@JUDGMENTTAG-ORDER
P.R. Shivakumar, J.@mdashThe respondent W.S.Electric Ltd. owned 5.670 hectares at Porur village, Ambattur Talu, Tiruvallur District comprised in various survey numbers, the details of which are as follows:
The entire extent of 5.670 hectares form a single block and the respondent entered into a Development Agreement with the first applicant TCG Software Parks Pvt. Ltd. (in short referred to as TSP) on 27.07.2005 for the development of the said property into an IT/ITES/Software Technology Park. As dispute arose between them in relation to the said Development Agreement dated 27.07.2005, the same was terminated by mutual consent and a new Tri-Partite Agreement dated 24.12.2007 came to be executed between TSP, the first applicant herein and T.C.G. Urban Infra structure Holdings Limited (in short TCGUIH), the second applicant on one part and the respondent W.S.Electric Limited (in short referred to as WSE) on the other part. A sum of Rs.1.75 Crores was paid by the first applicant (TSP) to the land owner, namely the respondent (WSE), as interest free security for proper execution of the development work entrusted to the petitioners.
2. Subsequently, by a supplemental agreement dated 13.03.2008, certain clauses in the Tri-Partite agreement dated 24.12.2007 were modified. As per the tri-partite development agreement dated 24.12.2007 as modified by the supplemental agreement dated 13.03.2008, the development work was agreed to be carried out in three phases as follows:
The specifications of the building and the rentable area to be constructed in each phase were agreed as follows, based on the understanding that the maximum FSI (floor space index) allowed as per rules was 3.375. The details are as follows:
Out of the total rentable area of 25,82,525 sq.ft. the respondent/land owner (WSE) shall be entitled to a rentable area of 5,25,000 sq.ft. The proposed undivided share in the land shall remain with the respondent/land owner (WSE) and the balance extent of land in undivided shares shall be conveyed by the respondent to the first applicant/developer (TSP). The development agreement also provides for pro-rata sharing of the excess rentable area in the very same proportion, in case the permissible floor space index is increased. In case of reduction of rentable area due to change in low FSI pro-rata, reduction of the shares on the land owner and the developer shall be made and the same shall be adjusted in Phase-III.
3. Pursuant to the said development agreement, the first applicant carried out the development and completed in Phase - I and delivered the entitlement of the respondent in Phase - I on 17.11.2008. As per the amendment made in the supplemental agreement, the second and fourth floor of the tower constructed in the first phase in entirety ad-measuring in aggregate 87,279 sq.ft. rentable area, 89 car parks and 52 two-wheeler parks in the multi-level car parking 1 was handed over to the respondent WSE. However, the first applicant did not proceed with the development of the area allotted in the second phase for development on the premise that there was worldwide slump in the Information Technology market and that the developer could not get persons intending to get the IT Parks for rent. Pursuant to the development of Phase-I and on getting the built up portion ad-measuring 87,279 sq.ft. rentable area, the respondent executed a Conveyance Deed dated 17.11.2008 under the registered document No. 1086/2008 conveying 53,043 sq.ft. or thereabouts and another document No. 1085/2008 conveying an extent of 33,798 sq.ft. of undivided share in the land in the first phase to the first applicant.
4. The petitioners commenced the construction of tower 2 in phase-II proposing to put up ground + eight floors in accordance with CMDA letter dated 27.08.2008 permitting the commencement of the construction and also the letter approved by panchayat dated 06.10.2008. After the petitioners had carried out the piling for foundation and plinth work in phase - II, they came across an unprecedented global economic crisis in the Software Technology field. Since the proposed development was for putting up IT/ITES/Software Technology Park and user of the premises in the development of the said property was also restricted to IT/ITES companies, the petitioners stopped further construction on the premise that without identifying the pre- leased tenants putting up the construction would not be remunerative. Accordingly, the petitioners requested the respondent (WSE) to extend the date for completion of the building in phase-II from 30.09.2009 for two more years and they had also sought extension of time for completion of the building in phase-III suitably by a letter dated 25.03.2009. The respondent in their reply addressed to the petitioners maintained that the understanding between the parties was that adherence to the agreed time schedule and completion deadline for the various phases were essential to the performance of the contract and that the obligations of the first applicant would be to finance, execute and deliver the rentable area within the framework of the agreed terms and conditions.
5. In the background of the said developments, the petitioners, relying on clause 32 of the Development Agreement contended that they were excused by force majeure circumstances, which was beyond the control of the petitioners and that the said circumstances prevented, delayed and restricted the petitioners from performing their obligations under the Development Agreement. Pursuant to the said stand taken by the petitioners, the dispute was referred to the Sole Arbitrator viz. Hon''ble Mr.Justice Shivraj Patil (Retd.). Before that the petitioners filed an application in O.A.No. 1045/2009 on the file of this court under Section 9 of the Arbitration and Conciliation Act, 1996 for an interim measure not to hand over phase-II and phase-III area to any other person for development. The said application came to be partly allowed and partly dismissed by this court by an order dated 07.01.2010 granting injunction in respect of phase-II alone, with liberty to invoke Section 17 of the Arbitration and Conciliation Act in respect of remaining prayers in the said application.
6. Accordingly, an application under Section 17 came to be filed before the Sole Arbitrator for injunction restraining the respondent from alienating or encumbering or inducting any person or party in possession and enjoyment of Phase-3 property pending disposal of the arbitral dispute. The Hon''ble Arbitrator passed an order on 04.06.2010 restraining the respondent (WSE) from alienating or encumbering or inducting any person or party in possession and enjoyment of Phase-III property, with a specific observation that the said order was made without prejudice to the rights and contentions of the parties in the main dispute. As such, till the passing of the award, the petitioners did have the protection by way of injunction not to alienate Phase-III property and permission to proceed with the construction of the building in Phase-II property. The arbitration proceedings were terminated by passing an award on 04.03.2012 with the following terms, without cost:-
i) Force Majeure as envisaged under Clause-32 of the Development Agreement dated 24.12.2007 read with Supplementary Agreement dated 13.3.2008 is not attracted to the facts of the case.
ii) Development of Phase-I, Phase-II, Phase- III are independent and not on a composite basis.
iii) Claimants have not lost right to develop Phase-II, but have lost right to develop Phase-III.
iv) In view of the finding that the claimants have not lost right to develop Phase-II the claimants are not entitled to reimbursement of expenses incurred for Phase-II.
v) Respondent is entitled to recover 4,03,92,784/- (Rupees Four Crores Three Lakhs Ninety Two Thousand Seven Hundred Eighty Four only) as damages from 1.10.2009 till the date of award and Rs.70,98,359/- (Rupees Seventy Lakhs Ninety Eight Thousand Three Hundred Fifty Nine only) towards interest thereon. The respondent is also entitled for further interest @ 14% p.a on Rs.4,03,92,784/- (Rupees Four Crores Three Lakhs Ninety Two Thousand Seven Hundred Eighty Four only) from 5.3.2012 till the date of payment by the claimants. Respondent is also entitled for future loss of rent by way of damages at the same rate of Rs.15/- per sq.ft. on a monthly basis on or before 10th of each succeeding month, till the date of delivery of its entitlement in Phase II. In case of delay in payment the respondent is entitled to interest @ 14% p.a., on the arrears falling due.
7. After the passing of the award, the petitioners have approached this court with O.A.No. 264/2012 praying for an interim injunction restraining the respondent from in any manner inducting any third party, interfering with, inter meddling with or obstructing the possession of the petitioners in respect of Phase-III property pending disposal of an arbitration petition contemplated under Section 34 of the Arbitration and Conciliation Act, 1996. Not content with the said application, the petitioners have also filed O.A.No. 394/2012 under Section 9 of the Arbitration and Conciliation Act, 1996 praying for an order of interim injunction restraining the respondent from interfering with the status quo or in any way change or alter the status quo in respect of Phase-III of the property concerned in the arbitration, pending disposal of the arbitration O.P.No. 376 of 2012 filed along with the said petition. Now both the applications are being disposed of by the present common order.
8. The interim measures contemplated under section 9 of the Arbitration and Conciliation Act, 1996 can be granted to a party either before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36. While taking a decision to grant or refuse such interim measure, the question "whether the petitioner seeking such interim measure does have prima facie case and the question of balance of consideration? - should be gone into. In this case, the petitioners wanted extension of time from the time stipulated in the Development Agreement for the completion of Phase-II and also for the commencement of development work in Phase-III. When the respondent insisted upon sticking on to the time schedule agreed to between the parties, which have been incorporated in the Development Agreement, the petitioners ventured to claim that there was a force majeure situation, which would justify them in not performing their obligations under the agreement; that till the force majeure situation disappeared, the attempted cancellation of the agreement by the respondent and the claim of damages for the belated handing over of the rentable portion in the second phase was legally unsustainable.
9. The said contention was gone into thoroughly by the Hon''ble Arbitrator and a clear and categoric finding was recorded by the Hon''ble Arbitrator that there was no force majeure situation by the global surge in the Information Technology and Software Industry. It was also found by the Hon''ble Arbitrator in clear terms that such global melt down and its adverse impact on the Chennai Real Estate sector in general and the IT/ITES sector in particular, was not one of the force majeure circumstances contemplated under Clause 32 of the Development Agreement and that therefore, the petitioners could not be excused for not fulfilling their obligations under the agreement in accordance with the time schedule incorporated in the Development Agreement. However, in view of the fact that there was an interim order permitting the first applicant to proceed with the construction of the second tower in the second phase and still the second phase was not completed within the agreed time resulting in a loss to the respondent in the sense the respondent was deprived of the rental income from the proportionate share in the rentable area in the second phase, the Hon''ble Arbitrator chose to fix a sum of Rs.4,03,92,784/- (Rupees Four Crores Three Lakhs Ninety Two Thousand Seven Hundred Eighty Four only) from the agreed date for the completion of the second phase till the date of the award as damages for the delay in handing over the rentable portion to the respondent together with a sum of Rs.70,98,359/- and as interest thereon. The respondent was also held entitled to a further interest on Rs.4,03,92,784/- at the rate of 14% per annum from 05.03.2012 i.e. the day next to the passing of the award till payment of the entire amount. The above said figure Rs.4,03,92,784/- was arrived at on the basis that there was a delay of 24 months and four days in delivery of entitlement of respondent in Phase-II and the rental loss would be worked out at Rs.15/- per sq.ft. The Hon''ble Arbitrator has also chosen to award damages at the same rate, namely Rs.15/- per sq.ft. on a monthly basis, to be paid on or before 10th of each succeeding month till the delivery of the entitlement of the respondent in the second phase with a further direction that in case of delay in payment, the respondent shall be entitled to an interest at the rate of 14% per annum on the arrears falling due.
10. In the light of the findings of the Hon''ble Arbitrator that no force majeure situation arose to provide an excuse for the petitioner from completing the development work as per the time schedule incorporated in the Development Agreement and that due to the delay in handing over the entitlement of the respondent in the second phase, the respondent is entitled to damages equivalent to the rental loss fixed at the rate of Rs.15/- per sq.ft. with an interest at the rate of 14% per annum, there can be justification for the respondent if it has come forward with an application under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim measure to secure payment of the amount awarded as damages. In view of the categorical finding that the respondent was justified in terminating the Development Agreement so far as the third phase is concerned and the further fact that no damages came to be awarded for the delay in execution of the construction work in the third phase because of the necessity for the respondent to entrust the said work to another developer, it cannot be said that the petitioners do have prima facie case for getting interim protection/interim measures as prayed for in the applications.
11. So far as the balance of convenience is concerned, a consideration of the facts and circumstances of the case and a perusal of the award will show that it is in favour of the respondent and not in favour of the petitioners. The loss that may be occasioned to the respondent in case of grant of injunctions in favour of the petitioners will be highly excessive and disproportionate to the inconvenience to which the petitioners may be put to in the event of no injunction being granted. Any excess extent of rentable area handed over to the respondent in Phase-I can also be adjusted in the rentable area to be handed over to the respondent in Phase-II.
12. For all the reasons stated above, this court comes to the conclusion that the petitioners are not entitled to the relief sought for in either of the applications and both the applications are bound to be dismissed.
In the result, O.A.Nos. 264/2012 and 394/2012 are dismissed. The interim order granted in O.A.No. 394/2012 shall stand vacated. However, there shall be no order as to cost.
