The Nusli N. Wadia & Ors. v. Bastion Constructions1 matter before the Hon’ble Bombay High Court was a protracted conflict over the sale of valuable but problem-laden land in Mumbai.
Table Of Content
The matter was an Appeal against the Judgement and Decree dated 4th March, 2015 passed by the Ld. Single Judge pertaining to specific performance of an Agreement executed on 18th March, 2002 (“the said Agreement”).
The F.E. Dinshaw Trust, managed by the Wadia Family (referred as “the Trust”) , had agreed to sell two large parcels of land to Bastion Constructions in 2002.
What the matter was about?
The deal, struck at Rs. 14 crore, was heavily influenced by this statutory risk and other difficulties the land faced – ongoing litigation, proximity to a dumping ground, slum encroachments and most challengingly the said land was governed by the provisions of Urban Land (Ceiling & Regulation) Act, 1976 (ULC Act). ULC Act primarily limited how much vacant land an individual or entity could own in urban areas. The provision provided that such excess land can be acquired by the State Government at some nominal compensation, hence it was reasonable for the Trust fear of less return had the State bought it.
Under the said Agreement a crucial contract clause Clause 10 shifted the onus for obtaining the mandatory ULC clearance onto Bastion, the buyer within a “reasonable time”. If permission was denied, the seller would keep Bastion’s money, and the buyer would not receive the land or any refund. The Trust also required by law and by contract the prior sanction of the Charity Commissioner to sell, as this was Trust property.
Bastion paid the full price by late 2003, but the key ULC clearance remained elusive. Both parties realized that securing this exemption or NOC from the authorities was complex, time-consuming, and uncertain. The Trust, in a move it later described as a “concession,” even applied for the exemption itself in 2006 at Bastion’s urging.
Then, in a twist, Maharashtra repealed the ULC Act in late 2007—wiping away the regulatory threat and, with it, the rationale for the land’s depressed price. The property’s value soared overnight. Despite the risk being gone and Bastion repeatedly asking for the conveyance to be executed so it could take proper possession, the Trust refused. They invoked Bastion’s alleged non-compliance with Clause 10, claimed termination of the deal, and attempted to forfeit the entire Rs. 14 crore.
The Ld. Single Judge held in favour of Bastion, aggrieved by this the Trust appealed before the Hon’ble Division Bench
Submissions of the Trust
The Trust argued they were fully within their rights to terminate. In their view, Clause 10 was not merely a technicality but an essential and fundamental contract term; the buyer assumed a clear, enforceable responsibility to obtain ULC clearance. Its breach, they insisted, relieved them of any duty to convey. They further contended that interim ULC authority orders (which at one point deemed the land “surplus”) amounted to a refusal of clearance, frustrating the deal. They said Bastion showed no true “readiness and willingness” to perform, and that the windfall arising after ULC repeal should not benefit the buyer, especially given the Charity Commissioner’s sale sanction under Section 36 of the Maharashtra Public Trust Act, 1950 (“MPT Act, 1950”) itself was subject to seeking permission under ULC by the Buyer. Additionally, they invoked Section 50 of the MPT Act, 1950 arguing the lawsuit required permission from the Charity Commissioner since it concerned Trust property.
Submissions of Bastion Constructions
Bastion countered that Clause 10 was a risk-shifting device: if clearance did not arrive, the buyer alone suffered the loss; but once the seller i.e. the Trust had the money, Clause 10 did not entitle them to resile from the contract. The clause, they argued, could not allow cancellation after full payment. When the law was repealed, Bastion said, the entire premise of regulatory risk disappeared and the vendors could not raise a dead statute as a new hurdle. Furthermore, Bastion emphasized the Trust’s own actions accepting payment, facilitating security, and seeking the exemption themselves demonstrated an ongoing affirmation of the contract, not an intent to terminate. Bastion also argued the Charity Commissioner’s approval remained unaffected by the ULC repeal, that Bastion had been continuously ready and willing (shown by investment and appointment of security guards by them on the property), and that the MPT Act, 1950 posed no bar since this was a private enforcement case, not one about general Trust administration.
The Hon’ble Court’s Observation
The Hon’ble Court upheld Bastion’s arguments and dismissed the Appeal. The Hon’ble Court found that Clause 10 did not bestow a right on the sellers to terminate post payment; it simply allowed postponement of the sale if required statutory permission wasn’t obtained. With the repeal of the ULC Act, this permission became totally irrelevant the vendors could not rely on a vanished legal risk to renege on a completed deal. The Hon’ble court also noted that, during the years after payment, the Trust had applied for exemptions, allowed Bastion to improve and protect the land, and otherwise behaved in a way that showed the contract was alive until it became financially inconvenient for them.
On questions of equity, the judges rejected the Trust’s plea of hardship due to post-repeal price escalation, observing that contracts are made in light of existing risks, and windfalls from external events flow to those who took those risks. The Charity Commissioner’s sanction, they held, did not require review just because the statutory context changed. The Hon’ble Court also decided that the restrictions in Section 50 of the Trusts Act did not apply to this suit.
In simple terms, the Hon’ble Court declared that the Trust having crafted a contract that protected them from regulatory risk and having accepted the buyer’s payment could not later use unforeseen legal changes to backtrack, even if this meant the Buyer received a substantial asset at a now-cheap price. The Buyer, who had risked losing their entire investment if the law went a different way (may be in the event the ULC permission never came through), was entitled to their bargain when that risk melted away.
The decision stands as a lesson about drafting risk clauses in contracts, the importance of clearly articulating rights and anticipating parties’ rights and liabilities in the even of statutory changes, and, above all, the principle that the law will not allow parties to take advantage of unexpected windfalls based especially on unforeseen circumstances and long after their own obligations being secured.
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