Telangana High Court
M/S. Cresco Housing Projects vs G. Vibby on 22 April, 2024
Author: K. Lakshman
Bench: K. Lakshman
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HON'BLE SRI JUSTICE K. LAKSHMAN
ARBITRATION APPLICATION NOs.155 OF 2023 AND 15 OF 2024
COMMON ORDER:
Both the applications arise from a common set of facts between the same parties. Therefore, both the Applications are heard together and disposed of by way of this common order:-
2. Heard Sri B.Rajeshwar Reddy, learned counsel for the Applicants in A.A.No.155 of 2023 and respondents 1 and 2 in A.A.No.15 of 2023, Sri K.Sathakarni, learned counsel for the Applicant in A.A.No.15 of 2024 and respondent Nos.1 and 4 in A.A.No.155 of 2023, M/s Unnam Law Firm, learned counsel appearing for respondent No.2 and Sri Mohd. Moin Ahmed Quadri, leaned counsel appearing for respondent No.3 in A.A.No.155 of 2023.
3. Mr. G.Vibby and Mr. G.Chakradhar, sons of late G.K.Raju, represented by their GPA holder Mr. N. Ravinder Reddy, have filed Arbitration Application vide A.A.No.155 of 2023 against M/s. Cresco Housing Projects, Mr. Shyam Sunder Baheti, Mr. Dommata Narsimha Rao and Mr. S. Anil Kumar, seeking appointment of Arbitrator to adjudicate the disputes between the parties in relation to cancellation 2 of Development Agreement - cum - General Power of Attorney (DAGPA), dated 06.02.2017. Likewise, M/s Cresco Housing Projects represented by its Promoter and working partner Mr. S.Anil Kumar, has filed A.A.No.15 of 2024 against Mr. G. Vibby and Mr. G. Chakradhar, seeking appointment of Arbitrator to adjudicate its claims including but not limited to indemnification, specific performance of the respondent's/Mr. G. Vibby and Mr. G. Chakradhar duties and obligations as per the clauses of the DAGPA dated 06.02.2017, rectification deed and to resolve the said disputes.
4. The said G.K.Raju and G.Vibby, have entered into a registered DAGPA bearing Doc.No.272 of 2017, dated 06.02.2017 with M/s Cresco Housing Projects and partnership firm represented by its partners Mr. Shyamsunder Baheti, Mr. D.Narsimha Rao and Mr. S.Anil Kumar, with regard to development of land admeasuring Ac.21.31guntas comprising of Ac.09.09guntas in Sy.Nos.317/A, 317/AA/1, 317/AA/2, 317/AA/3, 317/E; Ac.05.17guntas in Sy.Nos.324/A/2 and 324/E; Ac.6.05guntas in Sy.Nos.324/AA/2A, 324/AA/3A, 324/AA/2, 324/AA/3 and Ac.2.00guntas in Sy.No.324/E/3 situated in Singapur Village, Shankarpally Mandal, Ranga Reddy District (for short, 'the subject property'). They have 3 also entered into supplementary agreements for Phase-1 and Phase-2 on the same day of the said property. Mr. G.Chakradhar had executed a rectification deed bearing document No.4510 of 2022 dated 27.08.2022 in favour of M/s Cresco Housing Projects represented by the aforesaid three partners.
(For the sake of convenience, the parties hereinafter are referred to as arrayed in A.A.No.155 of 2023).
5. As per said DAGPA, 1st respondent/ M/s Cresco Housing Projects, has to obtain necessary permits and shall complete the projects within 24 months from the date of obtaining the said permits. Three months grace period was also agreed therein.
6. According to 1st respondent, it could not complete the said projects due to pendency of litigation in several suits including O.S.No.107 of 2015, O.S.No.385 of 2022 and other issues. But according to the Applicants, the said issues will not come in the way of respondent in obtaining necessary permits and completing project. Even then, respondent failed to complete the project in terms of the said DAGPA and supplementary agreements all dated 06.02.2017 and therefore, vide legal notice dated 01.07.2023, the Applicants have 4 cancelled and revoked the said DAGPA and the supplementary agreements all dated 06.02.2017.
7. According to the Applicants, their father Mr.G.K.Raju, died on 09.02.2018. In view of the said disputes, they have executed two unregistered irrevocable GPAs dated 27.07.2020 and also SPAs dated 26.08.2022 in favour of Sri N.Ravinder Reddy. According to the Applicants, clause No.14.5 of DAGPA, dated 16.02.2017 deals with governing law and dispute resolution mechanism besides arbitration clause. Therefore, they have issued legal notice dated 01.07.2023 cancelling the aforesaid DAGPA, supplementary agreements and proposed the name of Sri Justice L.Narasimha Reddy, Former Chief Justice of Patna High Court as sole Arbitrator of the disputes. Respondents have issued replies denying the same.
8. Thus, according to the Applicants, there are disputes between the Applicants and respondent No.1, with regard to development of the aforesaid property pursuant to the said DAGPA and supplementary agreements dated 06.02.2017 which are arbitrable in nature. But according to the respondent No.1, the Applicants cannot cancel the registered DAGPA dated 06.02.2017 by way of issuance of 5 legal notice dated 01.07.2023, it is impermissible. There is no provision in the said DAGPA to cancel the same. It is a registered DAGPA and it has to be cancelled by way of another registered document. Arbitrator cannot go beyond the terms of the said DAGPA and consider the aspect of cancellation. The irrevocable GPAs dated 27.07.2020 and SPAs dated 26.08.2022 are non-est in terms of Sections 24, 201 and 202 of the Indian Contract Act,1872. Therefore, A.A.No.155 of 2023 filed by the Applicants represented by their GPA holder Sri N.Ravinder Reddy is liable to be dismissed and A.A.No.15 of 2024 filed by M/s Cresco Housing Projects Limited is liable to be allowed.
9. There is no dispute that Mr. G.K.Raju and his son Mr. G.Vibby, have executed the aforesaid DAGPA in favour of 1st respondent with regard to development of aforesaid property. Sri G.K.Raju, died on 09.02.2018. The said registered DAGPA is in existence. Therefore, according to the Applicants, since the respondents failed to comply with the said projects in terms of said DAGPA within the timelines, they have cancelled the same by way of issuing legal notice dated 01.07.2023.
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10. In the light of the aforesaid submissions, Sections 24, 201 and 202 of the Indian Contract Act are relevant and the same are extracted below:-
Section 24 of Indian Contract Act, 1872
24.Agreements void, if considerations and objects unlawful in part.--
If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.
Section 201 of Indian Contract Act, 1872
201. Termination of agency.--An agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors.
Section 202 of Indian Contract Act, 1872
202. Termination of agency, where agent has an interest in subject- matter.--Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.
11. The said provisions inter alia provides that where the agent has himself an interest in the property which forms the subject matter of agency the agency cannot in the absence of an express contract, be terminated to prejudice such interest.
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12. In S. Saktivel (Dead) By Lrs vs M.Venugopal Pillai 1, the Apex Court held that the terms of registered document can be altered, rescinded or varied only by subsequent registered document and not otherwise.
13. In Seth Loon Karan Sethiya vs Ivan E. John 2, the Apex Court held:
"5. There is hardly any doubt that the power given by the appellant in favour of the Bank is a power coupled with interest. That is clear both from the tenor of the document as well as from its terms. Section 202 of the Contract Act provides that where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest. It is settled law that where the agency is created for valuable consideration and authority is given to effectuate a security or to secure interest of the agent, the authority cannot be revoked."
14. In Thota Ganga Laxmi vs. Government of Andhra Pradesh 3 the Apex Court held as follows:
"4. In our opinion, there was no need for the appellants to approach the civil court as the said cancellation deed dated 4-8-2005 as well as registration of the same was wholly void and non est and can be ignored altogether. For illustration, if A transfers a piece of land to B 1 (2000) 7 SCC 104 2 AIR 1969 SC 73 3 (2010) 15 SCC 207 8 by a registered sale deed, then, if it is not disputed that A had the title to the land, that title passes to B on the registration of the sale deed (retrospectively from the date of the execution of the same) and B then becomes the owner of the land. If A wants to subsequently get that sale deed cancelled, he has to file a civil suit for cancellation or else he can request B to sell the land back to A but by no stretch of imagination, can a cancellation deed be executed or registered.
This is unheard of in law."
15. In Dashamma vs State of Telangana 4, the Division Bench of this Court while discussing unilateral cancellation held that registration and unilateral cancellation of documents such as Development Agreement-cum-General of Power of Attorney under the Registration Act is not permissible in law. The same view was taken by another Division Bench of this Court in Gaddam Laxmaiah vs. The Commissioner of and Inspector General, Registration and Stamps 5.
16. In Bommisetti Vasundhara vs. Pachipulusu Subramanyam 6, the Madras High Court held that Section 202 of the Contract Act provides that where the agent has himself an interest in the property which forms the subject matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the 4 2019 SCC Online TS 2474 5 MANU/TL/0983/2022 6 MANU/TN/0603/1992 9 detriment of such interest. In the instant case, the agency is created for valuable consideration and authority is given to effectuate a security or to secure interest of the agent.
17. In P.Venkata Ravi Kishore vs. JMR Developers Pvt.Ltd. 7, Division Bench of this Court held that the Registration Act and the Rules made thereunder, as held by the Constitutional Courts, prohibits unilateral cancellation of any document by one party without the consent of other party. Once an agreement is registered under the Indian Registration Act, such agreement cannot be cancelled unilaterally by one party to the detriment of other party even when it deals with agency and when no clause is incorporated in the registered document authorizing principal to unilaterally cancel the agency affecting the interest of the agent.
18. In the light of the law laid down in the aforesaid judgments, coming to the facts on hand, as discussed supra, Mr. G.K.Raju and his son G.Vibby, the Applicant No.1 have executed registered DAGPA bearing Doc.No.272 of 2017 dated 06.02.2017, in favour of 1st respondent and it should be cancelled only by way of registered document with the consent of the 1st respondent, otherwise, they have 7 2022 (5) ALT 382 10 to file a civil suit. They cannot cancel by way of issuance of legal notice dated 01.07.2023. Therefore, they cannot execute the aforesaid irrevocable GPA both dated 24.06.2020 in favour of Sri N.Ravinder Reddy, with regard to the very same property. In fact, as rightly contended by learned counsel for the respondent, there is no provision in the registered DAGPA to cancel the same on the grounds stated by respondent No.1 in the legal notice dated 01.07.2023 including for delay in completing the project. Applicants are entitled for rents.
19. The Applicants seeking to appoint arbitrator to adjudicate the disputes between the Applicant and respondents in relation to cancellation of the DAGPA executed between the parties on 06.02.2017. In the light of the same, clause No.14.5 of the said DAGPA is relevant and the same is extracted below:-
Clause 14.5 of the DAGPA is extracted below:
"This Agreement shall be governed and construed in accordance with the laws of India (jurisdiction of the relevant court in the City of Hyderabad, Telangana) and shall benefit and be binding upon the parties hereto and their respective successors and assigns. In the event of a dispute arising out of or pertaining to this Agreement, or under this agreement or in the interpretation of any of the terms and conditions of this Agreement the same shall be referred to arbitration. The arbitration shall be conducted by an arbitral tribunal consisting of a sole-arbitrator mutually appointed by both Parties in accordance with 11 the Arbitration and Conciliation Act. 1996. The language of the arbitration shall be English. The venue of arbitration shall be Hyderabad, Telangana. Each of the Parties submits 10 the exclusive jurisdiction of Courts at Hyderabad, Telangana over any matter pertaining to seeking interim relief or enforcement of the arbitration award or any other matter that cannot be referred to arbitration under applicable law."
Cancellation is not part of the same. Therefore, Arbitrator cannot travel beyond the scope of the aforesaid arbitral clause in the agreement.
20. In Union of India vs. Bharat Enterprise 8, the Apex Court held that the Arbitrator cannot travel outside contractual provision and pass an award. The same principle was laid down by the Apex Court in Steel Authority of India Limited vs. J.C.Budharaja 9.
21. Emaar india Ltd. Vs. Tarun Aggarwal Projects 10, the Apex Court held that the Court at the reference stage itself can go into non- arbitrability of the disputes.
22. In Victory Iron Works Ltd. Vs. Jitendra Lohia 11, the Apex Court held that the claim cannot be beyond the agreement.
23. In PSA Sical Terminals Pvt.Ltd. vs. the Board of Trustees of V.O.Chidambranar Port Trust, Tuticorin 12, the Apex 8 2023/INSC/277 9 AIR 1999 SC 3275 10 2022 SCC OnLine SC 1328 11 2023/INSC/230 12 Court held that the jurisdiction of the Arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject matter of reference. The Arbitral Tribunal is not a Court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its powers ex debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement. He can only pass such an order which may be the subject matter of reference.
24. In the light of the same, as discussed supra, Clause No.14.5 of the DAGPA, dated 06.02.2017 deals with the arbitration clause and dispute resolution mechanism. The arbitrator has to confine to the same.
25. Learned counsel for the Applicant has placed reliance on the following judgments:-
1. M/s Asian Avenues Pvt.Ltd vs. Sri Syed Shoukat Hussain 13
2. Sushma Shivkumar Daga vs. Madhurkumar Ramkrishnaji Bajaj 14
3. Epsilon Eduventures Private Limited vs. Nikhil Goel 15 12 2021/INSC/265 13 2023 AIR (SC) 2185 14 2023 LiveLaw (SC) 984 13
4. M/s Sree Durga Estates vs. J.A.S.Padmaja 16 The facts of the said cases are altogether different to the facts of the present case since the DAGPA in the case on hand is a registered document, whereas the same was cancelled by way of issuance of legal notice, dated 01.07.2023 which is impermissible in law.
26. As discussed supra, the Applicants in A.A.No.155 of 2023 i.e. owners of the subject property represented by Sri N.Ravinder Reddy, GPA holder sought appointment of Arbitrator and whereas, 1st respondent also sought appointment of an Arbitrator to adjudicate the disputes between the owners and itself.
27. Thus, admittedly there are disputes between the Applicants and respondents with regard to the aforesaid DAGPA, dated 06.02.2017 and the same are arbitrable to be adjudicated by an Arbitrator.
28. During the course of arguments, it is brought to the notice of this Court about filing of the suit by the developer against Sri M.Ravinder Reddy, and obtaining an order and also filing of an Application under Section 9 of the Act, vide COP Nos.6 and 7 of 2021 and also COMCA Nos.19 and 20 of 2022. The aforesaid facts would reveal that there are 15 2022 SCC OnLine Del 1308 16 COMCA No.34 of 2022, dated 10.02.2023 of High Court of Telangana, at Hyderabad.
14disputes between the Applicants and respondents which are arbitrable in nature.
29. During the course of arguments, it is brought to the notice of this Court that M/s Cresco Housing Projects has entered into MOU dated 05.09.2019 with PVR Developers India Private Limited. According to the Applicants, the 1st respondent has no power to execute the said MOU. It is an arbitrable issue and this Court cannot go into the same. At the reference stage, being referral Court, under Section 11(6) of the Act, this Court has to see as to the existence of agreement and arbitration clause as held by the Apex Court in Vidya Drolia v. Durga Trading Corporation 17,
30. It is also brought to the notice of this Court that there are disputes between the partners of M/s Cresco Housing Projects. According to Sri K.Sathakarni, learned counsel for 1st respondent, the same are with regard to rendition of accounts and they are nothing to do with the present applications. The said fact is confirmed by M/s Unnam Law Firm, learned counsel appearing for respondent No.2 and Sri Mohd. Moin Ahmed Quadri, learned counsel appearing for respondent No.3 in A.A.No.155 of 2023.
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(2021) 2 SCC 1.
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31. As discussed supra, during the subsistence of the said registered DAGPA bearing Doc.No.272 of 2017, dated 06.02.2017, Applicants cannot cancel the same by way of issuance of legal notice dated 01.07.2023 and execute the aforesaid two irrevocable GPAs dated 27.07.2020 and SPAs dated 26.08.2022 in favour of Mr. N.Ravinder Reddy, the same are non-est in the eye of law. On the strength of the same, Mr. N.Ravinder Reddy, cannot represent the owners and file arbitration application vide A.A.No.155 of 2023.
32. In the light of the above discussion, A.A.No.155 of 2023 filed by the Applicants represented by their GPA Holder Mr. Ravinder Reddy, is liable to be dismissed and accordingly, dismissed. Whereas, A.A.No.15 of 2024 filed by M/s Cresco Housing Projects against the respondents Mr.G.Vibby and Mr.G.Chakradhar is liable to be allowed and accordingly allowed. Accordingly, Sri Justice M. Seetharama Murti, Former Judge of High Court of Andhra Pradesh at Amaravati. is appointed as sole Arbitrator to adjudicate the disputes between the parties. The parties are at liberty to take all the defences before the learned sole Arbitrator.
Consequently, miscellaneous petitions, pending if any, shall stand closed.
_________________ K. LAKSHMAN, J Date:22.04.2024 vvr