"Absence of Consensus on Essential Terms Defeats Interim Relief Plea": Bombay High Court Upholds Termination of Redevelopment Agreement
Kiran Raj
The Bombay High Court has dismissed an appeal filed under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996, challenging an order of the Arbitral Tribunal. The petition was filed by Heritage Lifestyles & Developers Private Limited against Madhugiri Co-operative Housing Society Ltd., contesting the Tribunal's refusal to grant interim relief under Section 17 of the Act. The single-judge Bench of Justice Somasekhar Sundaresan pronounced the decision, declining the developer’s request for an injunction to restrain Madhugiri from appointing an alternate developer.
The court, while rejecting the petitioner’s arguments, held that the parties had not reached a conclusive agreement on amending the Development Agreement (DA) and the Supplemental Development Agreement (SDA). Consequently, the Arbitral Tribunal’s order refusing interim relief was upheld.
Heritage Lifestyles & Developers Private Limited, the petitioner, had entered into a redevelopment agreement with Madhugiri Co-operative Housing Society Ltd. for the redevelopment of its residential property. The initial Development Agreement (DA) was executed in 2014, outlining the terms of redevelopment, including the allocation of built-up area to the society and the developer.
A revised proposal was subsequently introduced by Heritage in March 2023, seeking modifications to the agreement. The revised proposal suggested an increase in the total development potential from 1,09,220 square feet to 1,63,620 square feet, altering the allocation of constructed area between the society and the developer. While Madhugiri had initially agreed in principle to reconsider the termination of the earlier agreement, discussions continued regarding the specific allocation of the additional built-up area arising from road setback provisions.
Madhugiri, in its communication dated May 3, 2023, sought further clarifications on key aspects, including detailed plans, accommodation agreements, and a final draft of the amended development agreement. Despite exchanges between the parties, a consensus on the revised terms was not reached. On July 24, 2023, the society wrote to Heritage asserting that any additional area emerging from the road setback ought to be shared in a 54:46 ratio. Following continued disagreements, Madhugiri resolved to terminate the DA and SDA once again on January 21, 2024, and communicated the termination to Heritage on February 21, 2024.
In response, Heritage sought interim relief before the Arbitral Tribunal, challenging the termination and requesting a stay on the society’s decision to engage a new developer. However, the Arbitral Tribunal, in its order dated October 14, 2024, refused the interim relief, prompting Heritage to file the present appeal before the High Court.
The High Court extensively examined the exchanges between the parties and the materials on record before concluding that no concluded agreement had been reached on the proposed amendments to the DA and SDA.
“It would be unreasonable to conclude even prima facie that the parties had arrived at a firm agreement to amend the DA and the SDA of 2014,” the court observed.
The judgment noted that essential elements of the redevelopment agreement, including the precise allocation of the additional built-up area, remained unresolved. The court found that the numerical figures concerning the increased development potential and the break-up of the additional area between the parties only emerged in a draft sent on June 28, 2023, well after key communications relied upon by the petitioner to establish the existence of a binding amendment.
“Since it is apparent that the parties had not reached an agreement on amending the DA and the SDA pursuant to the Revised Proposal, I do not think it necessary to pronounce upon past delays and the effect of any such delay. This is in the domain of the Learned Arbitral Tribunal, which may deal with it in the course of the final hearing,” the court recorded.
Addressing the petitioner’s reliance on precedents, the court cited the judgment in Pittie Antariksh Grl Pvt. Ltd. Vs. Kher Nagar Sai Prasad Co-operative Housing Society Ltd., which dealt with the requirement of execution of a development agreement to infer a concluded contract. The court held that for a contract to come into existence, there must be acceptance of an offer on the same terms, which must be unequivocal, unconditional, and absolute.
“When parties negotiate with a view to enter into a contract, multiple preliminary communications may pass between them before a definite offer is made. One party may ask or respond to requests for information, or invite the other to make an offer. If at the end of negotiations the parties have not reached a consensus on essential terms, no binding contract can be inferred,” the court stated.
It was observed that in the present case, prolonged discussions and disagreements over the allocation of additional built-up area indicated that no binding agreement had been reached between Heritage and Madhugiri.
The High Court dismissed the appeal, upholding the Arbitral Tribunal’s order refusing interim relief.
“For the aforesaid reasons, the appeal in this Section 37 Petition is dismissed. Having examined the facet of costs, this being a commercial arbitration, on the facts of the case, I am convinced that costs is a subject matter that is the domain of the Learned Arbitral Tribunal. I would leave the consideration of costs, including any costs relating to this Petition, to the Learned Arbitral Tribunal,” the court directed.
Additionally, the court rejected the petitioner’s request to continue the restraint on Madhugiri appointing an alternate developer for a further period of three weeks.
“In view of what is articulated in this judgment, it would not be appropriate to continue such a restraint any further. The request is rejected,” the judgment concluded.
Case Title: Heritage Lifestyles & Developers Private Limited v. Madhugiri Co-operative Housing Society Ltd.
Neutral Citation: 2025:BHC-OS:3440
Case Number: CARAPL-32740-2024
Bench: Justice Somasekhar Sundaresan
[Read/Download order]
