Bombay High Court rules that mere awareness of a contract or potential benefits does not create privity of contract

Introduction:

The Bombay High Court, in Shree Construction Company v. Bagwe Housing Pvt. Ltd. & Ors. (2025: BHC-OS:16705), dismissed a developer’s suit as being barred by limitation and lacking any cause of action against subsequent purchasers and landowners. The Hon’ble High Court held that mere “awareness” of transactions does not establish privity of contract and that stale claims intended to obstruct development must be “nipped in the bud”. The ruling arose from a dispute over development rights to land and the validity of certain Deeds of Surrender and conveyance deeds executed nearly two decades earlier.

Brief Facts:

• In 1994, Defendant Nos. 2 to 8, owners of land in Andheri (CTS Nos. 182 and 182/1–5) granted development rights to Defendant No.1 (Bagwe Housing Pvt. Ltd.).
• Defendant No.1 then entered into two agreements with Shree Construction Company in January and February 1999, one for construction and another appointing the Plaintiff as the sole selling agent for flats in certain segments of the project.
• Subsequently, on 13 February 2006, Defendant No.1 executed Deeds of Surrender relinquishing its development rights to the owners (Defendants 2–8) and revoking earlier Powers of Attorney.
• Later that year, on 26 December 2006, Defendants 2 to 8 executed a Deed of Conveyance transferring part of the property (CTS Nos. 182/C–E) to Amey Realty & Construction LLP (Defendant No.9).
• The Plaintiff, claiming these transactions were invalid and prejudicial to its rights, filed the present suit in August 2016 i.e., over ten years later seeking to declare the Deeds void.
• Defendant No.9 sought rejection of the plaint under Order VII Rule 11(d) of the Code of Civil Procedure, arguing the claim was ex-facie time-barred and that there was no privity of contract with the Plaintiff.

Held:

The Hon’ble High Court allowed Defendant No.9’s interim application and dismissed the suit against Defendants 2 to 9 and observed that:

• The plaint disclosed no cause of action against Defendants 2 to 9, as no contract existed between them and the Plaintiff.
• The suit was barred by limitation, since the Plaintiff was aware of the Deeds of Surrender at least by 21 December 2009, as evidenced by its advocate’s letter, yet filed the suit only on 20 August 2016.
• Mere awareness does not create privity of contract nor extend limitation.
• The Plaintiff’s cause of action, if any, lay only against Defendant No.1, the original contracting party.
• The Plaintiff’s claim that limitation was deferred due to non-obtaining of the commencement certificate was rejected.

The Court also dismissed the Plaintiff’s application for stay and held that the Miscellaneous Civil Application No.199 of 2025, seeking transfer of a related suit had become infructuous.

Analysis:

The following key principles governing Order VII Rule 11 CPC were reaffirmed:

• When assessing a plea for rejection of plaint, the Court must consider only the plaint and documents annexed thereto.
• Where the plaint itself discloses that the claim is barred by limitation, the Court can summarily reject it without requiring evidence.

Citing Dahiben v. Arvindbhai Kalyanji Bhanusali, (2020) 7 SCC 366and ITC Ltd. v. DRAT (1998) 2 SCC 70, the Court underscored that clever drafting cannot manufacture a cause of action. Further, in line with Khatri Hotels (P) Ltd. v. Union of India, 2011 SCC OnLine SC 1236, the limitation period commences from the first accrual of the right to sue, subsequent violations do not revive it. The judgment highlights judicial intolerance for vexatious litigation intended to delay legitimate development, echoing the Supreme Court’s caution in MadanuriShri Rama Chandra Murthy v. Syed Jalal, 2017 SCC OnLine SC 459 that bogus suits should be “nipped in the bud.” By rejecting the Plaintiff’s attempt to extend limitation through technical arguments, the Court reinforced the doctrine that equity cannot override statutory limitation, and contractual privity cannot be implied merely from business association or awareness of transactions.