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Rajasthan High Court · body

2019 DIGILAW 2134 (RAJ)

S. N. G. Real Estate Pvt. Ltd. Through Its Director Shri Satyanarayan Gupta v. Ghanshyam Singhal S/o Surajmal Singhal

2019-08-08

ALOK SHARMA, MOHAMMAD RAFIQ

body2019
Judgment Per (Hon’ble Alok Sharma, J.) 1. M/s. SNG Real Estate Private Limited of the one part (hereafter ‘the appellant’) and Shri Ghanshyama Singhal as also his wife Smt. Pritibha Singhal of the second part (hereafter ‘the respondents’) entered into a Development Agreement dated 3.6.2013 in respect of 110 bighas of agriculture land situated in village Mahla, Tehsil Mojmabad, District Jaipur. To facilitate the execution of the development agreement, a Power of Attorney was also executed by the two respondents in favour of the appellant. Under the Development Agreement, the appellant having been handed over possession of the lands, at its own cost, was to obtain all requisite permissions for developing it for industrial purposes or as otherwise agreed. Thereafter the developed plots were to be jointly allotted by the appellant and the respondents. The purchasers / allottees were entitled to obtain leases for the land allotted from the JDA. As per Clause (7) of the Development Agreement parties thereto covenanted that the appellant would be entitled to 32% of the gross revenue from the sale of developed plots and the respondents to 68% thereof. Clause (29) of the Development Agreement provided for arbitration in respect of dispute relating to or arising out thereof. Clause 29 reads as under: bl vuqcU/k ds vUrxZr vf/kdkjksa] nkf;Roksa vFkok drZO;ksa vFkok bldks ykxw djus ds lEcU/k esa nksuksa i{kksa ds e/; mRiUu gksus okys dksbZ Hkh fookn] varj] fojks/kkHkkl vFkok nkos ¼fookn½ tks fd bl vuqcU/k dks Hkax] fujLr] izHkko oS/krk] HkkokFkZ bR;kfn djrs gksa dks nksuksa i{k vkilh le>kSrs o lgefr ls lqy>k;saxsaA ;fn fdlh dkj.ko'k ,slk fookn nksuksa i{kksa ls ugha lqy> ikrk gS rks mldks e/;LFkrk izfØ;k ds }kjk lqy>kus gsrq izLrqr fd;k tk;sxkA izR;sd i{k izfr i{k dh lwpuk ls 30 fnu dh vof/k esa viuh vksj ls ,d e/;LFk dh fu;qDr djsxk rFkk nwljs e/;LFk dh fu;qfDr ls 15 fnu dh vof/k esa nksuksa i{kksa }kjk fu;qDr nksuksa e/;LFk }kjk ,d e/;LFk dh vkSj fu;qfDr dh tk;sxh] ,slk fu;qDr r`rh; e/;LFk e/;LFkksa dk izeq[k e/;LFk gksxkA ,slh vof/k esa e/;LFk dh fu;qfDr ugha dh tkus ij e/;LFkrk vf/kfu;e ds vuqlkj dk;Zokgh dh tk;sxhA e/;LFkksa dk fu.kZ; vafre o nksuksa i{kksa ij ck/;dkjh gksxkA e/;LFkrk izfØ;k dk LFky t;iqj gksxkA e/;LFkrk dk;Zokgh dk leLr [kpkZ nksuksa i{kksa }kjk leku :i ls ogu fd;k tk;sxkA 2. Work under the development agreement having commenced, on 2.6.2015, the appellant is stated to have executed in favour of the respondents a sale deed in respect of 129 plots (from which he was to avail his share of the 32% gross revenue generated from the sales of developed plots) for the agreed sale consideration of Rs. 1,46,96,111/-. Pursuant thereto the respondents made over to the appellant a cheque bearing no. 000112 of HDFC Bank for a sum of Rs. 1,41,25,000/- dated 8.6.2015; and another cheque no. 001377 on HDFC Bank for a sum of Rs. 5,71,111/- dated 11.6.2015. 3. Certain differences having arisen in the course of the execution of the development agreement, vide letter dated 29.5.2016, the respondents cancelled their power of attorney executed in favour of the Director of the appellant Company pursuant to the Development Agreement dated 3.6.2013. Vide letter dated 12.9.2016, the appellant resisted / objected to the cancellation on multiple grounds and sought a reference of the disputes consequently arising under the Development Agreement dated 3.6.2013 to an arbitrator as per clause 29 thereof. Vide letter dated 10.10.2016 the respondents denied the appellant’s claim to refer its purported disputes under the development agreement dated 3.6.2013 to arbitration. The matter for the moment thus rested. 4. Then the respondents vide their letter dated 28.4.2017 to the appellant stated that under clause (11), (12) and (13) of the Development Agreement and even otherwise thereunder, it had failed to carry out, as agreed the requisite development works at its cost within three years from the date of approval of the development plans by JDA on 17.10.2014. Details of the incomplete works which were the obligation of the appellant to discharge under the Development Agreement in aggregating to Rs. 8,80,00,000/- were set out. The appellant was alleged to be thus in breach of its obligations under the Development Agreement and hence liable to take corrective action. It was further stated by the respondents that in the event they were forced, resulting from continued breach of obligations of the appellant under the Development Agreement dated 3.6.2013, another agency would be required to execute the incomplete works for the discharge of the appellant’s obligations and the costs thereof incurred alongwith interest @ 18% p.a. would be recoverable from it. Then vide registered notice dated 4.8.2017 the respondents invoked the arbitration clause under Clause (29) of the Development Agreement for resolution of the disputes relating thereto and arising with the appellant and nominated one Alok Bhargava as their nominee Arbitrator. The appellant on its part was required to nominate its Arbitrator who alongwith the respondents’ nominee would in terms of the agreed procedure proceeded to appoint a third Arbitrator / Umpire to enter into reference and adjudicate the disputes between the parties in relation to the Development Agreement dated 3.6.2013. 5. In response to the respondent notice dated 4.8.2017, vide letter dated 2.9.2017, the appellant through counsel denied that any of its obligation under the Development Agreement dated 3.6.2013 had remained unfinished or undischarged. It was stated that the developed plots falling to the share of the appellant under the development agreement in issue had been sold and the only dispute which remained between the parties to the dated 3.6.2013 related to the losses suffered by the appellant for breaches of the respondents’ obligations thereunder. It was submitted that in the circumstances the purported disputes referred to in the respondents’ notice dated 4.8.2017 for appointment of an Arbitrator required no arbitration. 6. The appellant then on its part approached the Commercial Court No.1 (District Level), Jaipur under Section 9 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act of 1996’) praying that the respondents be restrained by way of a temporary injunction from obtaining without its signatures any lease deed/s from JDA in respect of plots developed under the Development Agreement dated 3.6.2013 as also under the sale deed dated 2.6.2015 whereunder the appellant had allegedly transferred its rights in 129 plots to the respondents for valuable consideration of Rs. 1,46,96,111/-. Consequential relief of injunction against further alienation by the lessees of such plots under the JDA’s lease deeds was also prayed for. 7. The respondents filed their reply of denial to the said application under Section 9 of the Act of 1996. It was stated that the relief sought in the application clearly related to 129 plots referable to the sale deed dated 2.6.2015 which did not contain any written arbitration clause. Nor in fact such an arbitration clause could at all be culled out as alleged from the respondent’s notice dated 4.8.2017. It was stated that the relief sought in the application clearly related to 129 plots referable to the sale deed dated 2.6.2015 which did not contain any written arbitration clause. Nor in fact such an arbitration clause could at all be culled out as alleged from the respondent’s notice dated 4.8.2017. It was submitted that an application under Section 9 of the Act of 1996 was visualized in law only in respect of disputes covered by an arbitration clause and hence the application as laid before the Commercial Court was foundationless and misdirected. It was further submitted that even otherwise on merits, there was no force in the application under Section 9 inasmuch as neither was any prima facie case nor balance of convenience for the appellant were made out. No injunction in the absence of the aforesaid ingredients can be granted. It was also emphasized that in fact the application under Section 9 of the Act of 1996 seeking to agitate the appellant’s purported rights in respect of 129 plots conveyed under the sale deed dated 2.6.2015 was an after-thought inasmuch as in its arbitration notice dated 12.9.2016 no reference to the said plots had been made nor any dispute in regard thereto raised. It was submitted that the case set up by the appellant in its Section 9 application was also contrary to its reply dated 2.9.2017 to the respondents’ notice dated 4.8.2017 wherein the dispute qua the said plots had been denied and therefore now assertion of an arbitrable dispute in that regard could not sustain. It was submitted that the sale deed dated 2.6.2015 was merely record of transfer of the appellant’s rights to 32% of the gross value from the sale of developed plots under the Development Agreement dated 3.6.2013 in lieu of the sale agreed consideration of Rs.1,46,96,111/- which was paid by cheques. It was submitted that for the aforesaid reasons, the appellant’s application under Section 9 of the Act of 1996 seeking injunction in respect of 129 plots was misdirected, baseless besides being founded on an underlying agreement i.e. 2.6.2015 which had no arbitration clause. It therefore deserved to be dismissed. 8. It was submitted that for the aforesaid reasons, the appellant’s application under Section 9 of the Act of 1996 seeking injunction in respect of 129 plots was misdirected, baseless besides being founded on an underlying agreement i.e. 2.6.2015 which had no arbitration clause. It therefore deserved to be dismissed. 8. On the respective cases set up, the Commercial Court No.1 (District Level), Jaipur vide its impugned order dated 17.9.2018 dismissed the appellant’s Section 9 Application primarily on the ground that it sought injunction in respect of 129 plots covered under an agreement dated 2.6.2015 which had no written arbitration clause. The court below also held that nor was such an arbitration clause deducible under Section 7(4)(b) of the Act of 1996 where an exchange of letters, telex, telegrams or other means of telecommunication (including communication through electronic media) could indeed reflect a written arbitration agreement. The court held that the appellant had also not been able to make out any case of incorporation by reference in the sale deed dated 2.6.2015 of arbitration clause (29) in the Development Agreement dated 3.6.2013. The Commercial Court also held that there was no merit in the application and hence dismissed it. 9. Mr. Rajesh Maharshi appearing for the appellant submitted that albeit the sale deed dated 2.6.2015 did not indeed contain a written arbitration clause, yet such a clause was deducible within the scope of Section 7(4)(b) of the Act of 1996 from the notice dated 4.8.2017 by the respondents to the appellant. He submitted that the said notice made it evident that both the appellant and the respondent were ad-idem and had the clear intention to resolve all disputes and differences qua the aforesaid sale deed dated 2.6.2015 through arbitration. Mr.Rajesh Maharishi submitted that thereafter the respondents despite notice of the appellant did not agree on the appointment of an arbitrator as suggested under the agreed procedure under clause (29) of the Development Agreement dated 3.6.2013 and consequently an application under Section 11 of the Act of 1996 has also been filed before this Court. Mr.Rajesh Maharishi submitted that thereafter the respondents despite notice of the appellant did not agree on the appointment of an arbitrator as suggested under the agreed procedure under clause (29) of the Development Agreement dated 3.6.2013 and consequently an application under Section 11 of the Act of 1996 has also been filed before this Court. Mr.Rajesh Maharishi submitted that the Commercial Court in the circumstances under its impugned order dated 17.9.2018 has erred and failed to exercise its jurisdiction in holding that the application under Section 9 of the Act of 1996 inter-alia seeking an injunction qua the said 129 plots (all developed under the agreement dated 3.6.2013) under the sale deed dated 2.6.2015 did not relate to an arbitrable dispute and hence was liable to be dismissed. 10. Per Contra, Mr. Sanjiv Arora appearing for the respondents supported the impugned judgment dated 17.9.2018 passed by the Commercial Court No.1 (District Level) Jaipur. He submitted that for the Commercial Court to exercise its jurisdiction under Section 9 of the Act of 1996, it was a fundamental necessity that it had to first prima-facie come to a conclusion that the interim injunction sought before it related to a matter in an arbitrable dispute. He submitted that the appellant failed the aforesaid test inasmuch as the purported grievance of the appellant in respect of 129 plots relating to the sale deed dated 2.6.2015 could not be the subject matter of an arbitration, as the said sale deed did not include a written arbitration clause within the scope of Section 7 of the Act of 1996. Mr. Sanjiv Arora further submitted that the mere reference to the Development Agreement dated 3.6.2013 in the sale deed dated 2.6.2015 was of no event inasmuch as the said sale deed related to covenants between the parties with regard to the purchase of the appellant’s 32% share in the gross revenue receipt from the sale of said plots developed under the development agreement dated 3.6.2013. No term or condition / covenant of the Development Agreement dated 3.6.2013 related to the sale of the appellant’s right to 32% of the gross sale value of the developed plots to a third party which incidentally in the instant case happened to be the respondents. Mr. No term or condition / covenant of the Development Agreement dated 3.6.2013 related to the sale of the appellant’s right to 32% of the gross sale value of the developed plots to a third party which incidentally in the instant case happened to be the respondents. Mr. Sanjiv Arora submitted that the sale deed dated 2.6.2015 was an absolutely independent contract between the appellant and the respondents and nothing recorded therein even remotely intends as allows for incorporation of Clause (29) of the Development Agreement dated 3.6.2013 therein. Mr. Sanjiv Arora then submitted that the reference to 129 plots detailed in Annexure-6 as mentioned in the registered notice dated 4.8.2017 was only incidental, unrelated to the development agreement daed 3.6.2013 and no written arbitration agreement in regard to such plots was adverted to. This Mr. Sanjiv Arora submitted is evident from the language of the notice dated 4.8.2017 which when referring to 129 plots separated them from the dispute qua the development agreement dated 3.6.2013. He submitted that the words ”vykok” and “vyx“ when referring to 129 plots in para 7 of the notice dated 4.8.2017 is indicative of the fact that the losses occasioned by obstruction of the appellant in due issuance of lease deed by the JDA in respect of the plots under the sale deed dated 2.6.2015 was a matter separate from the respondents claims against the appellant for failing to discharge its duties/ obligations to develop the 120 bighas as agreed under the development agreement dated 3.6.2013. Counsel pointed out that in fact the respondent’s notice dated 4.8.2017 does not at all refer to any arbitration agreement to resolve the dispute which arose qua the sale deed dated 2.6.2015. Nothing in the notice dated 4.8.2017 makes out a case of Clause 29 of the development agreement dated 3.6.2013 being incorporated by reference in the sale deed dated 2.6.2015. Mr. Sanjiv Arora further submitted that besides the above, more importantly in reply to the notice dated 4.8.2017 sent by his counsel on instructions from the appellant on 2.9.2017, it was denied that the dispute with regard to 129 plots under the sale deed dated 2.6.2015 was arbitrable. Mr. Mr. Sanjiv Arora further submitted that besides the above, more importantly in reply to the notice dated 4.8.2017 sent by his counsel on instructions from the appellant on 2.9.2017, it was denied that the dispute with regard to 129 plots under the sale deed dated 2.6.2015 was arbitrable. Mr. Sanjiv Arora pointed out that the language of Section 7 (4)(b) of the Act of 1996 has to be strictly constructed and unless there is an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provides a record of a written arbitration agreement, it cannot be held that there was a binding arbitration agreement in writing as mandated by Section 7 (3) of the Act of 1996. Mr.Sanjiv Arora submitted that the respondents’ notice dated 4.8.2017 does not even remotely provide any record of the purported written agreement for arbitration of disputes relating to the sale deed dated 2.6.2015 and therefore no arbitration clause in respect of the disputes under the sale deed dated 2.6.2015, can be found on the strength of section 7 (4)(b) of the Act of 1996. And in the absence of such arbitration clause, no injunction under Section 9 of the Act of 1996 in respect of the subject matter of any dispute referable to the sale deed of 2.6.2015 could be sought or granted by the Commercial Court. 11. Heard. Considered. 12. Section 9 of the Act of 1996 inter alia provides that interim reliefs can be granted by the Court before or during arbitral proceedings. It is thus clear that the power to grant interim reliefs under Section 9 of the Act of 1996 in respect of any dispute under an agreement cannot be exercised unless the agreement in issue has a written arbitrable clause within the meaning of section 7 of the Act of 1996. The appellant herein in its Section 9 of the Act of 1996 application sought an injunction qua the 129 plots referred to in the sale deed dated 2.6.2015. The sale deed aforesaid does not have a written arbitration clause nor can one be culled out under Section 7 (4) (b) of the Act of 1996 from the written communications between the parties. The respondent’s notice dated 4.8.2017, which is the appellant’s lynchpin argument in this appeal does not reflect a written communication recording an arbitration agreement qua the sale deed dated 2.6.2015. The respondent’s notice dated 4.8.2017, which is the appellant’s lynchpin argument in this appeal does not reflect a written communication recording an arbitration agreement qua the sale deed dated 2.6.2015. No case of incorporation of a written arbitration agreement in the sale deed dated 2.6.2015 by reference to the arbitration clause 29 in the development agreement dated 3.6.2013 is also made out. The purpose of the development agreement dated 3.6.2013 is wholly distinct from the purpose of the sale deed dated 2.6.2015. Absent an arbitration clause in the sale deed dated 2.6.2015 – no injunction qua the subject matter of the said sale deed on an application under Section 9 of the Act of 1996 could be granted. 13. There is no force in the contention of the counsel for the appellant that Clause 29 of the Development Agreement dated 3.6.2013 has been incorporated by reference in the sale deed dated 2.6.2015. The argument is wholly vacuous, without any substance. The sale deed dated 2.6.2015 does not at all refer to the arbitration clause in the development agreement dated 3.6.2013. The Development Agreement dated 3.6.2013 has only been adverted to in the sale deed dated 2.6.2015 as the background to trace the appellant’s right which was being passed on to the respondents thereunder. The conditionalities for construing an incorporation of a clause in an agreement by reference into another are thus wholly absent. What the appellant appears to be seeking without any legal foundation is only an inference to be drawn with regard to clause 29 in the Development Agreement dated 3.6.2013 being a part of the sale deed dated 2.6.2015 on the strength of the notice dated 4.8.2017 issued by the respondents to the appellant. 14. As submitted by Mr. Sanjiv Arora even that inference is not in place and founded on misconstruing the notice dated 4.8.2017 overlooking that the obstructions of the appellant with regard to the 129 plots under the sale deed dated 2.6.2015 were distinctly referred to as separate to the disputes qua the agreement dated 3.6.2013. Besides Section 7 of the Act of 1996 mandates an agreement in writing, albeit indeed it may under Section 7 (4)(b) be culled out from correspondences / communications in writing. No record of an arbitration agreement – its form and content is evident from the notice dated 4.8.2017 qua the subject matter of sale deed dated 2.6.2015. 15. Besides Section 7 of the Act of 1996 mandates an agreement in writing, albeit indeed it may under Section 7 (4)(b) be culled out from correspondences / communications in writing. No record of an arbitration agreement – its form and content is evident from the notice dated 4.8.2017 qua the subject matter of sale deed dated 2.6.2015. 15. The Commercial Court has therefore correctly dismissed the appellant’s application under Section 9 of the Act of 1996. 16. For the aforesaid reasons, we find no force in this appeal. It is accordingly dismissed.