contracts should be able to sue to enforce their rights or claim damages i.e. the Society and the Builders.

HIGH COURT ORDERS 21 SOCIETY RESIDENTS OPPOSING REDEVELOPMENT TO VACATE FLATS IN 60 DAYS

 

Mumbai : March 12, 2015

The Bombay High Court has ordered 21 flat owners of a Housing Society in Oshiwara to vacate their apartments within 60 days to make way for the redevelopment of the building. Justice S C Gupte said that if the families refusing to vacate within the stipulated time, a Court Receiver would be appointed to take possession of the flats and even seek police assistance if needed.

The Court was hearing an application filed by M/s Supreme Mega Constructions which had been appointed by Symphony Co-operative Housing Society in Oshiwara to carry out redevelopment of its property. The Court rejected the plea of the 21 residents who had refused to move out, citing some shoddy clauses in the Development Agreement.

"The Balance of Convenience is in favour of the Developer as the Society and its overwhelming majority of members who want the building to be reconstructed," said the judge. The High Court pointed out that the Builder had spent substantial sums to start the project. It had paid Rs 1.00 crore towards Conveyance of the Land and existing building, Rs 50 lakhs to the Society towards Security Deposit and over Rs.5.31 crore to the Society’s members towards various compensations and spent various sums for preparing and having the plans of the new building approved. It was argued that the opposing flat owners do not oppose the redevelopment, but merely have reservations about certain clauses of the Development Agreement and the Permanent Alternative Accommodation Agreements, added the Court.

Symphony Co-operative Housing Society is spread over 2,997 Square Metres and its 68 residents own the 72 flats and 19 garages in the building. Society members had agreed to redevelop its property and appointed the Developers in 2011. Around 64 members signed and approved the Development Agreement. The Developers moved the High Court after the 21 members refused to vacate. The opposing residents disputed that the agreements had been approved in the Special General Meeting and produced video recordings claiming that the records of the meeting were fabricated. They alleged that the Development Agreement was not in accordance with the conditions of the Tender Document and that conditions had been violated. However, ignoring the challenger’s plea, the Judge ruled that merely on the basis of a purported video CD of the proceedings of Special General Meeting and the recorded minutes of the meeting which the society stands by, cannot be disregarded at this interim stage.

AUTHOR’S COMMENTS : Generally, the various drafts of redevelopment documents including the Development Agreement are sent by the Developers to the Society. These Drafts after methodically vetted, scanned and scrutinized theoretically by us and the gray areas/pitfalls and shortfalls are exposed and a detailed written report is given to our Client Society apprising them the areas of alerts and awareness and advise them that before its execution, the Society must impress upon the Developers to modify and improve all the legal documents of redevelopment in corporate interest and safety of the Society to achieve the desired results.

The Housing Societies must study, understand and try to forestall the weaknesses under Financial/Legal and Technical areas to be termed in Development Agreement benefiting the members as many of these areas are conveniently ignored/not documented by the Developers in the Development Agreement and we impress upon the Housing Societies to emphasize upon and compel the Developers to add those ignored conditions in Development Agreement in the corporate interest of the Society to protect their hard earned homes.

Please click on the link given below to understand the importance of vetting and scrutinizing of various legal documents related to the redevelopment.

http://redevelopmentofhousingsociety.com/index.php/article-showcase/redevelopment-matters/importance-of-scrutiny-and-vetting-of-redevelopment-documents

We also recommend going through the following videos.

The Author is addressing the Seminar on Redevelopment sponsored by MSWA and Interview by M/s Legal Pundits on Fungible FSI:

https://www.youtube.com/watch?v=rIHEh23aqtE https://www.youtube.com/watch?v=Za8enLqsi7w

**********