Rajinder Singh Walia And Anr vs Nabanita Singh And Anr
2022 Latest Caselaw 2842 Cal/2

                  IN THE HIGH COURT AT CALCUTTA
                           Ordinary Original Civil Jurisdiction
                                     Original Side


Present:

The Hon'ble Justice Shekhar B. Saraf

                                    AP 537 of 2022
                           Rajinder Singh Walia And Anr.
                                            VS
                              Nabanita Singh And Anr.




     For the Petitioners                         : Mr. Debnath Ghosh, Adv.
                                                   Mr. Megnad Dutta, Adv.
                                                   Ms. Debanjana De, Adv.



     For the Respondents                         : Mr. A.C. Kar, Sr. Adv.
                                                   Mr. T.K. Aich, Adv.



Last heard on: November 04, 2022
Judgment on: November 24, 2022


Shekhar B. Saraf, J.:
1.    The petitioners in the instant application [being A.P. No. 537 of 2022]

      under Section 9 of the Arbitration and Conciliation Act, 1996 [hereinafter

      referred to as 'the Act'] are partners in a partnership firm under the name

      of 'Kirat Construction', carrying on the business of developing properties.
                                       2


2.   The respondent no. 1 is the owner of the premises No. 2A, Hari Bose Lane,

     Police Station - Burtolla, Kolkata 700016 measuring more or less 6

     cottahs, 9 chittacks 25 sq. ft. [hereinafter referred to as 'the Premises'].

     Respondent no. 2 is the husband of respondent no. 1.




3.   The petitioners have preferred this application praying for injunction on

     the Premises in the form of the following directions: (a) the respondents,

     his men, servants, agents be restrained from dealing with disposing off,

     alienating and/or creating any third party right, title or interest in the

     Premises; (b) the respondents, his men, servants, agents be restrained

     from giving effect or further effect to the cancellation and/or termination

     notices dated July 9, 2021 and October 25, 2021; (c) the operation of the

     notices dated July 9, 2021 and October 25, 2021 issued by respondent

     no. 1 be stayed.




Relevant Facts

4. Respondent no. 1, being the absolute owner of the Premises, accompanied

by respondent no. 2, approached the petitioners for developing the

Premises.

5. The petitioners and respondent no. 1 entered into a development

agreement dated August 25, 2009 [hereinafter referred to as 'the

Agreement'] followed by a General Power of Attorney dated August 25,

2009 [hereinafter referred to as the 'GOA'].

6. The petitioners paid Rs. 65,00,000/- to the respondents via various

cheques in pursuance of the Agreement.

7. Since a tenant, by the name of Snighdha Jana [hereinafter referred to as

'the tenant'] was already residing at the said premises, a tripartite

agreement was entered into between the petitioners, tenant and

respondent no. 1 [hereinafter referred to as the 'tripartite agreement'], vide

which the tenant was promised a total of 2500 sq. ft. in the Premises after

development.

8. The petitioners spent a further amount of Rs. 24,15,000/- for developing

the Premises, Rs. 5,00,000/- for the tripartite agreement and Rs.

25,00,000/- on sanction plan for construction on the Premises.

9. The petitioners constructed some portions of the ground floor and first

floor of the building on the Premises. These facts are also confirmed by the

receiver's report which was taken on record vide order dated November 4,

2022.

10. The respondent no. 1 vide two notices dated July 9, 2022 and October 25,

2022 terminated the Agreement and the GOA [hereinafter referred to as

'termination notices']. The petitioners contested the termination vide two

notices dated August 12, 2021 and November 29, 2021.

11. The respondent no. 1 has stated in the termination notices that only Rs.

65,00,000/- were paid and substantial amounts due as per the Agreement

were remaining. Since substantial time has passed, termination had to be

effected. The respondent also deducted Rs. 15,00,000/- by way of

damages for suffering loss and mental agony and 25% of the total price

and offered a refund of Rs. 15,00,000/- to the petitioners.

The Submissions

12. It is pertinent now to state the arguments put forth by counsels of both sides.

13. Mr. Debnath Ghosh, learned Advocate, appearing on behalf of the

petitioners submitted the following arguments:

a) The petitioners have been ready and willing to perform their obligations

under the Agreement, except the obligations whose execution has been

waived and/or prevented by the respondents;

b) The petitioners have a right to specific performance of the contract and

despite thirteen years already having been passed since the execution

of the Agreement the right still subsists as time was not essence of the

contract. Reliance has been placed on N. Srinivasa v. Kuttukaran

Machine Tools Limited ([2009] 5 SCC 182) to substantiate the point

that there is a presumption in contracts relating to immovable property

that time is not the essence of the contract. Irrespective of this

contention, even after termination, the arbitration clause survives and

interim safeguards must be granted;

c) The petitioners have also placed reliance on Branch Manager, Magma

Leasing and Finance Limited and Another v. Potluri Madhavilata

and Another ([2009] 10 SCC 103) to argue that a right to take the

claim to arbitration subsists even if the contract comes to an end by its

termination;

d) The respondent No. 1 has entered into agreements with third parties,

which is evidence of mala fide intent and will subsequently frustrate

their rights, leading to irreparable loss.

14. Mr. A.C. Kar, Senior Advocate, appearing on behalf of the respondents

submitted the following arguments:

a) The petitioners reneged on their obligations by not paying the entire

amount and a substantial period of time has passed, therefore the

performance of the Agreement was barred and hence was terminated;

b) This court does not have jurisdiction under the Act as on account of

non-encashment of any cheque issued by the petitioner, the Agreement

under Clause 6, provides for refund after determination of costs and

expenses incurred by the petitioner for carrying on the construction

work. Such amounts have to be assessed by the Architects of the newly

appointed developer and respondent no. 1. Clause 6 supersedes the

arbitration clause since it is a prior clause. Reliance has been placed

on Ramkishorelal and Another v. Kamal Narayan (1963 Supp [2]

SCR 417) for the said proposition.

Issues

15. Upon analysing the arguments put forth by both the parties, I am of the

view that the following issues are required to be addressed by me to

resolve the disputes between the parties:

a) Whether this court can exercise power under the Act in light of the

arbitration clause?

b) If the answer to the former issue is in the affirmative, whether interim

relief should be granted as per Section 9 of the Act?

Analysis

16. Mr. A.C. Kar, Senior Advocate, appearing on behalf of the respondents

submitted that clause 6 supersedes the arbitration clause. The Apex

Court, in Ramkishorelal and Another (supra) held that where earlier

clauses make absolute disposition of property, latter clauses which limit

such disposition must be disregarded. However, the Court also avers that

attempts must be made to read the two parts of the document

harmoniously, if possible.

17. Mr. Debnath Ghosh, learned advocate appearing on behalf of the

petitioners relied upon judgements to impress upon this court that the

termination was dehors the contract for two reasons: (i) the contract does

not provide for deduction of amounts for mental agony and harassment

and (ii) time was not the essence of the contract. Reliance was placed on

N. Srinivasa (supra) and Branch Manager (supra).

18. The petitioners also contended that despite termination of the contract,

the dispute has to be referred to arbitration and interim relief should be

granted.

19. The relevant portion from Branch Manager (supra) is extracted below

wherein the Apex Court held:

"14. The statement of law expounded by Viscount Simon, L.C. in Heyman

[1942 AC 356 : (1942) 1 All ER 337 (HL)] as noticed above, in our view,

equally applies to the situation where the contract is terminated by one

party on account of the breach committed by the other particularly in a case

where the clause is framed in wide and general terms. Merely because the

contract has come to an end by its termination due to breach, the arbitration

clause does not get perished nor is rendered inoperative; rather it survives

for resolution of disputes arising "in respect of" or "with regard to" or

"under" the contract. This is in line with the earlier decisions of this Court,

particularly as laid down in Kishorilal Gupta [AIR 1959 SC 1362 : (1960) 1

SCR 493]"

20. The Apex Court's observations in N. Srinivasa (supra) are extracted

below:

"31. As noted herein earlier, one of the main issues for the purpose of

deciding the application for injunction was whether time was the essence of

the contract or not. By the impugned order, the High Court had failed to

appreciate that in the contract relating to immovable property, time cannot

[Ed.: The complete legal position as to time being of the essence in contracts

for sale of immovable property is stated in para 27.] be the essence of the

contract. In any event even in such a case the arbitration clause would

survive and the dispute would be required to be resolved. That being the

position, pending disposal of the arbitration proceeding, interim measure to

safeguard the interest was required to be taken."

Conclusion

21. Relevant clauses of the Agreement are extracted below for proper

determination of the said dispute:

"6. It may be mentioned that if any of the aforesaid cheques issued by the

Developer in favour of the owner and/or her nominated person namely

Arjun Singh upto the month of November is not encashed due to any reason

whatsoever then the owner shall be at liberty to stop the work and if within

15 days from the date of stop of work, the amount is not paid then the

owner shall be at liberty to complete the said work either by herself or by

deputing new constructor and in such event the owner shall refund the

money received today or to be received in the meantime from the Developer

herein after deducting 25% of the total sale price. The cost and expenses

incurred by the Developer in the meantime for carrying on the construction

work shall be paid by the owner after handing over the said project to any

new Developer. The amount of such expenses to be assessed by the

Architects of the Developer and the Owner engaged and/or to be engaged in

the said project"

"22. Any dispute arising as between the Owner and the Developer

regarding any matter in respect of the development of the said property

shall be referred to Arbitration as per provision of the law in this regard."

22. A harmonious understanding of the Agreement would lead to an inference

that while the expenses incurred may be assessed by the Architects, the

arbitration clause is not ousted. Such assessments can be submitted to

the arbitrator, but first the arbitrator has to decide on the validity of the

termination notices and contractual retractions of the parties.

23. Prima facie, I find that the contract was not one where time was of the

essence of the contract. Even if it were, it is a determination that the

arbitrator has to make. What is undisputed though is that there are

certain amounts deducted vide termination notices which are clearly not

contemplated in the Agreement. Thereafter, attempts have been made to

make commercial arrangements with third parties with respect to the said

premises. In my view, a prima facie case has been made out by the

petitioners with respect to validity of the arbitration clause and for

injunctive reliefs. Furthermore, balance of convenience is in favour of the

petitioner as development work has progressed and termination of the

same would lead to irreparable loss to the petitioners.

24. In light of the above, Issue No. 1 and Issue No. 2 are decided in the

affirmative. Interim reliefs are granted in terms of prayers (a), (b) and (c) of

the notice of motion. The interim orders shall continue for a period of 8

weeks from date or until further orders, whichever is earlier.

25. Accordingly, affidavit-in-opposition is to be filed within five weeks from the

date of this order and affidavit-in-reply, if any, two weeks thereafter.

26. Urgent Photostat certified copy of this order, if applied for, should be made

available to the parties upon compliance with the requisite formalities.

(Shekhar B. Saraf, J.)