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2021 DIGILAW 577 (AP)

Chinnari Suryanarayana v. Nagireddy Srinivasa Rao

2021-08-27

ARUP KUMAR GOSWAMI

body2021
ORDER : Arup Kumar Goswami, J. 1. Heard Mr. Tarlada Rajasekhar Rao, learned counsel for the applicants. Also heard Mr. A.K. Kishore Reddy, learned counsel for the respondent. 2. This is an application filed by the applicants under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996 read with the Scheme for appointment of Arbitrator, 1996 (for short "the Act, 1996"), for appointment of an Arbitrator. 3. The case of the applicants is that the 2nd applicant is the wife of the 1st applicant and 3rd and 4th applicants are the children of the 1st and 2nd applicants. They are the owners of land admeasuring 226.2 sq. yards (222.56 sq. mts.,) in old Sy. No. 57/1 part, new survey no. 23/2 and land admeasuring 513.99 sq. yards (429.74 sq. mts.) in old survey No. 57/1 part, New survey No. 23/2, Patha Srikakulam Rural, Killipalem Panchayat, Patha Srikakulam village, Srikakulam Mandal, totalling 780.19 sq. yards (652.316 sq. mts.). The lands are contiguous and they purchased the same vide Document No. 6711/2011 from one Sabbella Adinarayana Reddy and since the date of purchase, they are in possession. 4. A Development Agreement dated 14.12.2011 was entered into with the respondent, who is a Developer, for construction of residential units. It is not necessary to dilate on various terms and conditions of the Development Agreement for the purpose of this case. Suffice it is to say that the Development Agreement visualizes that the Developer will construct 15 dwelling units with a total super built-up area of 16200 sq.ft. in each dwelling unit. After completion of 15 units, 6 units were to be for the applicants and balance 9 units would fall in the share of the Developer. The development work relating to the share of the owners was to be completed within one year three months from the date of the Development Agreement with a grace period of six months, failing which the applicants are entitled to prevailing local rent for each flat till handing over of the respective flats by the respondent. The Development Agreement also recites that the Developer shall not assign its right of development to any other person, though a sub-contractor could be appointed by the Developer for specific works on his own responsibility. 5. The Development Agreement also recites that the Developer shall not assign its right of development to any other person, though a sub-contractor could be appointed by the Developer for specific works on his own responsibility. 5. The respondent, it is alleged, by violating the terms of the Development Agreement, entered into an agreement with one Gurugubelli Raju, who issued a notice dated 08.06.2016 to the applicants, demanding a certain amount. Stating that the Developer had completed construction of 9 flats falling into his share, however, with deviation from the agreed specifications, and made the same ready for sale, the flats which are allocated to the applicants were left unfinished by not laying down flooring, electrical lines, plumbing and wood work etc., a legal notice dated 23.08.2016 was issued by the applicants, calling upon him to complete the construction of 6 flats according to the agreed specifications, to restore common electrical connection and plumbing work as per agreed specifications and to deliver the same to them after releasing the same from the mortgage which was fraudulently created by the respondent and to pay rent in terms of the Development Agreement. 6. The aforesaid notice was refused to be received by the respondent and as disputes and differences had arisen, a legal notice dated 06.09.2016 was issued by the applicants nominating one Thota Bhaskara Rao, District Judge (Retired), as the sole arbitrator and requesting to intimate as to whether the respondent had any objections for the above nomination within a period of five days. In the same notice, it is stated that the first applicant personally and through elders had approached the respondent as the respondent had not performed in terms of Development Agreement before the period of one year nine months expired and also thereafter, but the respondent did not accede to the demands and had not allowed further negotiations. 7. A reply notice dated 17.09.2016 was issued by the respondents expressing surprise with the allegations made and contending that there were no disputes in between them as the applicants had not approached and also stating that there was an understanding that the 6 flats falling on the applicants would be delivered after the applicants pay him towards the expenses incurred by him towards panchayat approval, land conversion fee, gravel filling etc. It is also stated therein that it is desirable that they talk to each other and only after talks failed, he would intimate his choice of the arbitrator. 8. Subsequently, two legal notices dated 08.10.2016 and 15.11.2016 were issued by the respondent demanding Rs. 23,50,000/- stating that he had incurred the amount towards additional expenditure and amenities, such as, transformer charges, bulk water charges, generator charges, etc. A notice was issued to the respondent denying the contents of the notices dated 08.10.2016 and 15.11.2016 stating categorically that negotiations were held personally and through elders, but the respondent has not performed his part of contract in terms of Clause 26 of the Development Agreement dated 14.12.2011. 9. In the aforesaid circumstances, the present application came to be filed for appointment of arbitrator. 10. The respondent had filed counter-affidavit. 11. At this juncture, it would be appropriate to take note of Clause 26 of the Development Agreement dated 14.12.2011, which reads as under: "Any dispute and or differences whatsoever arising under or in connection with this agreement which could not be settled by the parties through negotiations shall be settled by arbitration in accordance with the provisions of the Indian Arbitration and Conciliation Act by a sole arbitrator nominated by the parties by mutual consent." 12. In the counter-affidavit filed by the respondent, it is stated that after starting the development activity, it was noticed that the subject land was filled with debris and adjacent to the land there is a drainage canal of about 20 feet width and the drainage system of Srikakulam town is connected to this canal and the applicants had promised to share the expenditure to be incurred for removal of the debris and based on that he started to do the construction work. It is also stated that only for removal of debris almost one year had elapsed. He had requested the applicants to come forward for cancellation of the Development Agreement dated 14.12.2011. At that point of time, the applicants had assured that the stipulation of time for construction of units of owners will not be pressed into service. As he had incurred an expenditure of Rs.1,50,00,000/-, he had proceeded with the construction work even after time had elapsed as per the Development Agreement dated 14.12.2011. At that point of time, the applicants had assured that the stipulation of time for construction of units of owners will not be pressed into service. As he had incurred an expenditure of Rs.1,50,00,000/-, he had proceeded with the construction work even after time had elapsed as per the Development Agreement dated 14.12.2011. The work was completed in the month of December, 2016 and the purchasers occupied 9 flats falling in his share in the month of December, 2016. When the applicants requested to handover 6 flats which fell in their share, the respondent demanded the applicants to pay him back the expenditure which he had incurred and also requested them to choose persons of their choice to have negotiations, but the applicants were not interested to negotiate with the respondent. It is stated that as no negotiations were initiated by the applicants to settle the dispute, this application is not maintainable. 13. Learned counsel for the applicants submits that many attempts for negotiations had taken place and the applicants have tried to settle the dispute by way of negotiations through the intervention of the elders, but when the respondent had failed to come up with any response, there is no alternative to the applicants but to approach this Court by way of filing petition under Arbitration and Conciliation Act read with Scheme for appointment of Arbitrator. 14. Learned counsel for the respondents has reiterated the stand taken in the counter-affidavit regarding non-maintainability of the petition because no negotiations were held earlier. A plea is sought to be raised that the claim is barred by limitation. 15. In reply, the learned counsel for the applicants submits that no plea of limitation was taken in the counter-affidavit. He also seeks to rely upon the judgments in Visa International Limited v. Continental Resources (USA) Limited, reported in (2009) 2 SCC 55 , Indian Oil Corporation Limited v. SPS Engineering Limited, reported in (2011) 3 SCC 507 , and judgment dated 27.11.2019 in Special Leave Petition (C) No. 11476 of 2018 between M/s. Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited. 16. I have considered the submissions of the learned counsel for the parties and have perused the materials on record. 17. 16. I have considered the submissions of the learned counsel for the parties and have perused the materials on record. 17. In Visa International Limited (supra), on the basis of exchange of letters between the parties, the Hon'ble Supreme Court held that the same undoubtedly discloses that attempts were made for an amicable settlement but without any result leaving no option but to invoke the arbitration clause. 18. In Indian Oil Corporation Limited (supra), the Hon'ble Supreme Court had observed that in an application under Section 11 of the Act, 1996, the Chief Justice or his designate is not expected to go into the merits of the claim or examine the tenability of the claim. The Chief Justice or his designate may however choose to decide whether the claim is a dead claim or whether the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the contract, so that neither the contract nor the arbitration agreement survived. It was explained that he will do so only when the claim is evidently and patently a long time-barred claim and there is no need for any detailed consideration of evidence. 19. In M/s. Uttarakhand Purv Sainik Kalyan Nigam Limited (supra), the Hon'ble Supreme Court observed that the question of limitation involves a question of jurisdiction, which is to be determined having regard to the facts and the law. 20. In the instant case, no plea is taken in the counter-affidavit that the dispute raised by the applicants is a stale claim and barred by limitation and, therefore, it is not necessary for this Court to dilate on the aforesaid issue. 21. Materials on record indicate that flats falling in the share of the respondent, numbering 9, have been completed by the respondent as a Developer, and the 6 flats falling in the share of the applicants have remained incomplete. In all the legal notices issued by the applicants, it is the categorical stand taken that repeated demands were made by the applicant No. 1 himself and through elders but the request for performing his part of the contract had fallen on deaf ears. 22. On the other hand, the respondent had also raised various demands including payment of a sum of Rs. 23,50,000/-. That there are disputes between the parties is evident from the notices exchanged between them and the pleadings before the Court. 22. On the other hand, the respondent had also raised various demands including payment of a sum of Rs. 23,50,000/-. That there are disputes between the parties is evident from the notices exchanged between them and the pleadings before the Court. From the correspondence exchanged, it is clear that there is no scope of amicable settlement. Though the respondent had also raised a demand by way of raising a dispute from his side, he has not volunteered to come forward for negotiation by intimating any suitable date for such meeting. Materials on record persuades me to take a view that the applicants had made attempts for negotiation and having failed in their attempts to have an amicable settlement, had no option but to invoke the arbitration clause. 23. Accordingly, this application is allowed and Mr. T. Venugopal Rao, District Judge (Retired), D. No. 54-14/2-3B, Plot No. 52, R. No. 1-A, Srinivasa Nagar, Bank Colony, Vijayawada-520 008 is appointed as arbitrator to adjudicate the disputes between the parties. 24. The fee of the arbitrator as well as the other terms and conditions shall be settled by the parties in consultation with the arbitrator so appointed. 25. Registry will send a copy of this order to Mr. T. Venugopal Rao, District Judge (Retired), in his proper address. 26. No costs. Pending miscellaneous applications, if any, shall stand closed.