Bombay High Court Directs Developer Of Lodha Worli Towers To Collect Maintenance At Rate Agreed Upon Between Parties Until Arbitral Proceedings Are Completed

The Bombay High Court bench of Justice Somasekhar Sundaresan the developer of Lodha World Towers in a petition filed under section 9 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) has been directed to charge the Federation Common Area Maintenance (FCAM) Charges at the rate agreed upon in the agreement executed between the parties, until the arbitral proceedings are completed. Brief Facts: This group of petitions have been filed under Section 9 of the Arbitration Act seeking interim relief in the form of full access to all utilities and facilities at Lodha World Towers, Worli which was developed by Macrotech Developers Ltd. (Respondent). The Petitioners who are high networth individuals, have acquired apartments at Lodha Worli. They assert having fully paid all applicable dues in respect of 'Federation Common Area Maintenance Charges' (“FCAM Charges”) towards their entitlement to use various amenities such as Gymnasium, Club House, Spa etc. (“Common Amenities”). Macrotech contended that the Petitioners are in default and to assert its rights, has cut off access of these Petitioners to certain Common Amenities. The FCAM Charges stipulated in the agreements were provisional in nature. The estimated FCAM Charges for the first 60 months (five years) payable by the purchasers of the units was indicated. The FCAM Charges have been paid for 30 months upfront. Under the agreement, the FCAM Charges were subject to inflation of 7.5% to 10% per annum. Any hike higher than this range would need consent of the parties. Contentions: The Petitioners submitted that denial of access to Common Amenities infringes on their basic right to life and health, particularly for their children. Despite paying FCAM charges in advance, facilities like the Club and Spa were not made operational on time and remained closed during the COVID-19 pandemic, incurring no actual maintenance expenses. It was further argued that Club Usage Charges being clubbed into FCAM Charges and being charged to all residents regardless of use of the Club. That apart, the Club is a common area, and charges towards the Club would be subsumed in the FCAM Charges. Per contra, the Respondent submitted that the Petitioners are the only residents at Lodha Worli raising issues over FCAM charges, while others have been paying without any protest. Allowing defaulters access to Common Amenities would be unfair to residents who are compliant and who bear the cost of maintaining these facilities. Hence, restricting access for defaulters was essential to ensure equity in the present case. Observations: The court observed that it is unclear how Macrotech could assert that the rate of Rs. 4.5 per square foot as contracted at the launch of the project could escalate to Rs. 9.92 per square foot, applying even the highest inflation of 10% per annum, when the FCAM Charges were made applicable only from October 2017. It further added that at the rate of 10% per annum, the escalation would come to Rs. 0.45 per annum and at that simple rate for eight years (although eight years would be completed only in October 2025) the aggregate increase would come to Rs. 3.6 per square foot, which would add up to Rs. 8.10 per square foot. Based on the above, the court held that if one were to take the escalation rate of 10% at a compounded annual rate, Rs. 4.50 per square foot in October 2017 would come to Rs. 9.65 in eight years. Evidently, the Proforma Invoice payable by January 2025 charges Rs. 9.92 per square foot. The court also said that indeed, the agreement between the parties provides that non-payment of dues would result in denial of access to the Common Amenities. Likewise, the FCAM Charges have to be in conformity with the agreement, which only gives a leeway of a maximum of a 10% escalation without the need for mutual consent. Based on the above, the court directed the following: Macrotech shall provisionally compute FCAM charges for each Petitioner's apartment using Rs. 4.5/sq.ft (as of Oct 2017) with 10% compounded annual escalation. This calculation must be shared within one week.Petitioners must pay the provisional FCAM charges within two weeks from the receipt. Once the FCAM charges are paid, Macrotech must provide unhindered access to all common amenities at Lodha Worli without imposing unreasonable usage conditions. Furthermore, Macrotech must submit an audited statement within four weeks from the date when arbitral tribunal takes up the matter in which the details of third-party commercial use of common areas and income earned since Oct 2017 should be included. Macrotech must disclose unsold flats for which it is deemed a society member and account for related FCAM charges, to enable fair apportionment by the Arbitral Tribunal. All payments will be subject to adjustment based on the final arbitral award. Accordingly, the...

Bombay High Court Directs Developer Of Lodha Worli Towers To Collect Maintenance At Rate Agreed Upon Between Parties Until Arbitral Proceedings Are Completed

Mohd Malik Chauhan

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