SSD ESCATICS PRIVATE LIMITED v. GOREGAON PEARL COOPRATICE HOUSING SOCIETY LIMITED
Enforceability of Contractual Bars on Damages in Redevelopment Agreements and the Mandatory Restoration of FSI Purchase Costs as "Benefits" under Section 64 of the Indian Contract Act.
Court: Bombay High Court
Citation: 2026:BHC-OS:7691
Decision Date: 30-03-2026
List of Laws
Arbitration and Conciliation Act, 1996; Indian Contract Act, 1872; Specific Relief Act, 1963; Maharashtra Cooperative Societies Act, 1960; Doctrine of Unjust Enrichment
- Facts: The Petitioner (Developer) and the Respondent (Cooperative Housing Society) entered into a Redevelopment Agreement (DA) in 2007. After a stop-work notice in 2011 and subsequent delays, the parties filed Consent Terms in 2017 to provide the Developer another opportunity. However, the Developer failed to pay transit rent, and post-dated cheques were dishonored. Consequently, the Society terminated the DA and Power of Attorney in 2018. An Arbitral Tribunal upheld the termination and awarded the Society monetary claims for rent arrears and costs, while rejecting the Developer's counterclaims for loss of profits, construction costs, and the price paid for additional Floor Space Index (FSI).
- Procedural Posture: The Petitioner-Developer challenged the arbitral award before the Bombay High Court under Section 34 of the Arbitration and Conciliation Act, 1996.
- Issue: 1. Whether the termination of the Development Agreement based on breaches by the Developer was valid. 2. Whether a contractual clause (Clause 22) prohibiting the Developer from claiming damages/compensation upon termination is enforceable. 3. Whether the Developer is entitled to the restoration of benefits, specifically construction costs and FSI purchase prices, under Section 64 of the Indian Contract Act, 1872.
- Holding: 1. Yes, the termination was valid due to consistent breaches. 2. Yes, the clause denying compensation is enforceable under Section 73. 3. Partial: While construction costs and transit rent are not "benefits" to be restored, the purchase price of FSI/TDR utilized by the Society must be restored to avoid unjust enrichment.
- Reasoning: The Court reasoned that the Arbitrator's finding on termination was a "plausible view" based on evidence of non-payment and delay. Regarding damages, the Court held that in redevelopment, a developer's right to profit is "imperfect" until obligations are met; thus, a clause barring damages for a defaulting developer is not against public policy. However, the Court distinguished between "compensation" (Section 73) and "restoration of benefits" (Section 64). Transit rent is a cost for displacing members, and the bare-shell construction was not a "benefit" as it was unusable. Conversely, the additional FSI/TDR purchased by the Developer and retained by the Society is a tangible asset that the Society can monetize. Rejecting the return of the FSI purchase price constitutes a "patent illegality" and "unjust enrichment", violating the fundamental policy of Indian law.
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