Shambhavi Estates, Ranga Reddy District v. M. Mohan Goud
2020-06-30
A.RAJASEKHAR REDDY
body2020
DigiLaw.ai
ORDER : 1. By way of this application filed under Section 11(5) and (6) of Arbitration and Conciliation Act, 1996 (for short “the Act”), the applicant seeks for appointment of a retired Judge of this Court as an Arbitrator to settle the disputes among the applicant and respondent. 2. The brief facts of the case are that the applicant is a registered firm registered under the provisions of Indian Partnership Act, 1932 and is into the business of developing the properties by undertaking construction of flats or independent houses and also civil works of its clients. The respondent herein approached the applicant in the year 2006 stating that he is the absolute owner and possessor of Plot Nos. 51, 52, 57, 58 and 59 admeasuring 1,520 Sq. Yards in Sy. No. 31/A and Plot Nos. 53, 54 and 55 admeasuring 546 Sq. Yards in Sy. No. 31/EE and Plot No. 56 admeasuring 267 Sq. Yards in Sy. No. 31/EE, total admeasuring 2,333 Sq. Yards situated at Manikonda Jagir Village and Gram Panchayat, Rajender Nagar Mandal, Ranga Reddy District having purchased the same under Registered Document Nos. 1275/2002 dated 18.2.2002, 10918/2003 dated 30.8.2003 and 14295/2003 dated 13.11.2003 and offered the applicant for development of the said property for construction of duplex houses and entered into an unregistered Agreement dated 29.4.2006 and received a sum of Rs. 5,00,000/- as non-refundable deposit. In pursuance of the same, applicant obtained necessary sanction and permission from the competent authorities with its own expenses in the name of the respondent and commenced construction immediately by investing huge capital. However, the respondent though produced the records relating to title for obtaining necessary sanctions from the competent authorities, did not deliver the same to the applicant. On repeated persuasion by the applicant, the respondent finally executed a registered Development Agreement-cum-General Power of Attorney, dated 15.3.2007 (for short ‘Development agreement dated 15.3.2007’). However, once again respondent entered into a Registered Supplementary Development Agreement-cum-General Power of Attorney, dated 26.4.2007 (for short ‘Supplementary Development Agreement dated 26.4.2007’) in respect of some adjustments. The applicant completed the structure of all the ten villas and commenced brick work and fixed the door frames in order to complete and deliver to the respondent on priority.
However, once again respondent entered into a Registered Supplementary Development Agreement-cum-General Power of Attorney, dated 26.4.2007 (for short ‘Supplementary Development Agreement dated 26.4.2007’) in respect of some adjustments. The applicant completed the structure of all the ten villas and commenced brick work and fixed the door frames in order to complete and deliver to the respondent on priority. Thereafter, the applicant entered into agreements with the prospective purchasers in respect of his share of villas and received part sale consideration and when those purchasers approached the banks in the year 2008 for financial assistance, the said loan proposals were rejected as title deeds were not submitted by the respondent. After execution of Registered Supplementary Development Agreement, dated 26.4.2007 there was change of Guard in the applicant's firm with effect from 27.2.2009 by which an Admission-cum-Retirement Deed was drawn and the then Managing Partner Sri D. Chandrasekhar Reddy retired from the firm and one Sri T. Umesh joined as a partner and Smt. D. Sashirekha became the Managing Partner and this change was registered as Document No. 85/2009, dated 28.3.2009, which was informed to the respondent and was ratified. As the respondent started interfering with the construction activity of the applicant by sending antisocial elements, applicant filed OS No. 28 of 2011 for perpetual injunction on the file of Additional Junior Civil Judge, Rajender Nagar, R.R. District. The respondent herein also filed suit OS No. 1227 of 2014 on the file of V Additional District Judge, Ranga Reddy District challenging the registered sale deeds executed by the applicant herein as null and void. In the said suit, the applicant filed application under Section 8 of the Act. 3. As the respondent was creating troubles and obstructing the construction activity and has failed to deliver the original title documents, the applicant issued a registered legal notice dated 30.11.2015 by nominating one N. Bhujanga Rao, Advocate as an Arbitrator and the same was received and acknowledged and replied by the respondent through his Advocate on 14.12.2015 by raising certain issues which are wholly irrelevant and denying the agreements being in force and did not give consent for appointment of an Arbitrator. Hence, the applicant filed this application. 4. A counter-affidavit dated 25.1.2018 is filed by the respondent admitting that he is the owner of the properties mentioned in the application and stating that Sri.
Hence, the applicant filed this application. 4. A counter-affidavit dated 25.1.2018 is filed by the respondent admitting that he is the owner of the properties mentioned in the application and stating that Sri. D. Chandrasekhar Reddy, who is the husband of the applicant, being the Managing Partner of the applicant firm came to the respondent in the year 2007 with the proposal to develop the properties of the respondent and entered into Development Agreement, dated 15.3.2007 and on noticing some typographical errors in the said Development Agreement, dated 15.3.2007, to rectify the said errors also entered into Supplementary Development Agreement, dated 26.4.2007. Thereafter, due to financial problems of Sri D. Chandrasekhar Reddy, the Managing Partner, the applicant firm was unable to take up the said construction and the respondent arranged an amount of Rs. 60,00,000/- towards hand loan from various sources for undertaking construction and the applicant failed to utilize the said amount for construction and voluntarily agreed to cancel the Development Agreement dated 15.3.2007 and Supplementary Development Agreement, dated 26.4.2007 and executed the Registered Cancellation of Development Agreement dated 2010 (for short Cancellation Deed dated 6.5.2010) vide Document No. 1339/2010 dated 6.5.2010 and the amount of Rs. 60,00,000/- were adjusted towards construction and cancellation of Development Agreement and as such the rights of the applicant were extinguished and it has no legal right, title, claim or interest in the subject property. It is further stated that the applicant filed IA No. 209 of 2011 in OS No. 28 of 2011, on the file of Additional Junior Civil Judge, Rajendra Nagar, R.R. District and obtained ad interim injunction and the same was made absolute on 27.8.2012. CMA No. 124 of 2012 filed against the said injunction order dated 27.8.2012 on the file of X Additional District Judge, Ranga Reddy District at L.B. Nagar was withdrawn as the respondent wants to proceed with the main suit itself. During the pendency of the above suit, the respondent came to know about the alleged Admission-cum-Retirement Deed dated 27.2.2009 and that D. Chandrasekhar Reddy had retired from the applicant Partnership firm and one T. Umesh who is no other than sister's son of D. Shesi Rekha had entered as Partner of the applicant firm, which is marked as Ex. A19 in the said suit. It is also stated that Admission-cum-Retirement Deed dated 27.10.2009 is typed on non-judicial stamp paper worth Rs.
A19 in the said suit. It is also stated that Admission-cum-Retirement Deed dated 27.10.2009 is typed on non-judicial stamp paper worth Rs. 100/- dated 2.2.2009 and Serial No. 2314 and fonts of the page are different from other 4 pages and also other 4 pages of the said document Serial Nos. 6117 to 6120 are all dated 17.3.2009 with different fonts and the document itself shows that the same was executed and reduced into writing on 27.2.2009 and was notarized and that the said document was manipulated, as such, the respondent filed a complaint against D. Seshi Rekha, D. Chandrasekhar Reddy and T. Umesh and the same was registered as FDR. No. 494 of 2014, dated 25.10.2014 for the offences under Sections 420, 468, 471, 120-B of I.P.C. and the same is pending before the VIII Metropolitan Magistrate Court, Cyberabad, at Rajendranagar. 5. It is further stated in the counter-affidavit that the respondent is in possession of the said property and there is no interference from any person and it is the applicant who tried to dispossess the respondent and as the respondent came to know that the applicant has executed Registered Sale Deeds in favour of third parties/prospective buyers, he filed OS No. 1227 of 2014 for cancellation of the same. 6. The additional counter-affidavits dated 4.12.2019 and 16.3.2020 are on the same lines as that of main counter-affidavit except stating in the additional counter-affidavit dated 16.3.2020 that the application filed by the applicant in IA No. 879 of 2015 in OS No. 1227 of 2014 under Section 8 of the Act seeking for appointment of Arbitrator was dismissed on 6.2.2020 and for leave of the Court to bring the document i.e., order dated 6.2.2020 on record. 7. Heard Sri. E. Phani Kumar, learned Counsel for the applicant and Sri. B. Madhusudhan Rao, learned Counsel for the respondent. 8. Learned Counsel for the applicant submits that since the notice dated 30.11.2015 invoking arbitration clause is issued by the applicant after the commencement of Amendment Act 2015, which came into force from 23.10.2015, the only issue that needs consideration for appointment of an Arbitrator is the existence of arbitration clause.
B. Madhusudhan Rao, learned Counsel for the respondent. 8. Learned Counsel for the applicant submits that since the notice dated 30.11.2015 invoking arbitration clause is issued by the applicant after the commencement of Amendment Act 2015, which came into force from 23.10.2015, the only issue that needs consideration for appointment of an Arbitrator is the existence of arbitration clause. In the present case, the respondent does not dispute about existence of arbitration clause in the Development Agreement dated 15.3.2007 except pleading that the same is cancelled vide Cancellation Deed dated 6.5.2010 and that aspect cannot be considered in this application. Further, he submits that D. Chandrasekhar Reddy, the Managing Partner, who is said to have executed the Cancellation Deed on 6.5.2010 is no longer the Managing Partner on the said date as he retired from the partnership firm on 27.2.2009 and as such the applicant is not a party to the Cancellation Deed dated 6.5.2010. He also submits that there is a categorical finding by the civil Court in Paragraph No. 21 of the judgment in OS No. 28 of 2011, which is numbered as OS No. 1 of 2017, that D. Chandrashekar Reddy was no more Managing Partner after 27.2.2009 and that no value and weight can be given to Cancellation Deed dated 6.5.2010, which is marked as Ex. B6. Learned Counsel further submits that since there was a requirement of typing the Admission-cum-Retirement Deed dated 27.2.2009 on stamp papers before the Registrar of Firms the same was typed on non-judicial stamp papers. As per Section 11(6-A) of the Act, this Court can entertain the application notwithstanding any judgments, decree or order of any Court and even though the application under Section 8 of the Act is dismissed inasmuch as the same has not become final since applicant is taking steps to challenge the same. 9. In support of his contentions, learned Counsel for the appellant relied upon the judgments of the Hon'ble Apex Court in S.B.P. and Co. vs. Patel Engineering Ltd. and Another, 2006 (1) ALD 10 (SC) : (2005) 8 SCC 618 and Booz-Allen and Hamilton Inc. vs. SBI Home Finance Ltd. and Others, (2011) 5 SCC 532 . 10.
9. In support of his contentions, learned Counsel for the appellant relied upon the judgments of the Hon'ble Apex Court in S.B.P. and Co. vs. Patel Engineering Ltd. and Another, 2006 (1) ALD 10 (SC) : (2005) 8 SCC 618 and Booz-Allen and Hamilton Inc. vs. SBI Home Finance Ltd. and Others, (2011) 5 SCC 532 . 10. On the other hand, learned Counsel for the respondent submits that the Cancellation Deed dated 6.5.2010 was not challenged by the applicant, as such, the Development Agreement dated 15.3.2007 and the Supplementary Development Agreement dated 26.4.2007 are no longer in force and therefore the arbitration clause in the Development Agreement dated 15.3.2007 does not survive. He also brought to the notice of this Court the discrepancies regarding the stamp papers on which the Admission-cum-Retirement Deed dated 27.2.2009 was typed. He also submits that application filed under Section 8 of the Act was dismissed and the same has become final and in fact action has to be taken against the applicant for filing forged documents i.e., Admission-cum-Retirement Deed dated 27.2.2009. 11. In support of his contentions, learned Counsel for the respondent relied on the judgments of the Hon'ble Apex Court in Tulip Hotel Pvt. Ltd. vs. Trade Wings Ltd. and Others and Union of India and Others vs. Ramesh Gandhi, (2012) 1 SCC 476 . 12. In view of rival pleadings and contentions, the issues that are required to be considered in this application are: 1. Whether this application is maintainable in view of Registered Cancellation of Development Agreement-cum-General Power of Attorney, dated 6.5.2010 cancelling the registered Development Agreement-cum-General Power of Attorney, dated 15.3.2007 and Registered Supplementary Development Agreement-cum-General Power of Attorney, dated 26.4.2007? 2. Whether the dismissal of application filed under Section 8 of the Act in IA No. 817 of 2009 in OS No. 227 dated 6.2.2020 can be a ground for dismissing this application? 13. As far as Issue No. 1 is concerned, the admitted fact is that the Development Agreement dated 15.3.2007 contains arbitration clause and Clause 22 of the same reads as under: “22.
13. As far as Issue No. 1 is concerned, the admitted fact is that the Development Agreement dated 15.3.2007 contains arbitration clause and Clause 22 of the same reads as under: “22. In case of any disputes arises between the parties hereto touching these presents the matter shall be referred to the Arbitrators one chosen by each party and in case of any difference of opinion between such Arbitrators, they shall nominate a common umpire and their award shall be final and binding on both the parties and the relevant provisions of the Arbitration Act, 1996 shall apply and the arbitration proceedings shall be held at Hyderabad only. Further, it was agreed both parties shall not approach Courts for obtaining of interim orders if any till the disposal of arbitration proceedings.” 14. As the respondent is not paying the amounts due to the applicant, the applicant issued notice dated 30.11.2015 to the respondent invoking the arbitration Clause No. 22 of the said Development Agreement dated 15.3.2007 by nominating Arbitrator on its behalf and calling upon the respondent to act in accordance with the said arbitration clause and the respondent received the same and replied vide reply notice dated 14.12.2015 stating Development Agreement dated 15.3.2007 stood cancelled in view of Cancellation Deed dated 6.5.2010 and also raising other issues. However, the existence of arbitration clause in the Development Agreement dated 15.3.2007 was not disputed. Even in the counter-affidavits, the plea taken by the respondent was that the Development Agreement dated 15.3.2007 containing arbitration clause was cancelled and also pleaded about filing of suits by both the parties and also about dismissal of application under Section 8 of the Act. 15. The cancellation of Development Agreement dated 15.3.2007 vide Cancellation Deed dated 6.5.2010 is also disputed by the applicant stating that D. Chandrasekhar Reddy who has executed the Development Agreement, dated 15.3.2007 retired on 27.2.2009 and was no more a Managing Partner of the applicant firm on the date of execution of Cancellation Deed dated 6.5.2010. The respondent also stated that the Admission-cum-Retirement Deed, dated 27.2.2009 is forged and fabricated and he lodged a complaint which is registered as Cr. No. 494 of 2014 on 25.10.2014. However, in the judgment in OS No. 28 of 2011 filed by the applicant it is held that final report is filed in the said crime.
The respondent also stated that the Admission-cum-Retirement Deed, dated 27.2.2009 is forged and fabricated and he lodged a complaint which is registered as Cr. No. 494 of 2014 on 25.10.2014. However, in the judgment in OS No. 28 of 2011 filed by the applicant it is held that final report is filed in the said crime. All these aspects cannot be gone into in this application which pertains to the merit of the claim and sustainability of the dispute. 16. In the present case, since the arbitration clause is invoked by issuing notice on 30.11.2015 after coming into force of Section 11(6-A) of the Act on 23.10.2015 i.e., the date of coming into force of Amendment Act 2015, the only issue required to be considered is with regard to existence of arbitration clause. Accordingly, the Issue No. 1 is answered in favour of the applicant. 17. In M/s. Mayavati Trading Pvt. Ltd. vs. Pradyuat Bed Murman, (2019) 8 SCC 714 and M/s. Duro Felguera S.A. vs. M/s. Gangavaram Port Limited, (2017) 9 SCC 729 , the Apex Court by placing reliance on Section 11(6-A) of the Act, which reads as under: “11(6-A). The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.” Held that in an application under Section 11 of the Act the scope of enquiry is restricted to only finding out existence of arbitration clause and nothing more or less. 18.....Insofar as Issue No. 2 whether the dismissal of application filed under Section 8 of the Act in IA No. 879 of 2015 in OS No. 1227, dated 6.2.2020 on the ground that the Cancellation Deed dated 6.5.2010 is executed cancelling the Development Agreement dated 15.3.2007, which contain arbitration clause and on the ground that the applicant filed civil suit OS No. 28 of 2011, can be a ground for dismissing this application? 19. Section 11(6-A) of the Act prescribes that the Supreme Court or any other Court can consider any application under sub-section (4) or sub-section (5) or sub-section (6) of Section 11 of the Act notwithstanding any judgment, decree or order of any other Court, can refer the parties to arbitration.
19. Section 11(6-A) of the Act prescribes that the Supreme Court or any other Court can consider any application under sub-section (4) or sub-section (5) or sub-section (6) of Section 11 of the Act notwithstanding any judgment, decree or order of any other Court, can refer the parties to arbitration. This goes to show that even after dismissal of application under Section 8 of the Act, the application under Section 11(6-A) can be considered, however, confining to existence of arbitration clause. More so the said dismissal order has not become final. The scope of consideration under Sections 11 and 8 of the Act is clearly indicated by the Hon'ble Apex Court in Booz-Allen and Hamilton Inc. Case (supra), wherein the Hon'ble Apex Court at Paragraphs 32 and 33, held as under: “32. The nature and scope of issues arising for consideration in an application under Section 11 of the Act for appointment of Arbitrators, are far narrower than those arising in an application under Section 8 of the Act, seeking reference of the parties to a suit to arbitration. While considering an application under Section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of ‘arbitrability’ or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the arbitral Tribunal. If the Arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under Section 34 of the Act, relying upon sub-section (2)(b)(i) of that section. 33. But where the issue of ‘arbitrability’ arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the Court seized of the suit and cannot be left to the decision of the Arbitrator.
33. But where the issue of ‘arbitrability’ arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the Court seized of the suit and cannot be left to the decision of the Arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the Court where the civil suit is pending, will refuse an application under Section 8 of the Act, to refer the parties to arbitration, if the subject-matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special Court or Tribunal.” 20. As far as suit filed by the respondent in OS No. 227 of 2014 praying for cancellation of registered documents executed by the applicant in his favour or third parties is concerned, the parties to the suit are not parties in the Development Agreement or in the Cancellation Deed. The applicant's claim is with regard to damages. The suit filed by the respondent is only for cancellation of registered deeds executed by the applicant in favour of third parties in respect of his share as per Development Agreement dated 15.3.2007 notwithstanding the finding of the Trial Court with regard to cancellation of sale deeds in IA No. 879 of 2015 in OS No. 1227 of 2014 filed under Section 8 of the Act, which finding is contrary to the findings of the civil Court in OS No. 28 of 2011 in which it is held that D. Chandrashekar Reddy was no more Managing Partner after 27.2.2009 and that no value and weight can be given to Cancellation Deed dated 6.5.2010. All these aspects and scope of the suit filed by the respondent is different and out of scope of the claim of the applicant in the present application and needs to be probed by Arbitrator and roving enquiry can be conducted in that application. 21. The judgment of the Hon'ble Apex Court in Tulip Hotel Pvt. Ltd. Case (supra), is not applicable to the case on hand since the judgment is rendered prior to insertion of Section 11(6-A) by the amendment Act, 2015, which came into force on 23.10.2015 and in view of law laid down by Apex Court in Booz-Allen and Hamilton Inc.
21. The judgment of the Hon'ble Apex Court in Tulip Hotel Pvt. Ltd. Case (supra), is not applicable to the case on hand since the judgment is rendered prior to insertion of Section 11(6-A) by the amendment Act, 2015, which came into force on 23.10.2015 and in view of law laid down by Apex Court in Booz-Allen and Hamilton Inc. Case (supra), in Paragraphs 32 and 33, M/s. Mayavti Trading Pvt. Ltd. Case (supra) and M/s. Duro Felguera S.A. Case (supra). In view of the above facts and circumstances, this application is liable to be allowed. 22. Accordingly, the arbitration application is allowed nominating Sri Justice V. V.S. Rao, Former Judge of erstwhile High Court of Andhra Pradesh, H. No. 165/3, Street No. 6, Baghlingampally, Hyderabad-44. H. No. 425, Ground Floor, Sector-15A, Noida, NCR-201301, as the Sole Arbitrator for resolution of disputes between the applicant and respondent, arising out of Development Agreement dated 15.3.2007 entered into by the applicant and the respondent, in accordance with the provisions and mandate of the Act of 1996. No order as to costs.