Chinnari Suryanarayana vs Nagireddy Srinivasa Rao,
2021 Latest Caselaw 3246 AP

     IN THE HIGH COURT OF ANDHRA PRADESH : AMARAVATI

HON'BLE MR. JUSTICE ARUP KUMAR GOSWAMI, CHIEF JUSTICE

           ARBITRATION APPLICATION No.138 of 2017
                     (Taken up through video conferencing)

Chinnari Suryanarayana S/o. Satyanarayana,
Aged 53 years, Occu: Business,
R/o.12-31(1)-1A, Official colony,
Srikakulam Town and District and others.                     .. Applicants

        Versus

Nagireddy Srinivasa Rao, S/o. Prabhakara Rao,
Occu: Business, Proprietor A Square Builders
& Developers, R/o. MIG-1, Plot No.54,
Sector-III, M.V.P. Colony,
Visakhapatnam-530 017.                                       .. Respondent

Counsel for the applicants                  : Mr. Tarlada Rajasekhar Rao

Counsel for respondent                     : Mr. A.K.Kishore Reddy

Date of hearing                             : 24.07.2021

Date of order                              : 27.08.2021

                                ORDER

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 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. 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. 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. 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.

ARUP KUMAR GOSWAMI, CJ

GM

HON'BLE MR. JUSTICE ARUP KUMAR GOSWAMI, CHIEF JUSTICE

ARBITRATION APPLICATION No.138 of 2017 (Taken up through video conferencing)

Dt: 27.08.2021

GM