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Telangana High Court · body

2020 DIGILAW 504 (TS)

A. Raghunandan Raj v. Fortune Monarch Associates

2020-06-23

A.RAJASEKHAR REDDY

body2020
ORDER : 1. Arbitration Application is filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996, for appointment of an arbitrator. 2. It is the case of the applicant that he is the owner and possessor of the plot bearing No. 708, admeasuring 1210 sq. yds (before road widening) and 1050 sq. yds (after road widening) bearing Municipal No. 8-2-293/82/A/708 in Old Survey No. 403/1 and New Sy. No. 120 of Shaikpet village, forming part of Jubilee Hills Co-operative House Building Society, Hyderabad situated at Road No. 36, Jubilee Hills, Hyderabad, having purchased the same from Jubilee Hills Co-operative House Building Society vide registered sale deed bearing No. 559/1986 dated 05.03.1986. Out of 1050 sq.y ds of land, he sold 350 sq. yds to the respondents and retained 700 sq. yds with him. The 1st respondent is a partnership firm and the respondents 2 to 6 are its partners. The applicant entered into registered Development Agreement-cum-General Power of Attorney with the respondents on 06.09.2008 vide document No. 3536/2008. As the respondents failed to complete the project within the time agreed upon, the applicant suffered losses due to the negligence of the respondents the applicant got issued legal notice dated 11.07.2014 to the respondents to complete the construction, but there is no reply from the respondents. The applicant once again got issued legal notice on 25.08.2014 invoking arbitration clause to nominate the arbitrator of their choice, but the respondents have not acted upon. Hence, this application. 3. Counter affidavit is filed by the respondents denying the averments in the affidavit filed in support of this application admitting about the execution of Development Agreement-cum-GPA dated 06.09.2008 between the parties. There is no violation of any conditions of the development agreement and that there is no liability cast upon the respondents, to pay damages, as alleged by the applicant. That issuance of legal notice dated 11.07.2014 followed by second notice dated 25.08.2014 is not disputed, but it is stated that the said notice is an inappropriate notice without any cause of action. That issuance of legal notice dated 11.07.2014 followed by second notice dated 25.08.2014 is not disputed, but it is stated that the said notice is an inappropriate notice without any cause of action. It is asserted that after execution of the development agreement and after obtaining necessary permissions/sanctions from the concerned authorities, they have proceeded for development of the property, but due to various exigencies and circumstances that arose during such development, a supplementary agreement bearing No. 1392 of 2009, dated 04.05.2009 was entered into between the applicant and the respondents, which fact has been suppressed by the applicant in this application. Subsequent thereto, as per mutual understanding arrived at after incorporating appropriate changes in the building plan etc., an agreement dated 09.01.2014 was executed between the parties which is styled as Rectification Deed relating to the supplementary agreement bearing document No. 650/2014. As per clause (g) of the development agreement dated 06.09.2008, the respondents had paid a total sum of Rs. 1,80,00,000/- towards interest free refundable deposit to the applicant, which was agreed to be refunded by the applicant on completion of the construction of super structure as and when the super structure is fit for occupation or from the first sale of owners share. That after completion of construction and after incorporation of necessary changes, an understanding was arrived at between the applicant and the respondents specifically as to completion of the project and it is in the said circumstances a Rectification deed relating to the supplementary agreement dated 09.01.2014 was executed between the applicant and the respondents and clauses (2), (3) and (4) of the said agreement deals with the same. It is specifically agreed that he will have no further claim of whatsoever nature about the area allotted to him or entitlement by him under the original development agreement or under the supplementary agreement. It is specifically agreed that he will have no further claim of whatsoever nature about the area allotted to him or entitlement by him under the original development agreement or under the supplementary agreement. The respective areas allotted to the applicant stood delivered to him as per clause 3 of the agreement, there is a specific acknowledgment by the applicant that the party of the second part i.e. respondents have fulfilled their part of obligation as per the terms and conditions of the development agreement and that they are absolved of all their obligations under the development agreement, supplementary agreement and rectification deed relating to the supplementary agreement, as such, the applicant is estopped from raising any contrary claims and that the applicant having acknowledged complete performance of the contract by the respondents and having absolved the respondents from any liability, the applicant is not entitled to raise any contrary claims. That the applicant has not given the details of the alleged efforts made for amicable settlement of dispute by mutual consultation and failure thereof which is a precondition to be satisfied before filing this application, as such, the present application is premature. That the applicant has not nominated any sole arbitrator either in the notice dated 11.07.2014 or in the subsequent notice dated 25.08.2014, as such, the basic requirement for proceeding under Section 11(5) of the Act has not been complied with, as such, he sought for dismissal of the application. 4. Heard Sri. Raghavendra Rao, learned counsel representing Sri. D. Madhava Rao, learned counsel for the applicant and Ms. Manasi Ganu, learned counsel representing Sri. Sunil B. Ganu, learned counsel for the respondents. 5. Learned counsel for the applicant while reiterating the averments in the affidavit filed in support of the application; submits that the Development Agreement-cum-GPA dated 06.09.2008 contains an arbitration clause and when the respondents failed to fulfill the terms of the agreement, the applicant got issued legal notice dated 11.07.2014 for completion of the project and as there is no reply, another legal notice dated 25.08.2014 was issued invoking the arbitration clause. Though the respondents received the same, there is no response from the respondents, which goes to show that the existence of arbitration clause is not disputed. Though the respondents received the same, there is no response from the respondents, which goes to show that the existence of arbitration clause is not disputed. Whether there is full and final satisfaction of the claim between the parties have to be gone into by the arbitrator, as the same requires leading of evidence and production of documents. He submits that the full and final satisfaction, as contended by the learned counsel for the respondents relating to rectification deed dated 09.01.2014 is not with free consent and petitioner had to sign the same under coercion and undue influence and the said aspect is raised in the rejoinder filed in this application. There is no need to mention about the supplementary agreement as well as rectification deed, as the same is not a material fact, as such, non-mentioning of the same, does not disentitle the applicant from claiming relief in this application. That the applicant has not obtained any interim orders by suppressing the above facts, but it is sheer mistake of fact and for that the respondents cannot take plea of suppression of material facts. That the applicant has rented out the premises on the fond hope that the respondents will complete the construction within the time bound manner as envisaged in the development agreement. Since the respondents failed to complete the construction and deliver the constructed area pertaining to the applicant within the time bound manner, the prospective tenants cancelled the lease and sought for damages, which goes to show that the respondents have not completed the construction within the stipulated time, as agreed upon between the parties, as such, this application is maintainable and he is entitled for damages. He also submits that non mentioning about supplementary agreement and rectification deed is bona-fide mistake, but not intentional and there is no suppression of material fact. In support of his contention, he relied on the judgments reported in National Insurance Co. Limited vs. Boghara Polyfab Private Limited, (2009) 1 SCC 267 , Oriental Insurance vs. Digitex, S.J.S. Business Enterprises (P) Ltd. vs. State of Bihar, 2005 (2) ALT 4 (SC) : AIR 2004 SC 2421 and Payal Properties Pvt. Ltd. vs. I.B. Enterprise in O/IAAP/5/2013 of Gujarat High Court. 6. Limited vs. Boghara Polyfab Private Limited, (2009) 1 SCC 267 , Oriental Insurance vs. Digitex, S.J.S. Business Enterprises (P) Ltd. vs. State of Bihar, 2005 (2) ALT 4 (SC) : AIR 2004 SC 2421 and Payal Properties Pvt. Ltd. vs. I.B. Enterprise in O/IAAP/5/2013 of Gujarat High Court. 6. On the other hand, learned counsel for the respondent submits that the application is liable to be dismissed in limine solely on the ground of suppression of material facts i.e., about execution of supplementary agreement as well as rectification deed in which full and final satisfaction was recorded and refundable amount of Rs. 1,80,00,000/- was paid to the applicant. She submits that the person who comes to the Court must come with clean hands and only on the ground of suppression, the person should be disentitled from claiming any relief. She submits that the application is silent about the supplementary agreement as well as rectification deed, but only in rejoinder, a bald plea is raised without any supporting material, as such, unless this Court comes to prima-facie conclusion that there is coercion and undue influence, the matter cannot be referred to arbitration. Since the execution of rectification deed is not in dispute and there is full and final satisfaction recorded no arbitrable dispute exists, as such, arbitration application cannot be entertained. The arbitration clause provides for mutual consultations before invoking arbitration clause, but the same is not invoked by the applicant, as such, on this ground also, this application is liable to be dismissed. Initially, the trial Court allowed the application filed by the applicant under Section 9 in OP No. 510 of 2015 on the file of XXIV Additional Chief Judge, City Civil Court, Hyderabad, but the same was suspended by the Hon'ble Division Bench in CMA No. 837 of 2015 only on the ground of suppression of material facts as was done in the present application. In support of her contentions, she relied on the judgments reported in ONGC Mangalore Petrochemicals vs. ANS Constructions Limited, (2018) 3 SCC 373 , New India Assurance Company Limited vs. Genus Power Infrastructure Limited, (2015) 2 SCC 424 : 2015 (2) ALT 18.1 (DN SC), United India Insurance Company Limited vs. Antique Art Exports Private Limited, (2019) 5 SCC 362 , Union of India and Others vs. Master Construction Company, (2011) 12 SCC 349 : 2011 (5) ALT 17.1 (DN SC), Wapcos Limited vs. Salma Dam Joint Venture, 2020 (1) ALT 11 (SC) : (2020) 3 SCC 169 and K.D. Sharma vs. Steel Authority of India Limited, (2008) 12 SCC 481 : 2009 (4) ALT 4.3, 4.4, 4.5, 5.3, 6.2 (DN SC). 7. In view of above rival contentions, the following issues that arise for consideration are: (1) Whether the applicant is entitled for relief in view of suppression of supplementary agreement dated 04.05.2009 as well as rectification deed dated 09.01.2014? (2) Whether there is valid and final satisfaction pleaded by the respondents through the rectification deed pleaded by the respondents in terms of rectification deed, can be a ground to dismiss the application? (3) Whether the applicant prima-facie established coercion and undue influence in executing the rectification deed? 8. POINTS 1 TO 3: In this case, it is to be seen that admittedly, the Development Agreement-cum-General Power of Attorney dated 06.09,2008 bearing document No. 3536 of 2008 was entered into between the petitioner and the respondents for construction of commercial complex in the subject property. Subsequent to the same, Supplementary Agreement dated 04.05.2009 and Rectification Deed dated 09.01.2014 were also executed, which are not in dispute. But while invoking arbitration clause, the applicant issued notice dated 25.08.2014, but he did not mention about the Supplementary Agreement or Rectification deed. That apart, in the affidavit filed in support of this application also, the applicant did not refer to the Supplementary Agreement so also the Rectification Deed. The applicant raised plea of coercion in executing rectification deed, only after filing of the counter affidavit by the respondent, by way of rejoinder on 03.02.2016 after a period of four months. Even therein also, the execution of the Supplementary. Agreement and Rectification Deed was not disputed, but only pleaded that he executed those documents under coercion and undue influence. The applicant raised plea of coercion in executing rectification deed, only after filing of the counter affidavit by the respondent, by way of rejoinder on 03.02.2016 after a period of four months. Even therein also, the execution of the Supplementary. Agreement and Rectification Deed was not disputed, but only pleaded that he executed those documents under coercion and undue influence. The admission of the applicant in the rejoinder about the execution of Supplementary Agreement and Rectification Deed, goes to show that the applicant not disputed about the existence of the said documents at the time of filing of this application. Except bald plea in the rejoinder by the applicant, no factual foundation is laid in the pleadings. 9. That apart, the applicant filed OP No. 510 of 2015 on the file of 24th Additional Chief Judge, City Civil Court, Hyderabad under Section 9 of the Act for grant of injunction against respondent, which was allowed on 24.07.2015. However, on an appeal by the respondents, the same was suspended on 21.09.2016 in CMAMP No. 1803 of 2015 in CMA No. 837 of 2015 by this Court on the ground of suppression of rectification deed relating to supplementary agreement dated 09.01.2014. 10. It is pertinent to note that the applicant failed to offer any plausible explanation for non disclosure of existence of Supplementary Agreement and Rectification Deed in the affidavit filed in support of this application. More so, the suppression of rectification deed, which records full and final satisfaction between the parties, is the material document for the disposal of the arbitration application. The rectification deed is a material document since it contains about refund of deposit of Rs. 1,80,00,000/- and acknowledgment and clause 4 of the agreement reads as follows: “Clause 4: With this total interest free refundable amount of Rs. 1,80,00,000/- (rupees one crore and eighty lacks) has been paid by the parties of the first part to the parties of the second part, the receipt of which the party of the second part (developer) admits and acknowledges. The lien on the said property mentioned will be released and possession of the schedule 1 and schedule II property shall be handed over only on the realization of the above mentioned cheques. The lien on the said property mentioned will be released and possession of the schedule 1 and schedule II property shall be handed over only on the realization of the above mentioned cheques. The party of the second part has fulfilled their part of obligation as per the terms and conditions of the development agreement, and the party of the second party is absolved of all its obligation under the above said development agreement and subsequent supplementary agreement and rectification deed relating to supplementary agreement. Since the rectification deed is a material document, which recorded full and final satisfaction, which has been suppressed by the applicant, it cannot be said that there is no suppression of material facts, as contended by the learned counsel for the respondents. Since the full and final satisfaction is found in the Rectification deed, the arbitration application is liable to be dismissed on that ground alone. A party who comes to the court, must come with clean hands. When fraud, undue influence and coercion is pleaded, foolproof must be set forth in the pleadings and case can only be decided basing on the same. General allegations are insufficient if they are made in which such allegations should couch to establish undue influence. In the rejoinder, by way of passing reference made allegations of undue influence and coercion, as such, this application is liable to be dismissed.” 11. A perusal of the rectification deed, especially clauses 2 and 4 goes to show that full and final settlement was recorded and it was also agreed by the applicant that he would have no claim whatsoever over and above the areas allotted to them, by virtue of the rectification deed relating to supplementary agreement. It is also clear that the respondents have fulfilled their part of obligations as per the terms and conditions of development agreement, rectification deed and supplementary agreement. Therefore, there is no arbitral dispute between the parties. When once there is full and final satisfaction, there exists no arbitral dispute, as rightly contended by the learned counsel for the respondents. 12. Since invocation of arbitration proceedings is prior to Amendment Act, 2015, the provisions of said Act, 2015 are not applicable to such arbitral proceedings which have commenced in terms of the provisions of Section 21of the Principal Act, unless otherwise agreed by the parties. 12. Since invocation of arbitration proceedings is prior to Amendment Act, 2015, the provisions of said Act, 2015 are not applicable to such arbitral proceedings which have commenced in terms of the provisions of Section 21of the Principal Act, unless otherwise agreed by the parties. Union of India vs. Parmar Construction Company, (2019) 15 SGC 682. The aforesaid principle was followed in the case of Union of India vs. Pradeep Vinod Construction Company, 2020 (1) ALT 156 (SC) : 2020 (2) SCC 464 . While considering an application under Section 11(6) of the Act, the Hon'ble Supreme Court held that if the party is unable to establish a claim of undue influence or fraud, or appears to be lacking in credibility, it is not open to the Court to refer the dispute to arbitration. ONGC Mangalore Petrochemicals vs. ANS Constructions Limited (supra). A bald plea of undue influence is not sufficient. The applicant has to establish a prima-facie case. Without establishing the prima-facie case of fraud and undue influence by placing material on record, applicant is not entitled to reference of the matter to the arbitration. New India Assurance Company Limited vs. Genus Power Infrastructure Limited (supra). When once one of the parties adopts a path of full understanding and executes a document in furtherance of the same, it is not open to him to take recourse to arbitration thereafter. Wapcos Limited vs. Salma Dam Joint Venture (supra). 13. In National Insurance Co. Limited vs. Boghara Polyfab Private Limited (supra), which is relied on by the learned counsel for the petitioner, Hon'ble Apex Court held as follows: “17. Where the Intervention of the Court is sought for appointment of an Arbitral Tribunal under Section II, the duty of the Chief Justice or his designate is defined in SBP and Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section II of the Act into three categories, that is (i) issues which the Chief Justice or his Designate is bound to decide; (ii) issues which he can also decide, that is issues which he may choose to decide and (iii) issues which should be left to the Arbitral Tribunal to decide. 17.1 (The issues (first category) which Chief Justice/his designate will have to decide are: (a) Where the party making the application has approached the appropriate High Court. 17.1 (The issues (first category) which Chief Justice/his designate will have to decide are: (a) Where the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. 17.2 The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the arbitral tribunal) are: (a) Whether the claim is a dead (long barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 17.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral tribunal are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration....” In the first category of cases, the issues which the Chief Justice or his Designate is bound to decide in the second category of cases, the issues which the Chief Justice can also decide, that is issues which he may choose to decide; and the third category of cases, in which the issues which should be left to the Arbitral Tribunal to decide. In the second category, it is clarified that those issues can either be decided by the chief justice or referred to arbitrators. In this case, the respondents have taken a plea of full and final satisfaction and the applicant pleaded fraud, undue influence and coercion, but failed to establish the same. The applicant also suppressed about the execution of supplementary deed 04.05.2009 and Rectification Deed 09.01.2014, as such, this Court took up that issue and found that there is full and final satisfaction and suppression of the same, as such, said judgment relied on by the applicant cannot be come to his rescue. 14. The applicant also suppressed about the execution of supplementary deed 04.05.2009 and Rectification Deed 09.01.2014, as such, this Court took up that issue and found that there is full and final satisfaction and suppression of the same, as such, said judgment relied on by the applicant cannot be come to his rescue. 14. Judgment cited by the learned counsel for the applicant in the case of Payal Properties Private Limited vs. I.B. Enterprise in Case No. O/IAAP/5/2013 of Gujarat High Court, is also not applicable to the facts of the case, since this Court found that the suppression of documents is material one, which goes to the root of the matter. Even in the arbitration application, there is no whisper about the amicable settlement between the parties and that the applicant had proposed for amicable settlement with the respondents. 15. In view of above facts and circumstances, this Arbitration Application is liable to be dismissed and accordingly dismissed. There shall be no order as to costs. As a sequel thereto, miscellaneous applications, if any, pending in this Arbitration Application, shall stand dismissed.