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Rajasthan High Court · body

2008 DIGILAW 797 (RAJ)

Jagdambey Builders Pvt. Ltd. v. Harsh Rathore

2008-03-14

SHIV KUMAR SHARMA

body2008
Honble SHARMA, J.–This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short `Act) for appointment of independent arbitrator. (2). The arbitration agreement relied upon in this application is with reference to Memorandum of Understanding (for short `MOU) dated January 31, 2005 and the Collaboration Agreement dated March 9, 2005 entered into between the parties. Under the MOU dated January 31, 2005 entered into between the respondent Harsh Rathore, referred to as `the first party in the MOU and the applicant M/s. Jagdambey Builders Pvt. Ltd., referred to as `the Builder Company in the MOU. It was agreed that the respondent Harsh Rathore on the terms and conditions agreed upon would hand over/surrender his land admeasuring 7913 sq. Yds. bearing plot No. 6, forming part of Khasra No. 50, situated at Sodala Civil Lines, Jaipur, popularly known as ``Rathore Nursery to the applicant for developing and constructing a commercial complex and that the entire cost for construction of the complex including all incidental expenses would be to the account of applicant and on construction so made 50% of the constructed/built up area would vest in the respondent and remaining 50% of constructed/built up area would belong to and vest in the applicant. An amount of Rs. 4.5 crores was agreed to be paid by the applicant to respondent out of which 2.25 crores was non refundable and remaining 2.25 crores was refundable on completion of the construction of the proposed commercial complex. The applicant as per agreed terms made payment to the respondent. (3). Clauses 17 and 18 of the MOU dated January 31, 2005 read thus:- "17. That any dispute or difference that may at any time arise in connection with or incidental to this MOU shall be settled by mutual consent failing which by arbitration under the Arbitration & Conciliation Act, 1996 and thus MOU shall be deemed to be an Agreement to submit to arbitration." "18. That this MOU has been prepared in duplicate with original signatures of both the parties and attesting witnesses and one set has been kept by each party which is original. Until and unless agreed mutually in writing this MOU shall remain irrevocable." A look at the said clauses demonstrates that MOU shall remain irrevocable and a formal collaboration agreement to be signed between the parties. (4). Until and unless agreed mutually in writing this MOU shall remain irrevocable." A look at the said clauses demonstrates that MOU shall remain irrevocable and a formal collaboration agreement to be signed between the parties. (4). On March 9, 2005 a collaboration agreement was signed and executed between the parties and by that date as against the total of Rs. 4.5 crores an amount of Rs. 3 crores as per the terms agreed was already paid by the applicant to respondent, receipt whereof was duly acknowledged and admitted by the respondent in the said agreement. The respondent delivered/surrendered possession of the land to the applicant under the possession letter dated March 9, 2005 except the house over a part of the said land occupied by the respondent for his residence. Remaining 1.5 crores was payable by the applicant after sanction of the plan for the complex and on handing over possession of, the house in occupation of the respondent covering a part of the land in question as aforesaid. (5). Clause 49 of the collaboration agreement dated March 9, 2005 reads thus:- "49. That any dispute or difference that may at any time arise in connection with or incidental to this collaboration agreement shall be settled by mutual consent, failing which by arbitration under the "Arbitration & Conciliation Act, 1996." (6). As per another MOU dated January 31, 2006 was entered into between the parties to incorporate certain amendments in the collaboration agreement dated March 9, 2005. The collaboration agreement dated March 9, 2005 read with MOU dated January 31, 2006 remained in full force, operative and binding on the parties. The applicant, by the time MOU dated January 31, 2006 was signed, paid a total amount of Rs. 4 crores to the respondent, the receipt whereof was duly acknowledged and admitted by the respondent in MOU dated January 31, 2006. (7). It appears that some dispute arose between the parties and an application under Section 9 of the Act was filed before the Court of District Judge, Jaipur City for interim measures respondent from transferring or entering into any agreement with any third person and to maintain status quo in respect of the property. (7). It appears that some dispute arose between the parties and an application under Section 9 of the Act was filed before the Court of District Judge, Jaipur City for interim measures respondent from transferring or entering into any agreement with any third person and to maintain status quo in respect of the property. Learned District Judge vide order dated December 22, 2006 restrained the respondent from transferring the land and by subsequent order dated March 28, 2007 directed both the parties to maintain status quo in respect of the property. The interim order is operative and binding on the parties. I however find that the respondent in the reply to the said application denied even the existence of arbitration agreement. (8). It is contended by learned counsel for the applicant that the dispute and differences between the parties arising out of the MOU dated January 31, 2005, Collaboration agreement dated March 9, 2005 and MOU dated January 31, 2006 are required to be referred to arbitration. It is further contended that the applicant in filing the application under Section 9 of the Act suggested so and expected of the respondent to agree for reference of the dispute to the mutually agreed arbitrator, but the respondent did not agree. Since the dispute is arbitrable and respondent since opposed to the appointment of arbitrator as also arbitration agreement, it became necessary for the applicant to invoke Section 11 of the Act. (9). The respondent has submitted the reply to the instant application raising preliminary objection about the maintainability of the application on the ground that after subsequent MOU dated Jan. 31, 2006 was executed the arbitration clause in the earlier MOU did not remain in existence. I have been taken though the MOU. (10). Mr. Sanjeev Prakash Sharma, learned counsel for the respondent canvassed that in view of MOU January 31, 2006, since arbitration clause was not in existence the applicant cannot be permitted to make request to appoint arbitrator. My attention has been drawn to clause 3 of MOU dated January 31, 2006, which provides thus:- "That in the event the first party fails to handover the vacant and physical possession of the said house to the second party latest by 8th February, 2006 then the first party shall sign and execute sale deed in respect of land measuring 3500 sq. yards (which is already in possession of the second party) being part of property bearing plot No. 6, forming part of Khasra No. 50 Sodala District Jaipur, Rajasthan, popularly known as `Rathore Nursery (as demarcated in the site plan attached hereto), in favour of the second party or its nominees. The sale consideration for this area measuring 3500 sq. yards shall be Rs. 25000/- per sq. yard, which is agreed and acceptable to both the parties and the amount paid under collaboration shall be adjusted on this account." (11). Having closely scanned the MOU dated January 31, 2006. I find that it only suppliments the earlier MOU dated January 31, 2005. Following exracts of the MOU dated January 31, 2006 are required to be noticed- "And whereas now the first party has approached the second party for certain amendments in the terms and conditions of the earlier collaboration agreement, hence this MOU is being executed." "That the following amendments are to be made in the earlier collaboration agreement." (12). In Shree Ram Mills Ltd. vs. Utility Premises (P) Ltd. (2007) 4 SCC 599 , on which reliance is placed by learned counsel for respondent, the Apex Court held that:- "In deciding an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 what the Chief Justice or his designated does is to put the arbitration proceedings in motion by appointing an arbitrator and it is for that purpose that the finding is given in respect of existence of the arbitration clause, the territorial jurisdiction, live issue and the limitation. Unless there is a finding given on these issues, there would be no question of proceeding with the arbitration. If the Chief Justice does not, in the strict sense, decide the issue whether the claim is a dead one in the sense whether the parties have already concluded the transaction and have recorded satisfaction of their mutual rights and obligations or whether the parties concerned have recorded their satisfaction regarding the financial claims, in that event it is for him to locate such issue and record his satisfaction that such issue exists between the parties." (13). Bearing the principles laid down in Shri Ram Mills (supra) I have scrutinised the entire material on record and I hold that clause 17 of the MOU dated January 31, 2005 is still in existence and subsequent MOU dated January 31, 2006 has not evaporated clause 17 but it provided strength to the said clause. (14). That takes me to the second contention of learned counsel for the respondent that the application under Section 11 is not maintainable without serving mandatory notice under Section 11(5) of the Act. I do not find any merit in this contention since this is an application under Section 11(6) and not under Section 11 (5). In view of clause 17 of the MOU dated January 31, 2005, provisions contained in sub-clause (6)(a) of Section 11 are attracted to the facts of the instant case which provide that under an appointment procedure agreed upon by the parties, if a party fails to act as required under that procedure, the party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. Sub-section 6 of Section 11 does not provide that service of prior notice is necessary. Moreover when the respondent has denied the existence of `Arbitation clause no such plea regarding absence of notice could be raised. In the application filed on December 11, 2006 under Section 9 of the Act before District Judge, the applicant has categorically pleaded thus:- ^^izkFkhZ dEiuh us vkilh lgefr ls bl ekeys dks lqyÖkkuk pkgk ysfdu dksbZ urhtk ugha fudykA ,slh fLFkfr esa izkFkhZ dEiuh ds fy, ;g vko;d gks x;k fd og bl elys dks iap egksn; ls fuf.kZr djkosa D;ksafd izkFkhZ dEiuh dks fnu izfrfnu dkQh uqdlku gks jgk gSA** The respondent filed reply to the application on April 30, 2007, thus- ^^oLrqr% izkFkhZ dks bl dkuwuh fLFkfr dk iwjk Kku gS fd fnukad 31-1-2006 dk ,evks;w vfLrRo esa vk tkus ds ckn ls uk rks i{kdkjksa ds e/; dh fo"k; oLrq 7913 oxZ xt Hkwfe ij dkef-kZ;y dkEIysDl dksyscjs-ku ds rgr cukus dk eqn~nk gh vfLrRo esa jgk vkSj uk vkjchVsªku Dykt gh vfLRkRo esa jgkA** (15). In the ultimate analysis I hold that arbitration clause between the party is in existence and since the respondent failed to act as required under the procedure provided in clause 17 (Arbitation Clause) of the MOU dated 31, 2005 appointment of Arbitrator under Section 11(6) of the Act is necessary. (16). For these reasons, I allow the instant application and appoint Honble Justice Ranveer Sahai Verma (Retired) as arbitrator to settle the disputes. Fees and other terms and conditions of arbitration shall be settled by the Arbitrator. A copy of the order be sent to the Arbitrator.