Mr. Milind S/O. Dattatraya ... vs Mr. Pramod S/O. Deshraj Budhraja, ...
2016 Latest Caselaw 133 Bom

                                     1
                                                                    aa18.15.odt

          IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                            
                    NAGPUR BENCH, NAGPUR




                                                    
                      Arbitration Appeal No.18 of 2015


      1. Mr. Milind s/o Dattatraya Mahajan,
         Aged 54 years,




                                                   
         Occupation - Business,
         R/o Mahajan Wada,
         Mahajan Market,
         Sitabuldi, Nagpur-440 012.




                                        
      2. Mrs. Aarti w/o Milind Mahajan,
         Aged 51 years,      
         Occupation - Business,
         R/o Mahajan Wada,
         Mahajan Market, 
                            
         Sitabuildi, Nagpur-440 012.

      3. Mr. Dattatraya S. Mahajan,
         Aged 82 years,
         Occupation - Agriculturist,
      


         R/o Mahajan Wada,
         Mahajan Market,
   



         Sitabuldi, Nagpur-440 012.

      4. Mr. Ninad Milind Mahajan,
         Aged 25 years,





         Occupation - Business,
         R/o Mahajan Wada,
         Mahajan Market,
         Sitabuildi, Nagpur-440 012.                     ... Appellants/
                                                         Ori. Defendants





           Versus




    ::: Uploaded on - 02/03/2016                    ::: Downloaded on - 03/03/2016 00:01:36 :::
                                           2
                                                                               aa18.15.odt

      Mr. Pramod s/o Deshraj Budhraja,




                                                                                       
      Aged 66 years,
      Occupation - Business,




                                                              
      R/o "Ashray" 612, New Colony,
      Nagpur-400 001,
      through his power of attorney holder
      Mr. Rahul s/o Pramod Budhraja,
      Aged 31 years,




                                                             
      Occupation - Business,
      R/o "Ashray" 612, New Colony,
      Nagpur-440 001.                                            ...  Respondent




                                               
      Shri D.V. Siras, Advocate for Appellants.
      Shri M.G. Bhangde, Senior Advocate, assisted by Shri R.M. Bhangde, 
                             
      Advocate for Respondent.
                            
                   Coram : R.K. Deshpande, J.

Date of Reserving the Judgment : 25th February, 2016

Date of Pronouncing the Judgment : 29th February, 2016

Judgment :

1. Admit. Heard finally by consent of the learned Advocates

appearing for the parties.

2. The respondent/plaintiff-Pramod s/o Deshraj Budhraja has

filed Summary Civil Suit No.108 of 2015 under Order XXXVII of the

Code of Civil Procedure on 10-8-2015 for a decree in the sum of

Rs.3,51,26,250/- along with future interest at 21% per annum

aa18.15.odt

compounded quarterly from the date of filing of the suit till its

payment, against the appellant-defendants, alleging that the

defendants had issued four cheques dated 25-2-2015, 25-3-2015,

25-4-2015 and 25-5-2015 for an amount of Rs.1,00,00,000/- each in

favour of the plaintiff to discharge their liability, and all the four

cheques were dishonoured due to insufficient funds. The first cheque

dated 25-2-2015 was presented on 26-2-2015, and upon its dishonour,

it was returned to the defendant No.1, who made the payment of

Rs.70,00,000/- and assured to make the balance payment of

Rs.30,00,000/-, which he has failed to make. The other three cheques

were dishonoured on 13-6-2015 upon presentation, and no payment

has been made. Thus, the claim was for the principal amount of

Rs.3,30,00,000/- with interest at the rate of 21%. The parties shall

hereinafter be referred accordingly to their status as the plaintiff and

the defendants.

3. In response to the suit summons, the defendants at the very

first opportunity produced an arbitration agreement dated 9-4-2014

along with an application Exhibit 23 filed under Section 8 of the

Arbitration and Conciliation Act, 1996 read with Section 9-A of the

Code of Civil Procedure on 30-9-2015 for referring the matter to the

aa18.15.odt

Arbitrator named therein. The plaintiff filed his reply on 7-10-2015,

opposing this application. The Trial Court has, by an order

dated 27-10-2015, rejected the application at Exhibit 23 and hence the

defendants have approached this Court by filing this appeal under

Section 37(1) of the Arbitration and Conciliation Act.

4. The controversy involved in the present appeal is restricted

to the claim of the defendants to seek reference of the matter to the

Arbitrator in terms of clause 11, in the agreement dated 9-4-2014,

styled as "Sale Agreement/Memorandum of Understanding"

(hereinafter referred to as "the said agreement"), executed between

the defendants and the plaintiffs, who are described therein as

PARTY NO. ONE and PARTY NO. TWO respectively. In order to

appreciate the factual controversy involved in the matter, the terms of

the said agreement will have to be looked into.

5. The salient features of the said agreement, to which the

learned Advocates appearing for the parties have invited my attention,

are stated as under :

(1) The defendants are the owners of separate block

aa18.15.odt

Nos.301 A, 301 B, 301 C and 301 D, admeasuring totally

about 5000 sq.ft. carpet area, and terrace of about 12000

sq.ft. carpet area, situated on the third floor, bearing N.M.C. House No.64/301 A to 301 D, Ward No.65, Khasra No.101/3, City Survey No.1866, Sheet No.34, Mouza

Sitabuldi, at SV Patel Marg, Kingsway, Sadar, Nagpur (hereinafter called as "the said property"), which is the subject-matter of the said agreement.

(2) The plaintiff has agreed to purchase and the

defendants have agreed to sell the said property on 9-4-2014 for a total consideration of Rs.6,50,00,000/-,

out of which the plaintiff had paid an amount of Rs.4,50,00,000/- by two cheques dated 27-3-2014 for Rs.2,50,00,000/- and dated 29-3-2014 for Rs.2,00,00,000/-

to the defendants, and an amount of Rs.1,50,00,000/- by a cheque dated 22-4-2014. The balance consideration of

Rs.2,00,00,000/- was agreed to be paid at the time of registration of the sale-deed within a period of six months, on or before 30-9-2014.

6. Clauses 8 and 11 of the said agreement were heavily relied

upon by both the parties, and hence the same are reproduced below :

"8. That the PARTY No. ONE shall Execute and Register the Sale Deed in the name of PARTY No. TWO or his nominee and

aa18.15.odt

the PARTY No. TWO or his nominee shall take the Sale Deed

on or before 30th September, 2014, on the same conditions as

agreed between PARTY No. TWO & PARTY No. ONE provided all the necessary clearances as mentioned above have been taken by PARTY No. TWO. Time is the essence of the contract.

Both PARTY No. ONE and PARTY No. TWO shall have the right for specific performance of contract as per clause 11 below."

"11. Description of the complete property : 5000 sft covered carpet area, open terrace 12,000 sft. out of which

3450 covered carpet area and 4000 sft. open terrace has been offered on lease to Barbecue Nation as shown in the attached

plan, Marked in blue. There is a capsule lift connecting the basement parking, the ground floor and the third floor, which is being offered to them as an exclusive use, as well as certain

parking rights, the charges for the same shall only be the normal maintenance charges.

The property to be sold : 5000 sft covered carpet area, open

terrace 4,000 approx. sft. as shown in the attached plan marked in red. The balance area of terrace about 8000 sft is not under sale and shall remain in the ownership of PARTY No. ONE. There is a capsule lift connecting the basement parking,

the ground floor and the third floor, the same shall form a part of this sale. All facilities offered to Barbecue Nation shall be part of sale and before handing over the physical possession of the property it will be measured and appropriate pricing of

aa18.15.odt

covered area and terrace area will be calculated.

All expenses borne in providing power of 150 KW to Barbecue Nation shall be borne by the Purchaser.

Conditional sale/compensation agreed : This is a conditional sale, in the event the property does not go on lease to Barbecue Nation or any other client within a period of six

months from 1st April 2014, in that event the PARTY No. TWO shall have the right to charge an interest of 21% per annum as

compensation, to be compounded every 3 months on the amount given and withdraw from this transaction. It is also

agreed between the Parties that if the leasing of the property is concluded earlier, in that event the balance payment shall be made within 15 days from the date of agreement of the lease.

Arbitration : Any disputes in this matter shall be referred to

the sole arbitration of Mr. Pankaj Roshan Chandna, and his decision shall be final as he has been instrumental in

finalization of the transaction and is aware of all the communication between the two parties."

7. Clause 8 of the said agreement contains a stipulation that the

time is the essence of contract and both the parties, viz. PARTY

NO.ONE and PARTY NO.TWO shall have the right for specific

performance of contract as per clause 11 thereof. Clause 11 contains a

aa18.15.odt

stipulation "Conditional sale/compensation agreed" and it states that

this is a conditional sale in the event the property does not go on lease

to "Barbeque Nation" or any other client within a period of six months

from 1st April, 2014, in that event the PARTY NO.TWO shall have the

right to charge an interest of 21% per annum as compensation, to be

compounded every three months on the amount given, and withdraw

from this transaction. The stipulation regarding arbitration contained

in clause 11 states that any disputes in this matter shall be referred to

the sole arbitration of Mr. Pankaj Roshan Chandna, and his decision

shall be final as he has been instrumental in finalization of the

transaction and is aware of all the communications between the two

parties.

8. In para 4 of the plaint, it is stated that the cardinal term of

the said agreement was that "Barbeque Nation", a multi city chain of

restaurant, would take the property on lease latest by

30th September, 2014, and if the said restaurant or any other client

does not take the property on lease for any reason whatsoever, the

payment made by the plaintiff shall be refunded forthwith in the

October 2014 with interest at 21% per annum, compounded quarterly.

The plaint alleges in para 5 that "Barbeque Nation", which is a

aa18.15.odt

restaurant, refused to take the property on lease, as the entire property

was not sanctioned by the Nagpur Municipal Corporation - the

planning authority, and only a part of it was sanctioned.

9. In para 6, it is alleged that the plaintiff has been incessantly

asking for return of the amount with interest, as was agreed, and the

defendants requested for providing installments. After due

deliberation and discussion, the defendants issued eight cheques in

favour of the plaintiff for repayment of the amount due under the said

agreement in eight installments, which clearly shows that the liability

to repay under the said agreement was an admitted liability and was

never disputed by the defendants at any stage. Para 6 of the plaint

gives the details of seven cheques of Rs.1,00,00,000/- each

dated 25-2-2015, 25-3-2015, 25-4-2015, 25-5-2015, 25-6-2015,

25-7-2015 and 25-8-2015. It also gives the details of last cheque of

Rs.64,11,123/- dated 25-9-2015.

10. The claim in the plaint in question is restricted to the alleged

liability of the defendants discharged by the first four cheques of

Rs.1,00,00,000/- each, out of which, part payment of the alleged

liability to the extent of Rs.70,00,000/- contained in the first cheque,

aa18.15.odt

was discharged. The plaintiff issued a legal notice dated 22-6-2015,

calling upon the defendants to return the sum of Rs.3,30,00,000/-

contained in the aforestated four cheques, which were dishonoured

on 13-6-2015. Similarly, after dishonour of the other cheques,

separate such summary suits have been filed, as is informed to this

Court.

11. The Trial Court has recorded the finding that the defendants

have till this date not applied for leave to defend and the grounds

raised in the application could not have been raised in the application

for leave to defend. It further holds that the issue of referring the

matter to the Arbitrator could have been arisen only when the plaintiff

had claimed the amount on the basis of the said agreement. It further

holds that the agreement is used or relied upon in the present matter

only in order to show the background of the transaction. The suit has

been filed on the basis of dishonoured cheques and recovery of that

much amount only. It further holds that the agreement

dated 9-4-2014 is no doubt the source of contract between the parties,

but the dishonour of the cheques being a new cause of action,

independent and distinct from that is founded on the agreement, and

merely because the defendants have raised a plea that the cheques

aa18.15.odt

were security cheques, that is not enough. According to the Trial

Court, the new cause of action of dishonour of cheques cannot be said

to be the subject-matter covered by the arbitration clause under the

agreement and, therefore, the matter cannot be referred to the

Arbitrator.

12. Heard Shri D.V. Siras, the learned Advocate appearing for the

appellant-defendants; and Shri M.G. Bhangde, the learned Senior

Advocate, assisted by Shri R.M. Bhangde, Advocate, for the

respondent-plaintiff. Although the suit in question is a summary suit

under Order XXXVII of the Code of Civil Procedure, there was no

application for leave to defend filed, as contemplated by sub-rule (5)

of Rule 3 under Order XXXVII of the Code. It is not the case of any of

the parties that the arbitration agreement does not subsist/exist. On

the basis of the contentions raised by the learned Advocates appearing

for the parties, and in the light of the findings recorded by the Trial

Court, the following points for determination are framed, to deal with

the contentions.

Points for determination

aa18.15.odt

(1) Whether in the absence of an application for leave to

defend, as contemplated by sub-rule (5) of Rule 3 of

Order XXXVII of the Code of Civil Procedure, the application under Section 8 of the Arbitration and Conciliation Act, 1996 could be entertained and decided by the Trial Court?

(2) Whether the Trial Court was right in holding that the suit in question is exclusively based upon the dishonour of the cheques and it is not seeking to enforce the said

agreement dated 9-4-2014, so as to attract the clause No.11

of the arbitration, contained therein?

As to Point No.(1) :

13. Sub-sections (1) and (2) of Section 8 of the Arbitration and

Conciliation Act, 1996 being relevant, are reproduced below :

"8. Power to refer parties to arbitration where there is an arbitration agreement.--(1) A judicial authority, before

which an action is brought in a matter which is the subject of an arbitration agreement, shall, if a party to the arbitration agreement or any person claiming through or under him, so

applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie

aa18.15.odt

no valid arbitration agreement exists.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:

Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said

agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application alongwith a copy of the arbitration agreement and

a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court."

Sub-section (1) of Section 8 requires that a judicial authority, before

which an action is brought in a matter which is the subject of an

arbitration agreement, shall, if a party to the arbitration agreement or

any person claiming through or under him so applies not later than

the date of submitting his first statement on the substance of the

dispute, then, notwithstanding any judgment, decree or order of the

Supreme Court or any Court, refer the parties to arbitration unless it

finds that prima facie no valid arbitration agreement exists. In the

present case, there is no dispute in respect of the compliance of

sub-section (2) of Section 8 of the said Act.

aa18.15.odt

14. In terms of sub-section (1) of Section 8 of the said Act, it is

not permissible for the defendants to apply to the Court to refer the

parties to arbitration after filing an application under sub-rule (5) of

Rule 3 of Order XXXVII of the Code of Civil Procedure for grant of

leave to defend. The application under Section 8 of the said Act is

necessarily required to be made before the disclosure of the defence in

response to the summons of the suit filed under Order XXXVII of the

Code. Otherwise, it shall frustrate the very object of introducing an

arbitration clause in the agreement, as has been urged by Shri Siras.

This objection pertains to the jurisdiction of the Trial Court to deal

with the controversy on merits, and, therefore, the question of seeking

leave of the Court to defend the matter on merits does not arise. The

Trial Court, therefore, committed an error in holding that the claim for

reference of disputes to the Arbitrator could have been raised in the

application for leave to defend under sub-rule (5) of Rule 3 of

Order XXXVII of the Code.

15. The application for leave to defend under sub-rule (5) of

Rule 3 of Order XXXVII of the Code of Civil Procedure has to be filed

within 10 days from the service of summons for judgment. It is

aa18.15.odt

permissible for the defendant in terms of sub-rule (7) of Rule 3 of

Order XXXVII to file an application for excusing the delay caused in

entering an appearance or in applying for leave to defend the suit

upon showing sufficient cause. In view of this, even if the application

for leave to defend is not filed within 10 days, that will not prevent the

defendant from filing such application at any subsequent stage by

putting forth the cause that the application under Section 8 of the

Arbitration and Conciliation Act was filed immediately, and the

defendant was awaiting the decision on such application, which may

be considered by the Court to be the "sufficient cause", as

contemplated by sub-rule (7) of Rule 3 of Order XXXVII of the Code of

Civil Procedure. However, if the application under sub-section (1) of

Section 8 of the said Act is not filed at the very first opportunity, the

defendants shall run the risk of waiver of such objection.

16. The controversy has been put beyond the pale of any doubt

by the decision of the learned Single Judge of this Court

(Shri S.C. Dharmadhikari, J.) in the case of Ion Exchange (India) Ltd. v.

MSK Projects (India) Ltd., reported in 2005(4) Mh.L.J. 921, in which

the question was whether an application under Section 8 of the

Arbitration and Conciliation Act would lie in a suit filed under

aa18.15.odt

Order XXXVII of the Code of Civil Procedure. The Court has construed

the word/phraseology "Action", employed under Section 8 of the said

Act to cover all sorts of suits, which are instituted in the Civil Courts

by presenting a plaint. The Court has rejected the argument that

summary procedure provided under Order XXXVII to certain suits

being an exception carved out to the general procedural provisions

applying Section 8 thereto would be defeating and frustrating the

Legislative mandate. The Court has held that the said Act is aimed at

encouraging parties to settle their disputes by taking recourse to

arbitration and conciliation, and it minimizes the role, which is

supervisory, of the Court in arbitration process. If the purpose of this

enactment is to be achieved, then the interpretation of Section 8 that it

would not apply to the suits under Order XXXVII, cannot be accepted.

The Court has held that if summary suits are left out of the purview of

Section 8(1), the the purpose of enacting a comprehensive Legislation

of Arbitration and Conciliation Act, 1996, cannot be achieved.

Ultimately, the Court has held that Section 8 of the said Act would

cover the suits under Order XXXVII of the Code of Civil Procedure and

it is not permissible to leave them out of its purview.

17. In view of the aforesaid position, the point No.(1) is

aa18.15.odt

answered holding that even in the absence of any application under

sub-rule (5) of Rule 3 of Order XXXVII of the Code of Civil Procedure

for leave to defend, the application under sub-section (1) of

Section 8 of the Arbitration and Conciliation Act would be

maintainable.

As to Point No.(2) :

18. Both the learned Advocates have taken me through the

judgment of the Apex Court in the case of Branch Manager, Magma

Leasing and Finance Limited and another v. Potluri Madhavilata and

another, reported in (2009) 10 SCC 103. In para 17 of the said

judgment, after reproducing Section 8 of the Arbitration and

Conciliation Act, the Apex Court has held as under :

"17. ...

An analysis of Section 8 would show that for its applicability, the following conditions must be satisfied:

(a) that there exists an arbitration agreement;

(b) that action has been brought to the court by one party to the arbitration agreement against the other party;

aa18.15.odt

(c) that the subject-matter of the suit is same as the

subject-matter of the arbitration agreement;

(d) that the other party before he submits his first statement of the substance of the dispute, moves the court

for referring the parties to arbitration; and

(e) that along with the application the other party tenders

the original arbitration agreement or duly certified copy thereof."

Shri Bhangde, the learned Senior Advocate, submits that the Court has

to see whether the requirements of Section 8 of the said Act, as are

reproduced above, have been complied with. The dispute in the

present case is restricted to the compliance of clauses (a) and (c),

reproduced above, and it is not disputed that clauses (b), (d) and (e)

are satisfied in this case.

19. Shri Bhangde, the learned Senior Advocate, appearing for the

respondent-plaintiff, was put a specific question that is it your case in

reply to the application under Section 8 of the Arbitration and

Conciliation Act that the agreement dated 9-4-2014 does not subsist,

and he has answered it in the negative. It is nowhere the case of the

aa18.15.odt

plaintiff in response to the application under Section 8 of the said Act

that there does not exist an arbitration agreement between the parties.

Hence, the test in clause (a) above, is satisfied and it has to be held

that there exists a valid and enforceable agreement of arbitration

between the parties.

20. Shri Bhangde, the learned Senior Advocate, has urged that it

is for the defendants to establish that the subject-matter of the suit is

same as the subject matter of the arbitration agreement. In order to

satisfy this Court on this question, Shri Siras for the

appellant-defendants has invited my attention to the averments in

para 4 of the plaint that if Barbeque Nation or any other client does

not take the property on lease for any reason whatsoever, the payment

made by the plaintiff shall be refunded forthwith in the October 2014

with the interest at 21% per annum, compounded quarterly. In para 6

of the plaint, it is alleged that the parties met and extensively

discussed, and after due deliberation and discussion, the defendants

issued eight cheques in favour of the plaintiff for repayment of the

amount due under the agreement dated 9-4-2014 in eight installments.

He has further invited my attention to para 12 of the plaint, wherein it

is stated that the cause of action accrued to the plaintiff in the month of

aa18.15.odt

October 2014 when the amount was to be returned by the defendants as

per the agreement dated 9-4-2014.

21. Shri Siras has further invited my attention to clause 11 of the

said agreement, which is reproduced earlier, regarding conditional

sale/compensation agreed, in which it is stated that this is a

conditional sale, in the event the property does not go on lease to

Barbeque Nation or any other client within a period of six months

from 1st April 2014, in that event the party No.2 shall have the right to

charge an interest of 21% per annum as compensation, to be

compounded every three months on the amount given and withdrawn

from this transaction. He has further invited my attention to prayer

clause (i) in the plaint, which claims a decree in the sum of

Rs.3,51,26,250/- in favour of the plaintiff directing the defendants to

pay the said amount along with future interest at 21% per annum

compounded quarterly from the date of filing of the suit till

realization, which is the claim in terms of clause 11 of the said

agreement.

22. The total consideration to sell the said property, as agreed,

was Rs.6,50,00,000/-, out of which an amount of Rs.2,00,00,000/-

aa18.15.odt

was the balance consideration, which was required to be paid at the

time of registration of the sale-deed. The averment in para 5 of the

plaint is that Barbeque Nation, a multi city chain of restaurant, has

failed to take the said property on lease because part of the

construction of the suit property was not sanctioned by the Nagpur

Municipal Corporation and, therefore, the condition of sale

incorporated in the said agreement became incapable of performance.

The plaintiff was, therefore, entitled to return the amount of

consideration along with the interest, as agreed.

23. Clause 8 in the said agreement gives the right to both the

parties to the agreement to seek specific performance of contract as

per clause 11 therein. The specific performance may relate either to

get the refund of the entire consideration along with interest at 21%

per annum, compounded quarterly, by way of compensation, as is

averred in para 4 of the plaint read with clause 11 styled as

"Conditional sale/compensation agreed" in the said agreement. It is

also open for the defendants in terms of clause 8 of the said agreement

to seek specific performance of contract from the plaintiff to pay the

balance amount of consideration of Rs.2,00,00,000/- by showing that

there was a breach of contract on the part of the plaintiff in taking the

aa18.15.odt

stand that the condition under the contract could not be fulfilled, for

the reason that part of the said property constructed was not

sanctioned by the Nagpur Municipal Corporation. The entitlement of

the plaintiff to get the refund of consideration with interest of 21% per

annum as compensation, would depend upon resolution of the

dispute, which is covered by the clause of arbitration under the said

agreement.

24.

The Trial Court has committed an error in holding that the

suit in question is exclusively based upon the dishonour of cheques

and that the plaintiff is not seeking to enforce the terms of the said

agreement. From the averments in the plaint, it is clear that the

cheques were issued by the defendants in favour of the plaintiff to

refund the amount of consideration in terms of clause 11 of the said

agreement. Hence, it has to be held that the subject-matter of the suit

is same as the subject-matter of the arbitration agreement. Once it is

held that there exists a valid and enforceable agreement of arbitration

between the parties, the parties are required to be referred to the

arbitration in terms of sub-section (1) of Section 8 of the Arbitration

and Conciliation Act. The point No.(2) is, therefore, answered

accordingly.

aa18.15.odt

25. Shri Bhangde, the learned Senior Advocate, has further urged

that the said agreement does not provide for installments, and it is not

the contractual term to pay the amount in installments. If the

dishonoured cheques had not been issued, the suit could have been

filed for recovery of the entire amount, but in the present case, the suit

has been filed to recover the amount of liability covered by the

dishonoured cheques, which do not cover the entire amount of

consideration. According to him, the present suit is based upon the

cause of action, which arose on account of subsequent agreement

between the parties to provide installments, which is independent and

distinct from the said agreement dated 9-4-2014.

26. Keeping in view the fact that the plaintiff had issued two

cheques dated 27-3-2014 and 29-3-2014 for an amount of

Rs.2,50,00,000/- and Rs.2,00,00,000/- respectively towards part of

consideration to the defendants even before entering into an

agreement on 9-4-2014, Shri Bhangde was put a specific question as to

whether all the cheques dated 25-2-2015, 25-3-2015, 25-4-2015,

25-5-2015, 25-6-2015, 25-7-2015 and 25-8-2015 were issued on the

dates mentioned in the cheques or were the post-dated cheques. He

aa18.15.odt

has answered that these cheques were all post-dated cheques. The

theory of separate agreement is not found in the pleadings. Be that as

it may, the plaint averments are completely silent about the date on

which the alleged agreement to pay the amount in installments was

entered into between the parties. The plaint is conspicuously silent

about the dates on which such post-dated cheques were tendered to

the plaintiff by the defendants.

27.

In the absence of pleading the material date of fresh

agreement and the dates of tendering of post-dated cheques, it is

possible to assume that such cheques were tendered at the time of

execution of the said agreement itself on 9-4-2014 or during the

subsistence of the period of contract from 1-4-2014 till 30-9-2014, on

which date the period has lapsed, or even after 30-9-2014, but before

the first cheque was issued on 25-2-2015. It is possible to urge that

the cheques were issued at the time of execution of the agreement

dated 9-4-2014 by way of security, which is the stand taken by the

defendants, and subject to resolution of dispute, if any, raised in

respect of repayment of the amount of consideration, as contained and

covered by clause 11 of arbitration in the said agreement. In the

absence of any case regarding pre-existing liability or consideration,

aa18.15.odt

except to refund the consideration with 21% per annum as

compensation to be compounded quarterly, it is not possible to link

issuance of these cheques to an independent or distinct cause of action

based upon the agreement alleged to have been entered into between

the parties subsequent to 30-9-2014. If any such case is made out

before the Arbitrator, it shall be open for him to deal or decide it in

accordance with law.

28.

The decision of the Apex Court in the case of Ram Deo v.

Umrao Singh, cited supra, relied upon by Shri Bhangde, turns upon the

facts of that case and it was not a case of Section 8 of the said Act. It

was a suit for damages and eviction and the question was whether the

tenant was in arrears of rent. The Court held on facts of that case in

view of subsequent agreement, pre-agreement arrears lost their

original character on arrears of rent. The said decision, therefore,

does not apply in the present case.

29. For the reasons stated above, the appeal is allowed. The

order passed by the Trial Court on 27-10-2015 below Exhibit 23 in

Summary Civil Suit No.108 of 2015, is hereby quashed and set aside.

The application at Exhibit 23 is allowed and the parties are referred to

aa18.15.odt

arbitration in terms of clause 11 of the Sale Agreement/Memorandum

of Understanding dated 9-4-2014 for adjudication of the dispute as per

sub-section (1) of Section 8 of the Arbitration and Conciliation Act.

The further proceedings of Summary Civil Suit No.108 of 2015 shall

remain stayed, till the conclusion of the arbitration proceedings and it

shall be open for the parties to move the Trial Court thereafter.

30. It is made clear that this Court has not touched the

controversy on merits, including the entitlement of the plaintiff to

claim refund consideration with the compensation at 21% per annum.

If any observations are found touching the controversy on merits, the

Arbitrator shall not get influenced by it and it shall be open for him to

decide it independently in accordance with law.

31. The appeal is disposed of in above terms. No order as to

costs.

JUDGE.

Lanjewar