Telangana High Court
Mr. Vikram Takru vs M/S Sandhya Estate And Constructions ... on 29 December, 2023
THE HONOURABLE SRI JUSTICE J. SREENIVAS RAO
+ ARBITRATION APPLICATION No.188 of 2022
% Dated 29.12.2023
# Mr. Vikram Takru
S/o.Vijay Kumar Takru,
Aged: about 52 years,
Occ: Software Professional,
R/o.6027, Gleeneagles Circle,
San Jose, CA 95138, USA and others
....Applicants
VERSUS
$ M/s.Sandhya Estate and Constructions Pvt. Ltd.,
(earlier known as M/s.Sandhya Hotels Private Limited)
A Company registered under the Companies Act 1956
Having its registered office at Sy.No.86, 87, 90, 91,
Sandhya Techno-I,
Opp: sunshine Hospital Raidurg Main Road,
Hyderabad T.G. and another.
... Respondents
! Counsel for applicants : Sri Keerthi Arun Kumar
^ Counsel for Respondents :
< GIST:
> HEAD NOTE:
? CITATIONS:
1. 2020 (12) SCC 767
2. Curative Petition © No.44 of 2023 (2023INSC1066)
3. 2023 (7) SCC 1
4. (2011) 14 SCC 66
2
JSR, J
AA.No.188 of 2022
THE HONOURABLEJUSTICE SRI J. SREENIVASRAO
ARB.APPL.No.188 OF 2022
ORDER:
The applicants filed this application under Section 11(6) of the Arbitration and Conciliation Act, 1996, (for short 'the Act') to appoint a sole arbitrator to adjudicate the disputes and differences between the Applicants and the Respondent in respect of Letter of intent dated19.01.2018.
2. Factual matrix:
2.1. The applicants submit that they are software professionals and, with an intention to establish a company with Software development facilities in the Hi-tech City at Hyderabad, have approached respondent No.1 for purchase of Unit No.504 on Fifth floor with a super built up area of 25,898.81 Sq. feet (Built up area of 19,424.60sft.&Common area of 6,474.21sft.) along with twenty five car parking slots in Cellar 3 of the proposed building namely "SANDYA TECHNO-I" office building complex, along with undivided share of land equivalent to 310.78 Sq yards i.e., 259.851 Sq.meters out of 15,355Sq.Yards ('Scheduled Property' for brevity) for a total sale consideration of Rs.15,79,82,741/-.3
JSR, J AA.No.188 of 2022 2.2. The applicants further submit that respondent No.1 is a private limited company and it is represented by respondent No.2, who is the Managing Director. Respondent No.2 represented that respondent No.1 is the absolute owner and possessor of the property admeasuring 15,355 Sq.yards (Ac.3- 06gts) from out of total land admeasuring Ac.4-02.2 guntas in Sy.No.86, 87, 91/2(part) and 92 situated at Rayadurga, Panmaktha, Serilingampally, R.R. District and have obtained permission for construction of office-cum-commercial multi- storied complexes. The applicants intended to purchase the said schedule property for a total sale consideration of Rs.15,79,82,741/-.
2.3. Applicants further stated that initially a Letter of intent was executed on 19.01.2018 and subsequently an agreement of sale dated 16.04.2018 was executed. As per the terms and conditions of the agreement of sale, the respondents are under the obligation to hand over fully developed office unit, as mentioned in the specifications in the agreement of sale to the applicants. Respondents have agreed to hand over the same to the applicants by 31.07.2018. Similarly, the applicants were under obligation to make payments of the sale consideration in 4 JSR, J AA.No.188 of 2022 stage-wise/phased manner as described in Clause No.2 of agreement of sale. In case of delay in making payment of sale consideration by the applicants, interest @18% per annum was to be levied which is mentioned in Clause No.2(c), upto a period of three months from the due date.
2.4. Applicants further stated that as on May, 2018, they have paid an amount of Rs.11,24,14,402/- under various heads. Respondents have failed to comply with the terms and conditions of the agreement of sale and failed to handover the possession of the premises,i.e., fully developed office to the applicants, and they are jointly liable to pay liquidated damages of an amount of Rs.12,85,22,844/- to the applicants in terms of the agreement of sale. Though the applicants have made several requests and demands for handing over the possession of the scheduled property, the respondents have failed to complete the construction and abandoned the project. Applicants have addressed a letter dated 16.09.2018 brining to the notice of the respondents about all the shortfalls which they have noticed in the building and made a demand for completion of the said works. Though respondents received the said letter, they have not carried out the said works and the applicants have 5 JSR, J AA.No.188 of 2022 constrained to issue legal notice dated15.11.2018 to the respondents calling upon them to execute sale deed and make payment of liquidated damages as agreed under the agreement of sale. As the respondents failed to honour the terms and conditions of the agreement, applicants were constrained to file a Consumer Complaint before the Telangana State Consumer Disputes Redressal Commission, Hyderbad vide C.C.(Sr) No.375 of 2019 on 08.02.2019 and the said complaint was returned on 04.04.2019 on the ground of pecuniary jurisdiction.
2.5. The applicants further stated that on 13.11.2019 they got issued another legal notice duly called upon the respondents to complete the pending works and to hand over the possession of the property by executing registered sale deed by taking balance sale consideration, for which there was no response from the respondents. In spite of repeated requests, notice etc., of the applicants, the respondents have neither issued any reply nor followed the terms and conditions of the agreement. As the respondents have committed breach of the terms of agreement of sale, the applicants have got issued notice dated 16.08.2022 through their counsel invoking the arbitration clause 6 JSR, J AA.No.188 of 2022 of Letter of intent to the respondents to give consent for appointment of sole arbitrator for adjudication of the differences and disputes between them. In the said notice, the applicants mentioned three high court retired judges. The said notice was returned with an endorsement that "No such addressee in this plot" and the other was returned as "Unclaimed returned to sender". Hence, the applicants filed the present application.
3. Respondent Nos.1 and 2 filed preliminary counter-affidavit contending that the application filed by the applicants for seeking appointment of sole arbitrator to adjudicate the purported disputes between the parties arising under Letter of intent dated 19.01.2018 is not maintainable under law, as it is no longer res integra and the Letter of intent is not an enforceable document. The Letter of intent merely expresses an intention to enter into a contract. There was no binding legal relationship between the applicants and the respondents. In the absence of a valid enforceable agreement. The applicants are not entitled to seek the relief sought in this application and the same is not maintainable and liable to be dismissed. 3.1. It is further stated that the agreement of sale dated 7 JSR, J AA.No.188 of 2022 Nil, April 2018 is not a registered document and requisite stamp duty is not paid. Therefore, unless and until such deficit stamp duty is paid through proper impounding procedure as per the provisions of the Indian Stamp Act, 1899 (herein after called brevity, 'the Act'), the said document cannot be taken into consideration. It is stated that applicant No.11 viz., Mr. Sohan Ghanathe has cancelled the agreement of sale with the respondents vide cancellation of agreement of sale dated 16.01.2023. Therefore, applicant No.11 is unequivocally given up all the claims in relation to the subject matter of the application. By virtue of the cancellation of agreement of sale by one of the purchasers, impinges on the validity of the agreement of sale and renders it unenforceable.
4. Heard Sri Keerthi Arun Kumar, learned counsel for the applicants, and Smt. A. Satyasiri, learned counsel for the respondents.
5. Learned counsel for the applicants submits that the applicants intend to purchase the scheduled property for the total sale consideration of Rs.15,79,82,741/-.Accordingly, a Letter of intent was executed between the parties on 19.01.2018 8 JSR, J AA.No.188 of 2022 and subsequently an agreement of sale was executed on Nil-04- 2018. As per the terms and conditions of the agreement of sale, the respondents have to complete the construction of building along with all fixtures and fittings and handover fully developed office to the applicants by 31.07.2018. As per the terms and conditions of the agreement of sale, the applicants have paid an amount of Rs.11,24,14,402/-more than the amount as agreed, however the respondents have failed to complete the work and to handover the premises within the stipulated time. As per the terms and conditions of the agreement of sale, the respondents have to pay penalty of total amount of Rs.12,85,22,844/- as on 15.08.2022.
5.1. He further contended that the applicants have addressed a letter to respondents on 16.09.2018 pointing out all the facts and demanded the respondents for completion of the works. In spite of the same, respondents have not taken any steps to complete the works and not paid liquidating damages to the applicants in terms of agreement of sale. At that stage the applicants have got issued legal notice on 16.08.2022 invoking the arbitration clause No.9 of the Letter of intent dated 19.01.2018 informing them to give their consent for appointment of sole arbitrator by choosing 9 JSR, J AA.No.188 of 2022 any one arbitrator out of three arbitrators to dissolve the disputes between them and the notice in respect of respondent No.1 was returned with a postal endorsement that no such address and the notice in respect of respondent No.2 returned with an endorsement that unclaimed.
5.2 He vechemently contended that the objections raised by respondents that whether the letter of intent dated 19-01-2018 and consequential agreement of sale dated Nil.04.2018are properly stamped as per the provisions of the Act,or not and required to pay any deficit stamp duty, the said issues can be gone into by the arbitral tribunal and the arbitral tribunal is having power to sent the said document to the Registrar for impounding the document by paying deficit stamp duty and the same is curable defect. He also contended that arbitration agreement need not be in any particular form and basing on the Letter of intent dated 19.01.2018, the applicants are entitled to seek appointment of arbitrator through the said document. In support of his contention, he relied upon the judgment of the Hon'ble Apex Court in Mahanagar Telephone Nigam Limited 10 JSR, J AA.No.188 of 2022 vs. Canara Bank and others 1.
6. Per contra, Smt. Satyasiri, learned counsel appearing on behalf of respondents vehemently contended that the applicants filed this arbitration application basing on the Letter of intent dated 19.01.2018 and the said document cannot be treated as agreement between the parties. Hence the arbitration application filed by the applicants for seeking appointment of sole arbitrator invoking the provisions of the Act is not maintainable. She further contends that the agreement of sale dated Nil.04.2018 is required stamp duty and registration and the said document cannot be taken into consideration unless and until the applicants pay deficit stamp duty by impounding the document under the provisions of the Act.
6.1. She further contended that applicant No.11-Mr.Sohan Ganathe cancelled the agreement of sale with the respondents vide cancellation of agreement of sale dated 16.01.2023 and has given up unequivocally all the claims in relation to arbitration application and he has taken an amount of Rs.17,00,000/- from respondent No.1. Hence, the arbitration application filed by the 1 2020 (12) SCC 767 11 JSR, J AA.No.188 of 2022 applicants is not maintainable.
7. Having considered the rival submissions made by respective parties and upon perusal of the material available on record, the following points arise for consideration.
(i) Whether the applicants are entitled to seek appointment of sole arbitrator basing upon the Letter of intent dated 19.01.2018 invoking the provisions of Section 11(6) of the Act?
(ii) When the said agreement of sale dated Nil.04.2018 is cancelled by one of the applicant, the other applicants can seek any relief basing upon the said agreement of sale?
(iii) To what relief.
8. It is an undisputed fact that the applicants and respondents have entered into a Letter of intent on 19.01.2018, followed by an Agreement of Sale dated Nil.04.2018, for the purchase of a property for a total consideration of Rs.15,79,82,741/-. Pursuant to the same, applicants made certain payments. The grievance of the applicants is that the respondents failed to fulfill the terms and conditions outlined in the Letter of intent and Agreement of Sale and for non-compliance of the terms and conditions, they got issued legal notices on 15.11.2018 and 12 JSR, J AA.No.188 of 2022 13.11.2019 to the respondents claiming penalties and demanding for completion of works and also handover the possession of the property by executing a registered sale deed. In spite of the same, respondents took no action. Records further discloses that on 16.08.2022, the applicants issued a notice invoking Section 21 of the Act seeking appointment of a sole arbitrator basing on the arbitration clause No.9 in the Letter of intent dated 19.01.2018. The notices were returned indicating that the given addresses were nonexistent and one notice returned with postal endorsement 'unclaimed'.
9. The main objection of the respondents is that Letter of intent is only expresses an intention to enter into agreement and basing on the said document, the applicants are not entitled to seek appointment of arbitrator, as the document is not enforceable document.
10. It is very much relevant to place on record that arbitration agreement need not to be in particular format. Provision of Section 7(4)(d) of Arbitration and Conciliation Amended Act 2015 reads as follows:
d) An exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or 13 JSR, J AA.No.188 of 2022
11. In Mahanagar Telephone Nigam Limited Vs. Canara Bank,(3 supra) the Hon'ble Apex Court specifically held that the arbitration agreement as per the provisions of amended act, communication through arbitration agreement can be derived from exchange of letter, telex, telegram or other means of communication including through electronic means.
12. It is an undisputed fact that the applicants have entered agreement of sale with respondents to purchase the scheduled property and paid certain amounts and disputes arose between the parties. As per the terms and conditions of the Letter of intent as well as agreement of sale, if any dispute arises between the parties, they have to dissolve the said dispute through arbitration. Pursuant to the Letter of intent, the parties have entered into agreement of sale dated Nil.04.2018, wherein Clause 2(f)(b) says as follows:
"The terms agreed to into letter of intent dated signed by the vendor and purchaser will continue to remain in effect to that extent that is not contrary to this agreement of sale to show the intent of the parties".
13. In view of the same, terms and conditions mentioned in the Letter of intent and consequential agreement of sale are binding upon the parties and the application filed by the applicants invoking arbitration 14 JSR, J AA.No.188 of 2022 clause for seeking appointment of arbitrator is maintainable under section 11(6) of the Act. It is relevant to extract the arbitration clause as follows:
"9. If there is any dispute arising out of these head of terms, including with respect to the validity or enforceability of the same, the party shall refer the same to arbitration under the Arbitration And Conciliation Act,1996.The arbitral panel shall comprise of a sole arbitrator to be mutual agreed between the parties. The venue of arbitration shall be Hyderabad and the language shall be English".
14. Insofar as the other objection raised by the respondents is concerned, applicant No.11 cancelled the agreement of sale by receiving an amount of Rs.17 lakhs from the respondents and executed cancellation of agreement of sale dated 16.01.2023 and by virtue of the same, the applicants are not entitled to seek the appointment of arbitrator. The cancellation agreement is applicable to applicant No.11 only and the same is not binding upon other applicants.
15. In respect of the other objection raised by respondent Nos.1 and 2 that agreement of sale dated Nil April, 2018 is not properly stamped as per the provisions of the Stamps Act and the applicants cannot seek appointment of arbitrator until the deficit stamp duty is paid is concerned, the said objection can be investigated/verified by the arbitral tribunal and arbitrator is having power to send the said document to the 15 JSR, J AA.No.188 of 2022 Registrar for impounding the same by paying deficit stamp duty.
16. It is very much relevant to place on record that Seven-Bench Judges of the Hon'ble Apex Court In M/s Bhaskar Raju and Brothers and Anr v. M/s Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & Other Charities and Ors 2, overruling the earlier judgments of N. N. Gobal mercantile (p) ltd. V. Indo Unique Flame ltd. 3 and SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., 4 holding that Non-stamping or inadequate stamping is a curable defect and an objection as to stamping does not fall for determination under Section 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement is exist between the parties or not and all other objections and disputes including stamping of agreement falls within the ambit of arbitral tribunal only.
17. In view of the foregoing reasons as well as the law laid down by Hon'ble Apex Court, Sri Justice Challa Kodandaram, Plot No.68, Road No.71, Phase-III, Jubilee Hills, Hyderabad-33, is appointed as Arbitrator, who will adjudicate the dispute between the parties arising out of the Letter of intent dated 19.01.2018 followed by the agreement of sale dated Nil.Apirl, 2018.
2 Curative Petition (C) No. 44 of 2023 (2023INSC1066) 3 2023 (7) SCC 1 4 (2011) 14 SCC 66 16 JSR, J AA.No.188 of 2022
18. The learned Arbitrator shall fix his own remuneration upon deliberation and consultation with the parties. He shall also estimate the cost and expenses for the secretarial assistance and other incidental expenditure of the arbitration proceedings. The parties will bear the expenses of the arbitration proceedings in equal share.
19. Accordingly, the Arbitration Application is allowed. No costs.
As a sequel thereto, miscellaneous applications, if any, pending in this Arbitration Application, shall stand closed.
______________________ J. SREENIVAS RAO, J Date: 29.12.2023 L.R. Copy to be marked - Yes.
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