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2012 DIGILAW 506 (ORI)

Woodburn Developers,Builders v. Kiran Mohanty

2012-11-16

V.GOPALA GOWDA

body2012
JUDGMENT V. GOPALA GOWDA, J. 1. The petitioners have filed this petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter called 'the Act' in short) seeking for appointment of an arbitrator to adjudicate the claims and resolve the dispute between the parties urging various facts and legal contentions. 2. Relevant facts are stated for the purpose of examining and considering the claim of the petitioners herein. The case of the petitioners in brief is that on 5.7.1997, petitioner company entered into an agreement under Annexure–1 with one Satya Prakash Mohanty (since dead) husband of opposite party No.1 and father of opposite party Nos. 2 to 4, for constructing a multistoried building on his lands under Schedule–'A' consisting of independent flats capable of being enjoyed as independent apartment with common service core, common parking spaces and other facilities and selling the same to prospective buyers. As per the terms and conditions of the agreement the petitioner-company was appointed as sole and exclusive builder and it is mentioned in the agreement that the land owner shall be allotted 25% of the total built up area free of all costs and charges and the petitioners were given the right to deal with the rest 75% of the build up area in the manner they like. Accordingly, a sum of Rs. 50,000/- was deposited with the owner as interest free caution money. The building was required to be completed within 48 months from the date of sanction of the building plan by the competent authority however there was also stipulation for extension of one year time. It was also stipulated under Clause 18 of the agreement that the caution money will be forfeited in case of non-completion of the building within the stipulated time and the work can be assigned to any other person. Further, the owner shall not deal with the 'A' schedule property with anybody during the subsistence of work. Clause 18(f) of the agreement provides for an Arbitration Clause which reads thus:– "18. (f) In case of any doubt or dispute, arising out of the agreement shall be referred to a sole arbitrator i.e. arbitration clause." 3. Pursuant to the said agreement, the owner executed an irrevocable power of attorney in favour of petitioner No.2 on 5.7.1997/6.8.1997 and immediately thereafter the petitioners took necessary steps for soil exploration work. (f) In case of any doubt or dispute, arising out of the agreement shall be referred to a sole arbitrator i.e. arbitration clause." 3. Pursuant to the said agreement, the owner executed an irrevocable power of attorney in favour of petitioner No.2 on 5.7.1997/6.8.1997 and immediately thereafter the petitioners took necessary steps for soil exploration work. On 26.09.1997 petitioners submitted the building plan to Cuttack Development Authority (CDA) for approval. Pending approval of the said building plan, petitioners started construction spending huge money for piling works, laying the plinth and columns upto 2.5 meters of proposed building. On 26.6.1998 petitioners also issued an advertisement in the Oriya daily "The Samaj" inviting prospective buyers for sale of flats. On 15.10.1998 the owner of the land in question Mr. Satya Prasad Mohanty died while the work was on full swing. However, the petitioners proceeded with the work without any objection from any of the opposite parties. But, on 18.10.2001 petitioners received a letter from opposite party Nos. 1 to 4 that they have rescinded the contract and forfeited the caution/security money on the ground that the time was the essence of contract and no development was made in spite of reminders after death of Satya Prasad Mohanty. It was further stated in the said letter that they were taking possession of land. Thereafter, petitioners requested the opposite parties for settlement, but as the opposite parties did not come forward for a settlement, on 10.04.2002 petitioners sent a reply copy by registered post. However, the opposite party Nos. 1 to 4 in utter disregard to the reply and without coming forward for settlement, proceeded to entrust the construction work to a third party advertising the same in 'the Samaj' dated 02.01.2003 under Annexure–9. After few days when the petitioner No.2 visited the spot, he found the work in progress. Thereafter on 13.02.2003 petitioner issued notice to opposite parties invoking the arbitration clause in the agreement. It is stated by the petitioners that the same was refused by the opposite parties. Thereafter petitioner filed Misc. Case No. 17 of 2003 under Section 9 of the Arbitration and Conciliation Act, 1996 in the Court of District Judge, Cuttack against opposite parties, wherein the learned District Judge vide order dated 10.04.2003 restrained the opposite parties from proceeding with the construction of building. Thereafter petitioner filed Misc. Case No. 17 of 2003 under Section 9 of the Arbitration and Conciliation Act, 1996 in the Court of District Judge, Cuttack against opposite parties, wherein the learned District Judge vide order dated 10.04.2003 restrained the opposite parties from proceeding with the construction of building. Against the said order opposite parties filed appeal under Section 37 of the Act before this Court being ARBA No. 19 of 2003. This Court set aside the order of the District Judge holding that the petitioners herein can be compensated their loss and damage in terms of money. 4. Learned counsel for the petitioners placing reliance upon the judgments of the Supreme Court in the case of Prem Power Construction Pvt. Ltd. vs. Hydroelectric Power Corporation, 2008 (Supp.-2) ArblR 370 (Del.); Inder Singh vs. Delhi Development Authority, AIR 1988 SC 1007 ; and Harishankar Singhania vs. Gourishankar Singhania, (2006) 4 SCC 658 , submits that in respect of limitation, provisions of Article 137 of the Limitation Act, 1963 apply to an application for appointment of Arbitrator under Section 11 (6) of the Arbitration and Conciliation Act, 1996 and a period of 3 years prescribed under Article 137 starts running from the date when right to apply for arbitration accrued or parties chose to decide the matter by dialogue and continued correspondence regarding settlement or from the date of dispute and wherein last correspondence was made. In the instant case the contract was terminated on 18.10.2001 and the demand for appointment of arbitrator was made on 10.4.2002 and further on 13.02.2003, therefore, the present petition is not barred by limitation. 5. Learned counsel for the petitioners submits that the averments of the opposite parties to the effect that after the death of Sri Satya Prasad Mohanty the agency was terminated under Section 209 of the Contract Act is not at all correct, reason being, it is not a contract between the Principal and Agent as per Section 182 of the Contract Act. The contract in question has been signed by both executants and as per Sections 37 and 40 of the Contract Act, the present opposite parties, who are the legal representatives of late Satya Prasad Mohanty are under obligation of the agreement. The contract in question has been signed by both executants and as per Sections 37 and 40 of the Contract Act, the present opposite parties, who are the legal representatives of late Satya Prasad Mohanty are under obligation of the agreement. After the death of Satya Prasad Mohanty, the arbitration clause cannot come to an end and it is still existing for adjudication of any disputes between the parties as per the provisions of the Arbitration & Conciliation Act, 1996. Therefore, learned counsel for the petitioners prayed for appointment of an arbitrator by allowing this arbitration petition. 6. The aforesaid contentions of the petitioners have been opposed by the opposite parties by filing a detailed counter statement inter alia, stating that the arbitration petition is not maintainable as the petitioners have extinguished their right and therefore Section 40(3) of the Act will come into operation for the reason that after the death of Satya Prasad Mohanty there was no agreement entered into between the petitioners and the opposite parties who are the legal representatives and successor of the properties. Further, the agreement was entered into on 5.7.1997 with Late Satya Prasad Mohanty and on the same day a Power of Attorney has been given by Late Mohanty in favour of the petitioner No.2 and thereafter petitioners could only apply for building permission from CDA in the year 1997, but could not do any development work. When Mr. Satya Prasad Mohanty died on 16.10.1998 till then no building plan was approved by CDA and further the Power of Attorney did not survive after the death of Late Mohanty. After the death of Satya Prasad Mohanty, petitioners did not take any steps or made any communication to the opposite parties either to discuss about the agreement or to enter into fresh agreement. Further, it is not disputed that on 18.10.2001 notice was issued to the petitioners by the opposite parties about the waiver and extinguishment of all their legal rights on and from 15.10.2001 i.e. the date of expiry of three years from the date of death of Satya Prasad Mohanty and to enforce the building contract against the legal heirs of Late Satya Prasad Mohanty, as they remained silent over the matter for three years. It is submitted ~hat shifting of cause action that arose on 16.10.1998 after the death of Late Mohanty to the date of issuance of appraisal notice dated 18.10.2001 so as to over-come the law of extinguishment of right of action as provided u/s. 40(3) of the Act as well as the law of Limitation u/s. 43 of the Act is not permissible under law and Section 40(3) of the Act shall come into the rescue in favour of the opposite parties and therefore, the petitioners have lost all their legal rights so as to invoke the jurisdiction either under Section 8, 9 or 11 of the Act. In this regard learned Senior Counsel for opposite parties placed reliance upon the decision of the Supreme Court reported in AIR 1994 SC 1615 and also a decision of this Court reported in AIR 1985 Orissa 182. 7. It is further contended on behalf of the opposite parties that the Power of Attorney created on 5.7.1997 by Late S.P. Mohanty in favour of the petitioners suffered revocation on 16.10.1998 when Mr. Mohanty died and admittedly by that time, no building permission was obtained by the petitioners from CDA. Placing reliance upon the decisions of various High Courts, reported in AIR 1985 AP 30 ; AIR 1938 Madras 542; and AIR 1933 Lahore 876, it is submitted that assignment of interest in subject matter to agent must be simultaneous with creation of power in him. The conditions of execution of an irrevocable power of Attorney were satisfied only in cases, where the authority was given for the purpose of being a security or a part of the security and not to cases where the interest of the agent arises afterwards and incidentally. It is submitted that if the building permission is not obtained, the interest of the builder has not arisen, therefore, the Power of Attorney got automatically revoked on the death of Late Satya Prasad Mohanty and further there exists no fresh power of attorney executed by the LRs. of Late S.P. Mohanty (opposite parties herein). 8. It is submitted that if the building permission is not obtained, the interest of the builder has not arisen, therefore, the Power of Attorney got automatically revoked on the death of Late Satya Prasad Mohanty and further there exists no fresh power of attorney executed by the LRs. of Late S.P. Mohanty (opposite parties herein). 8. It is further submitted that after observing the legal formalities by way of issuing notice to the petitioners followed with publication it public notice in newspapers in two successive occasions, the building contract was assigned to another builder on 24.01.2002 and possession was delivered to him, who in turn pending approval of building plan invested huge amounts in completing the building upto Second Floor as per plan approved later. But during that period petitioners raised no objection, but after lapse of about more than 5% years, the petitioners knocked the door of the Court for enforcement of contract against the legal heirs of Late S.P. Mohanty which is not only barred by limitation but also not legally enforceable due to extinguishment of right of action which at best can be decided by a competent Court and not by an Arbitrator. 9. Further, the petitioners without approval of any building plan and without any construction took advances from intending purchasers and when they came to know about the conduct of the petitioners filed cases for recovery of their money from them before the Consumer Dispute Redressal Forum and also initiated action under Section 138 of the N.I. Act resulting in conviction of the petitioner No.2 by the learned SDJM, Cuttack which was published in a newspaper 'The Samaj' dated 18.08.2003. Placing reliance upon Section 40(3) read with Section 43(1) and (2) of the Act, it is submitted that petitioners remained silent for more than three years without any correspondence or otherwise to enforce the agreement as against the legal heirs of Late Satya Prasad Mohanty who died on 16.10.1998 and that the petitioners were well aware of the date of death of Late S.P. Mohanty. Therefore, their conduct gave rise to extinguishment of their right of action against the legal heirs of Late S.P. Mohanty who died on 16.10.1998. Therefore, their conduct gave rise to extinguishment of their right of action against the legal heirs of Late S.P. Mohanty who died on 16.10.1998. Therefore, it is prayed on behalf of the opposite parties that there is no cause of action or right of action in favour of the petitioners so as to maintain this arbitration petition and hence petitioners are not entitled for appointment of any Arbitrator and the petition is liable to be dismissed. 10. I have heard the learned counsel for the parties and perused the records. With reference to the aforesaid rival legal contentions urged on behalf of the parties, the points which arise for consideration before this Court are:– 1. Whether after the death of Mr. Satya Prasad Mohanty, the agreement which was entered into between the petitioners and Late S.P. Mohanty has come to an end and petitioners have no cause of action to file this Arbitration Petition invoking the arbitration clause in the agreement? 2. Whether the petition is barred by limitation? 3. What order? 11. It is an undisputed fact that on 05.07.1997 an agreement was entered into between the petitioners and Late Satya Prasad Mohanty for construction of the multistoried building. Besides other terms and conditions, Clause 18(f) of the agreement provides for an Arbitration clause, which clearly prescribes that "in case of any doubt or dispute, arising out of the agreement the same shall be referred to a sole arbitrator". No doubt in addition to the said agreement, there was also an irrevocable power of attorney. Unfortunately, the owner of the property Mr. Satya Prasad Mohanty died on 15.10.1998. On 18.10.2001 petitioners received a letter from opposite parties that they have rescinded the contract and forfeited the caution money. That means, it is not in dispute that till 18.10.2001 the contract between the petitioners and Late Satya Prasad Mohanty was subsisting. Thereafter, petitioners approached the opposite parties for an amicable settlement of the matter and the opposite parties were also expressing their willingness in that regard. But as the opposite parties avoided to discuss over the matter in response to letter dated 18.10.2001, petitioners gave a reply to that opposite parties vide letter dated 10.04.2002. Thereafter, petitioners approached the opposite parties for an amicable settlement of the matter and the opposite parties were also expressing their willingness in that regard. But as the opposite parties avoided to discuss over the matter in response to letter dated 18.10.2001, petitioners gave a reply to that opposite parties vide letter dated 10.04.2002. As opposite parties did not respond to that letter and petitioners came to know that they are proceeding to entrust the construction work to a third party with utter disregard to the reply letter, on 13.02.2003 petitioners issued notice to all the opposite parties invoking the arbitration clause in the agreement in question. However, the same was refused by the opposite parties. Therefore, petitioner preferred a Misc. Case before the district Judge, Cuttack, under Section 9 of the Act wherein the learned District Judge vide order dated 10.04.2003 restrained the opposite parties from proceeding with construction work. However, against the said order, opposite parties preferred ARBA No. 19 of 2003 before this Court herein this Court set aside the order of the District Judge holding that the respondents (present petitioners) can be compensated their loss and damage in terms of money. That means this Court made it clear that if there is any dispute and differences between the parties the same can be settled as per the agreement. Be that as it may, as the opposite parties did not respond to the petitioners request for adjudication of the matter in terms of the agreement by way of arbitration, petitioners filed this Arbitration Petition on 17.04.2003 invoking the arbitration clause in the agreement. It is an undisputed fact that petitioners issued notice to the opposite parties invoking the arbitration clause on 10.02.2003. Opposite parties were required to give reply to that or appoint the arbitrator within 30 days thereafter. But they did not do anything. Therefore, petitioners have rightly filed the Arbitration Petition as per the Agreement. It cannot be said that after the death of Mr. Satya Prasad Mohanty the agreement which was entered into will come to end automatically and the petitioners will loose their rights in terms of the agreement. Even after the death of Mr. But they did not do anything. Therefore, petitioners have rightly filed the Arbitration Petition as per the Agreement. It cannot be said that after the death of Mr. Satya Prasad Mohanty the agreement which was entered into will come to end automatically and the petitioners will loose their rights in terms of the agreement. Even after the death of Mr. Mohanty, the agreement was still existing and in case of dispute and differences between the petitioners and legal heirs of Late S.P. Mohanty, petitioners can approach the Court as per the Arbitration & Conciliation Act, 1996 which has rightly been done by the petitioners. Considering the aforesaid fact situation, the reliance placed by the opposite parties on the decisions of the Supreme Court with regard to maintainability of the Arbitration petition as well as limitation petition is not applicable to the fact situation of this case. 12. The contentions of the petitioners, with reference to the judgments of the Supreme Court upon which reliance has been placed by the learned Counsel for the petitioners to the effect that provisions of Article 137 of the Limitation Act apply to an application for appointment of Arbitrator under Section 11 (6) of the Arbitration and Conciliation Act and a period of 3 years prescribed under Article 137 starts running from the date when right to apply for arbitration accrues or parties chose to decide the matter alive by dialogue and continued correspondence regarding settlement or from the date of dispute, are legal and valid for the reason that in the instant case the notice of termination of contract was given by the opposite parties on 18.10.2001 to the petitioners who gave reply on 10.04.2002 and subsequently demand for appointment of arbitrator was made on 13.02.2003 which are within a period of three years from the date of dispute. Therefore, it cannot be said that this petition is barred by limitation. 13. In this arbitration petition this Court is only concern with the question as to whether there is an admitted dispute and difference between the parties and whether the petitioners are entitled for appointment of arbitrator for adjudication of the dispute between the parties in terms of the arbitration clause in the agreement. 13. In this arbitration petition this Court is only concern with the question as to whether there is an admitted dispute and difference between the parties and whether the petitioners are entitled for appointment of arbitrator for adjudication of the dispute between the parties in terms of the arbitration clause in the agreement. Therefore, this Court has nothing to do with the order passed by the District Judge granting injunction against opposite parties or the order passed by this Court in ARBA No. 19 of 2003 setting aside the order of the District Judge and the same cannot be made use in this case to decide this Arbitration Petition. 14. I have carefully examined the above said pleadings and rival contentions of the parties with a view to find out as to whether the petitioner is entitled for appointment of an Arbitrator. It is well established principle of law as held by the Hon'ble Supreme Court, that as long as the dispute exists, the same is arbitrable in accordance with the clauses of the Agreement. As the opposite parties failed to appoint the Arbitrator within the stipulated time, the petitioner has got the right to approach this Court seeking for appointment of an Arbitrator in terms of the arbitration clause in the agreement in question. In the instant case, the claim cannot be said to be not a live claim and the same is barred by limitation. 15. Considering the entire fact situation of the case I am of the view that dispute and differences exist between the parties which are required to be adjudicated by an Arbitrator. Therefore, this Court appoints Shri Justice B.P. Das, a retired Judge of this Court as the sole Arbitrator to decide the dispute between the parties and pass the award. 16. The learned Arbitrator, so appointed, shall enter upon the reference as early as possible, preferably within a period of four weeks from the date of service of this order upon him and decide the dispute and pass an award, after affording reasonable opportunity to the parties to make their claim and counter claim, within a period of four months from the date of entering upon such reference. Fixation of remuneration of the Arbitrator and other charges is left to the discretion of the learned Arbitrator so appointed, which shall be borne by the parties equally. The ARBP is accordingly allowed. Petition allowed.