Bombay High Court Upholds Termination of Developer’s Authority: “Conveyance Deed Executed Using Terminated Power of Attorney Cannot Be Valid”

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Court’s Decision

The Bombay High Court dismissed the appeal filed by the appellant, a former developer, against an interim order that restrained it from using a disputed conveyance deed as a title document or alienating the property. The Court found no grounds to interfere with the trial court’s injunction, as the appellant’s reliance on a terminated Power of Attorney (POA) was unlawful. The High Court concluded, “The reasons given and the conclusion drawn by the Trial Court are based on the material available before it. No interference is called for.”

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Facts of the Case

1. Ownership and Development Agreement:
   • The respondents owned the suit property, which was declared as a slum in 2007.
   • They entered into a Development Agreement (DA) and executed a Power of Attorney (POA) in favor of the appellant to enable redevelopment under the Maharashtra Slum Areas (Improvement, Clearance, and Redevelopment) Act, 1971.
2. Payment Terms and Developer’s Responsibilities:
   • The DA stipulated monetary consideration and allocation of flats totaling 1,000 sq. ft. to the respondents.
   • However, the appellant failed to implement the slum redevelopment scheme.
3. Termination of Agreement:
   • Due to non-performance, the slum society applied for termination of the appellant’s developer status under the Slum Act.
   • In 2015, the Slum Rehabilitation Authority (SRA) terminated the appellant’s appointment as the developer and authorized the appointment of a new developer.
4. Conveyance Deed and Litigation:
   • Despite termination, the appellant executed a conveyance deed in 2023, relying on the 2007 POA, transferring the suit property to itself.
   • This led to the respondents challenging the validity of the conveyance deed in court.

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Issues

1. Validity of the Conveyance Deed:
   • Could the appellant legally execute a conveyance deed based on a terminated POA?
2. Injunction Amounting to Final Relief:
   • Did the trial court’s order to restrain the use of the conveyance deed grant final relief prematurely?

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Petitioner’s (Appellant’s) Arguments

The appellant argued:

1. Validity of the POA:
   • The POA of 2007 was not formally canceled through a registered document and remained valid.
   • Under Section 202 of the Indian Contract Act, 1872, the POA could not be revoked as it was coupled with interest.
2. Conveyance Deed Execution:
   • The conveyance deed executed under the POA was lawful and could not be challenged.
3. Injunction as Final Relief:
   • The trial court’s injunction effectively granted the final relief of invalidating the conveyance deed before trial.
4. Precedents:
   • Cited judgments supporting the irrevocability of POAs coupled with interest and the principle that interim orders should not amount to final relief.

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Respondent’s Arguments

The respondents contended:

1. Termination of POA:
   • The POA and DA were terminated in 2015 due to the appellant’s failure to implement the slum redevelopment scheme.
   • The appellant did not challenge the termination and had no legal authority to execute the conveyance deed in 2023.
2. SRA Termination Order:
   • The appellant’s appointment as a developer was terminated lawfully by the SRA, and a new developer was appointed to carry out the project.
3. Rehabilitation Efforts:
   • The new developer was paying transit rent to slum dwellers and actively progressing with redevelopment.
   • The appellant’s interference jeopardized the rehabilitation scheme.
4. Precedents:
   • Cited judgments emphasizing that terminated developers could not obstruct lawful redevelopment projects.

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Analysis of the Law

1. Conditions in the Development Agreement:
   • The DA required full consideration to be paid to the respondents and performance of redevelopment obligations by the appellant. Neither condition was fulfilled.
   • As a result, the appellant had no right to claim ownership or execute a conveyance deed.
2. Effect of SRA Termination:
   • The appellant’s authority as a developer was lawfully terminated by the SRA in 2015. This nullified the appellant’s rights under the POA.
3. Irrevocability of POA (Section 202, Contract Act):
   • The Court noted that the POA could not be irrevocable if the appellant failed to meet its obligations under the DA.
4. Trial Court’s Injunction:
   • The injunction merely prevented the appellant from alienating the property or acting on the conveyance deed during the trial. It did not grant final relief.

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Precedent Analysis

The Court referred to the following cases:

1. Wander Ltd. v. Antox India P. Ltd.:
   • Appellate courts should not substitute their discretion for the trial court’s unless the decision is arbitrary or perverse.
2. Ramakant Ambalal Choksi v. Harish Ambalal Choksi:
   • Reaffirmed the limited scope of appellate interference with interim orders.
3. Swashray Co-Op. Housing Society v. Shanti Enterprises:
   • Developers cannot impose themselves on owners after termination of their appointment.

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Court’s Reasoning

1. Prima Facie Case Against Appellant:
   • The appellant used the POA to execute a conveyance deed in its own favor, which was deemed legally and ethically untenable.
2. Balance of Convenience:
   • The new developer was actively progressing with the slum rehabilitation project and paying transit rent to slum dwellers. Halting this would cause significant harm.
3. Irreparable Loss:
   • The respondents and slum dwellers would suffer irreparable harm if the appellant continued to obstruct redevelopment efforts.
4. No Final Relief at Interim Stage:
   • The Court clarified that the trial court’s injunction did not set aside the conveyance deed but only restrained its use until the suit was decided.

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Conclusion

The High Court dismissed the appeal, upholding the trial court’s injunction. It found the appellant’s reliance on a terminated POA to be baseless and emphasized the importance of allowing the lawful redevelopment project to proceed.

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Implications

This judgment reinforces:

1. Accountability of Developers:
   • Developers must adhere to their contractual and statutory obligations or face termination.
2. Protection of Public Welfare Projects:
   • Courts will prioritize the timely execution of slum rehabilitation schemes over private disputes.
3. Limits on POA Validity:
   • A POA coupled with interest cannot be used unlawfully after the termination of the underlying agreement.

This decision serves as a precedent for cases involving redevelopment disputes and the interpretation of developer obligations.

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