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2021 DIGILAW 3 (MP)

Fortune Builders v. Hansraj Kamdar

2021-01-05

SUBODH ABHYANKAR

body2021
JUDGMENT : Subodh Abhyankar, J. 1. This appeal has been preferred under Section 37 of the Arbitration and Conciliation Act, 1996 (for short "Act, 1996") by the appellants assailing the order dated 23.4.2019 passed in MJC No. 40/2018 by the Second Additional District Judge, Bhopal, whereby the application filed under Section 9 of the Act, 1996 by the appellant has been rejected. 2. Shorn of details, in brief the facts of the case are that the appellant/firm is a registered partnership firm engaged in the business of real estate investment, development and its sale. The appellant/firm is also a registered colonizer with the Municipal Corporation, Bhopal. Pursuant to its business, the appellant/firm entered into a Joint Venture Development Agreement with the respondents on 21.2.2014, the same was registered on 13.3.2014 with respect to the joint development of the property bearing Khasra No. 147/9/1/6 admeasuring 0.36 acres, and Khasra No. 147/9/1/4 admeasuring 0.72 acres at Village Bawariya Kalan, Tahsil Huzur District Bhopal. Under this Joint Venture Agreement the appellant was to develop the property on the land of the respondents, the land owner. The development included the multi-storied apartments/fats on the land in question, the sale consideration of which after completion was to be shared in the agreed proportion between the appellant firm and the respondents as per the various clauses of the Joint Venture Agreement. Clause 3 of the said agreement provided that the subject property was to be developed within a period of 36 months. Clause 8 provided that procuring the necessary permissions and making expenditure with respect thereof shall be the solitary responsibility of the second party i.e. the appellant/Fortune Builders who was also to procure all the necessary permissions and accordingly start the development work. Clause 13 provided the division of the constructed property in the ratio of 43:57 and Clause 20 provided that wherever the signature and endorsement of the first party (i.e. the land owner Mr. Kamdar) are required, the same shall be provided immediately by the land owner and vide Clause 25 and 27, it was agreed that if the area is not developed within 36 months, then a penalty of Rs. 5,000/- per fat, per month shall be payable by the appellant firm. Kamdar) are required, the same shall be provided immediately by the land owner and vide Clause 25 and 27, it was agreed that if the area is not developed within 36 months, then a penalty of Rs. 5,000/- per fat, per month shall be payable by the appellant firm. Thus, the case of the appellant/firm is that the time was not the essence of the contract, as the same was extendable on payment of penalty by the second party to the first party. 3. It is further the case of the appellant firm is that the parties also agreed that the appellant shall pay a sum of Rs. 50 lakhs to the respondents and thus two cheques of Rs. 25 lakhs each dated 19.11.2013 were given by the appellant to the respondents. The appellant's further case is that as per the Joint Venture Agreement it was agreed that the respondents shall extend the entire assistance and shall sign on all the documents, wherever required towards procuring any permission from any authority for effecting the development over the subject land and thus as a precondition for carrying out any development on the land, it was necessary for the appellants to have procured the building permission/sanctioned from the Bhopal Municipal Corporation, which could have been sanctioned only after production of maps as signed by the land owner with the plan of the whole building. 4. It is further case of the appellant/firm that on two different occasions, the employee of the appellant/firm namely Radheshyam Malviya contacted and approached the respondents for signing of the duly prepared building maps, which were prepared by their architect, but the respondent/land owner avoided endorsing the aforesaid building plan map and for this reason despite being ready and willing to execute the project, the starting point of the whole project namely sanctioning of building permission map could not be achieved, hence for this reason the development work on the said project could not start on the subject disputed land. It is further case of the appellant/firm that a public notice was issued in the newspaper on 9.3.2018 by the respondents informing all the concerned that the Joint Venture Agreement between the appellant and the respondent has expired and therefore, no interest survived of the appellant/firm in the subject property. It is further case of the appellant/firm that a public notice was issued in the newspaper on 9.3.2018 by the respondents informing all the concerned that the Joint Venture Agreement between the appellant and the respondent has expired and therefore, no interest survived of the appellant/firm in the subject property. The aforesaid notice was immediately replied to by the appellant through its publication dated 11.3.2018 denying the fact that the agreement has expired with respect to the subject land. Sensing that a dispute has arisen between the parties, the appellant, on 16.4.2018, sent a legal notice to the respondents for appointment of sole arbitrator in terms of Clause 35 of the Joint Venture Agreement. Appellant also apprehended that the respondents may create third party rights in respect of the property in dispute to the prejudice of the appellant, hence they immediately, on 2.5.2018 filed an application under Section 9 of the Act, 1996 before the District Court at Bhopal. According to the appellant, the application was for temporary injunction that the respondents be directed not to create any third party rights in respect of the disputed property till their arbitration dispute is concluded. It is contended by the counsel for the appellant that in the application filed under Section 9 of the Act, 1996 all the ingredients required for a temporary injunction, namely prima-facie case, balance of convenience and irreparable loss were present but without considering the material on record in its right perspective the learned judge has passed the impugned order. 5. On the other hand learned counsel for the respondents has opposed the prayer of the appellant and has submitted that no illegality has been committed by the learned Judge of the lower Court in passing the impugned order, as the same is in line with the settled principles of the law and since the learned Judge of the lower Court has not found any prima facie case in favour of the appellant-firm, their application has been rightly dismissed by the learned Judge of the lower Court. 6. Heard the learned counsel for the parties and perused the record. 7. 6. Heard the learned counsel for the parties and perused the record. 7. From the record this Court finds that the main reason the learned Judge of the lower Court has assigned while dismissing the application filed by the appellant under Section 9 of the Act, 1996 is that the appellant has not taken the steps expeditiously after invoking the arbitration clause, as in para 27 of the agreement it is provided that the period of project would be 36 months and even after the lapse of the same, the appellant has not made any endeavour to settle the dispute through arbitrator. It is also found by the learned judge of the lower Court that the appellant has also not been able to prove that the respondents have not cooperated with him for proper execution of the agreement. 8. So far as the invocation of Section 9 of the Act, 1996 is concerned, it would be apt to refer to the judgment rendered by the Supreme Court in the case of Firm Ashok Traders v. Gurumukh Das Saluja reported as (2004) 3 SCC 155 , the relevant paras of the same read as under:- "17. There are two other factors which are weighing heavily with us and which we proceed to record. As per the law laid down by this Court in Sundaram Finance Ltd. an application under Section 9 seeking interim relief is maintainable even before commencement of arbitral proceedings. What does that mean? In Sundaram Finance Ltd. itself the Court has said: (SCC p. 488, para 19) It is true that when an application under Section 9 is filed before the commencement of the arbitral proceedings, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings. Section 9 permits application being filed in the court before the commencement of the arbitral proceedings but the provision does not give any indication of how much before. The word "before" means, inter alia, "ahead of; in presence or sight of; under the consideration or cognizance of". The two events sought to be interconnected by use of the term "before" must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or "within-sight" certainty. The word "before" means, inter alia, "ahead of; in presence or sight of; under the consideration or cognizance of". The two events sought to be interconnected by use of the term "before" must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or "within-sight" certainty. The party invoking Section 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the court that the arbitral proceedings are actually contemplated or manifestly intended (as Sundaram Finance Ltd. puts it) and are positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses. The purpose of enacting Section 9, read in the light of the Model Law and UNCITRAL Rules is to provide "interim measures of protection". The order passed by the court should fall within the meaning of the expression "an interim measure of protection" as distinguished from an all-time or permanent protection. 18. Under the A & C Act, 1996, unlike the predecessor Act of 1940, the Arbitral Tribunal is empowered by Section 17 of the Act to make orders amounting to interim measures. The need for Section 9, in spite of Section 17 having been enacted, is that Section 17 would operate only during the existence of the Arbitral Tribunal and its being functional. During that period, the power conferred on the Arbitral Tribunal under Section 17 and the power conferred on the court under Section 9 may overlap to some extent but so far as the period pre-and post-the arbitral proceedings is concerned, the party requiring an interim measure of protection shall have to approach only the court. The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the "proximately contemplated" or "manifestly intended" arbitral proceedings itself. The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the "proximately contemplated" or "manifestly intended" arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order under Section 9, the relationship between the order under Section 9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made "before" i.e. in contemplation of arbitral proceedings. The court, approached by a party with an application under Section 9, is justified in asking the party and being told how and when the party approaching the court proposes to commence the arbitral proceedings. Rather, the scheme in which Section 9 is placed obligates the court to do so. The court may also while passing an order under Section 9 put the party on terms and may recall the order if the party commits breach of the terms. 19. During the course of hearing, we asked the learned counsel for Group 'A', what steps have they taken for initiation of arbitral proceedings ever since 2-6-2003 -- the date on which they claim to have invoked arbitration clause, or since 22-7-2003 - the date on which the application under Section 9 was filed? We were told that Group 'A' was awaiting the orders of the court under Section 9 of the Act. This is hardly an explanation. Commencement of arbitral proceedings is not dependent on the interim relief being allowed or denied. It was expected of Group 'A' to have posthaste sought for the appointment of an arbitrator under Section 11 of the Act if the partners noticed had failed to respond to the demand of Group 'A' for arbitration. This, by itself, in our opinion, would have been enough to deny relief to Group 'A'. However, in the facts and circumstances of the case, as we find the High Court having felt convinced of the need for appointment of receiver and as we are inclined only to suitably modify the order, we do not deem it proper to dismiss the application under Section 9 in its entirety and for this reason alone. However, in the facts and circumstances of the case, as we find the High Court having felt convinced of the need for appointment of receiver and as we are inclined only to suitably modify the order, we do not deem it proper to dismiss the application under Section 9 in its entirety and for this reason alone. We direct the applicant under Section 9 to take steps for appointment of arbitrator(s), without any further loss of time." (emphasis supplied) A perusal of the aforesaid dictum of the Supreme Court clearly reveals that a party seeking an interim relief must also satisfy the Court that it intends to initiate arbitration proceedings at the earliest and its failure to do so may result in denial of any interim relief from the Court. In other words, no sooner an arbitration dispute has arisen between the parties, the concerned party must proceed for appointment of the arbitrator or should take necessary steps for the same and if it is found that the steps to appoint an arbitrator have not been taken within the reasonable period of time, it would disentitle the party to claim any interim measure. 9. In the case on hand, even going by the chronology of the events as narrated by appellant the case falls short of the requirement as envisaged in the case of Firm Ashok Traders (supra). The dispute initially arose on 16.7.2016 when the respondents refused to sign the necessary maps for execution of the agreement and thereafter on 11.3.2018, when the respondents issued a public notice in the local newspaper saying that the agreement between them has come to an end and thereafter on 16.4.2018, a legal notice was issued to the respondents invoking the Clause 35 of the agreement for appointment of the arbitrator to settle the dispute between them and after around 15 days i.e. on 2.5.2018, an application under Section 9 of the Act, 1996 was preferred by the appellant in the District Court, Bhopal to resort to an interim protection till appointment of an arbitrator. 10. 10. It is noteworthy to mention here that after 16.4.2018, i.e. the date of notice for appointment of arbitrator, the application under Section 11(5)(6) of the AC Act, 1996 for appointment of an arbitrator was not filed by the appellant before this Court even within one year's time but it was filed only on 26.6.2019 i.e. after more than one year. In the considered opinion of this Court, the aforesaid period of more than one year taken by the appellant without any justification only to appoint an arbitrator is more than sufficient to hold that they are not entitled to any relief of interim nature. On the other hand, if the date of cause of action is taken to be 16.7.2016 when allegedly, the respondents first refused to sign the necessary maps for execution of the agreement, in that case the application for appointment of arbitrator filed on 26.6.2019 clearly makes out a case of luxury litigation on the part of the appellants as they were pursuing the remedies available to them in a most leisurely and cavalier manner disentitling them to any interim protection. It is also found that after the application under Section 9 of the Act, 1996 was filed on 7.5.2018 it was finally disposed of by the learned Judge of the lower Court on 23.4.2019 i.e. after around 11 months. Thus till date it has been almost more than 2½ years since there is no interim protection in operation in favour of the appellant/firm. 11. So far as the finding recorded by the learned judge of the lower Court that the appellant has also not been able to prove that the respondents have not cooperated with him for proper execution of the agreement is concerned, since this Court has already held that the appellant is not entitled to any relief on the ground of delay only, it is not required to reflect on the merits of the case. 12. In view of the aforesaid discussion, this Court is of the firm view that no illegality or jurisdictional error has been committed by the learned judge of the lower Court in passing the impugned order. As a result, the present arbitration appeal being devoid of merits is hereby dismissed, affirming the order passed by the learned Judge of the lower Court. No cost.