Bombay High Court Refuses Substituted Performance in SRA Redevelopment Dispute for Non-Compliance with Section 20 Notice; Grants Protective Section 9 Relief to Preserve Security and Complete Rehabilitation Project
Bombay High Court Holds Seven-Day Notice Does Not Satisfy Section 20 of the Specific Relief Act Despite Prima Facie Contractual Breaches.
Facts
Shree Samarth Spark Developers LLP, the original developer of an SRA redevelopment project, entered into a Development Agreement with Amardeep Constructions as co-developer in 2014. Under the agreement and subsequent supplementary agreements, the co-developer assumed responsibility for financing the project, completing rehabilitation buildings, paying transit rent, obtaining statutory approvals and occupation certificates, and discharging project-related liabilities. A Memorandum of Understanding executed in September 2023 earmarked approximately 6,560 sq. ft. of free-sale area as security to ensure completion of Rehabilitation Building No. 4 and payment of transit rent and statutory dues.
Subsequently, the Slum Rehabilitation Authority terminated the petitioner’s appointment under Section 13(2) of the Slum Act for alleged defaults in payment of transit rent. Although the Apex Grievance Redressal Committee stayed the termination order, disputes regarding completion of the rehabilitation building, transit rent, contractor dues and statutory liabilities continued. Alleging that the respondents had even sold part of the secured flats, the petitioner invoked arbitration and sought extensive interim protection under Section 9 of the Arbitration and Conciliation Act, including substituted performance under Section 20 of the Specific Relief Act.
Issues
- Whether Clause 16 of the 2023 Memorandum of Understanding superseded Clause 31 of the Development Agreement.
- Whether contractual restrictions on the Arbitrator’s powers also restricted the Court’s jurisdiction under Section 9.
- Whether the petitioner established prima facie breaches by the respondents.
- Whether substituted performance under Section 20 of the Specific Relief Act could be permitted.
- What interim protection was necessary to preserve the subject matter of arbitration.
Petitioner’s Arguments
The petitioner argued that the respondents had accepted complete responsibility for financing and completing the redevelopment project, including Rehabilitation Building No. 4, payment of transit rent and statutory dues. Despite repeated assurances and execution of the Memorandum of Understanding, the project remained incomplete, substantial transit rent remained unpaid and statutory liabilities persisted. The petitioner further alleged that flats specifically earmarked as security under the MOU had been sold without consent, thereby diminishing the contractual security created for completion of the rehabilitation project. It sought appointment as the Court Receiver’s agent, preservation of the remaining security, authority to complete the rehabilitation building, reimbursement of expenses and interim measures under Section 9. It also contended that Section 20 of the Specific Relief Act permitted substituted performance.
Respondents’ Arguments
The respondents argued that the rehabilitation building was substantially complete, with only minor finishing work remaining, and disputed the petitioner’s financial claims. They contended that the petitioner had suppressed material facts, including representations before the Apex Grievance Redressal Committee that the work was almost complete. They further argued that Clause 31 of the Development Agreement restricted the Arbitrator from passing orders effectively removing the co-developer from the project and that similar limitations should govern the Court under Section 9. They also submitted that substituted performance could not be invoked because the petitioner had failed to comply with the mandatory statutory requirements of Section 20, particularly the requirement of issuing a thirty-day notice.
Analysis of the Law
The Court harmoniously interpreted the Development Agreement and the Memorandum of Understanding, holding that neither arbitration clause displaced the other. Clause 31 continued to govern disputes arising under the Development Agreement, while Clause 16 governed obligations created under the MOU. The Court further held that although Section 9 jurisdiction must respect contractual rights, contractual limitations upon the Arbitrator do not automatically curtail the statutory powers of the Court. Section 9 exists to preserve the subject matter of arbitration rather than rewrite commercial bargains.
On substituted performance, the Court analysed Section 20 of the Specific Relief Act after its 2018 amendment and held that issuance of a written notice of not less than thirty days is a mandatory precondition. Since the petitioner’s notice granted only seven days, statutory compliance was absent. Consequently, substituted performance could not be granted notwithstanding the prima facie breaches established by the contractual documents.
Precedent Analysis
- Essar House Pvt. Ltd. v. Arcelor Mittal Nippon Steel (India) Ltd. – Recognised the broad but preservative nature of Section 9 jurisdiction.
- The Court principally relied on statutory interpretation of Section 20 of the Specific Relief Act after the 2018 amendment to emphasise mandatory compliance with the thirty-day notice requirement.
- The judgment is largely contract-centric, construing the Development Agreement and MOU harmoniously while balancing redevelopment obligations and arbitration principles.
Court’s Reasoning
Justice Amit Borkar found that the contractual documents consistently imposed upon respondent No. 1 the obligation to finance, execute and complete Rehabilitation Building No. 4, pay transit rent and discharge statutory liabilities. The execution of the 2023 Memorandum itself demonstrated that both parties recognised continuing defaults and therefore created additional security to ensure completion. The Court observed that while disputes regarding the precise quantum of dues would be determined by the Arbitral Tribunal, the existence of those contractual obligations was prima facie established.
The Court further held that allegations regarding unauthorised sale of flats forming part of the identified security area were not specifically denied. This created a genuine apprehension that the subject matter of arbitration could be defeated if further alienations were permitted. At the same time, the Court refused to grant substituted performance because the petitioner had not complied with the mandatory thirty-day notice requirement under Section 20(2) of the Specific Relief Act. Instead, recognising the public importance of completing an SRA rehabilitation project, the Court crafted an interim arrangement under Section 9 that preserved the remaining security, restrained further alienation, protected the interests of slum dwellers and left all disputed issues—including breach, damages, reimbursement and substituted performance—to the Arbitral Tribunal. The Court also rejected the immediate claim for ₹61.15 crore and other disputed monetary reliefs, leaving those issues for arbitration.
Conclusion
The Bombay High Court partly allowed the Section 9 petition. It held that the petitioner had established a prima facie case requiring preservation of the contractual security but had not satisfied the mandatory statutory conditions for substituted performance under Section 20 of the Specific Relief Act. The Court therefore evolved an interim protective mechanism preserving the security area and facilitating completion of the rehabilitation component without granting final contractual relief or monetary recovery, leaving all substantive disputes to the Arbitral Tribunal.
Case Details
- Case: Shree Samarth Spark Developers LLP v. Amardeep Constructions & Ors.
- Court: Bombay High Court, Commercial Division
- Case No.: Commercial Arbitration Petition (L) No. 23540 of 2026
- Judge: Justice Amit Borkar
- Date: 28 July 2026
- Result: Petition partly allowed; substituted performance refused for non-compliance with Section 20, but extensive interim protective directions granted under Section 9 to preserve the security and facilitate completion of the rehabilitation project.
