Calcutta High Court
Sarika Bhoot vs Soumitra Projects Private Limited on 24 November, 2023
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
Present :
Hon'ble Justice Moushumi Bhattacharya
AP 557 of 2023
Sarika Bhoot
vs
Soumitra Projects Private Limited
For the petitioner : Mr. Rahul Karmakar, Adv.
Mr. Jibantaraj Dan Roy, Adv.
Mr. Rittick Chowdhury, Adv.
Ms. Champa Pal, Adv.
Mr. Nishant Choudhary, Adv.
For the respondent : Mr. Shuvasish Sengupta, Adv.
Mr. Samrat Mukherjee, Adv.
Ms. Ledia Dasgupta, Adv.
Last heard on : 18.10.2023
Delivered on : 24.11.2023
Moushumi Bhattacharya, J.
1. The petitioner's application is under section 11 of The Arbitration and
Conciliation Act, 1996 for appointment of an arbitrator. The petitioner has
prayed for the appointment by reason of disputes and differences having arisen
between the petitioner and the respondent out of an agreement for sale dated
7.9.2012 and a Memorandum of Settlement dated 29.9.2016.
2. First, a brief statement of the background to the dispute.
3. The petitioner was interested in purchasing a flat in a multi-storeyed
building complex constructed by the respondent in New Town, Kolkata. The
parties executed an agreement for sale on 7.9.2012. This agreement for sale
contained an arbitration clause at clause 18.1. The respondent, being the
developer, however failed to deliver the flat on time which would be evident
from the correspondence disclosed in the application from 30.10.2015 -
2.12.2015. The respondent could not make the flat ready for transfer and failed
to honour the timelines fixed for delivery of the flats to the petitioner. The
petitioner, through her lawyer, cancelled the agreement dated 7.9.2012 under
cover of a letter dated 21.1.2016 which records the claims of the petitioner
under various heads. The petitioner invoked the arbitration clause contained in
the agreement dated 7.9.2012 by a letter dated 11.3.2016. The respondent's
reply to the invocation on 22.3.2016 indicated that the flat was ready for
delivery and there was no requirement to proceed with the arbitration. The
respondent however failed to deliver possession of the flat to the petitioner.
4. The parties executed a Memorandum of Settlement dated 29.9.2016
recording that the earlier agreement of 7.9.2012 was cancelled / rescinded,
which was also recorded by a Co-ordinate Bench in AP No. 293 of 2016. The
order dated 3.11.2016 is part of records. The parties thereafter executed 6
supplementary Memoranda of Settlement on 9.11.2017, 3.3.2018, 27.4.2018,
31.7.2018, 1.1.2019 and 1.4.2019. The Memorandum of Settlement is
supplementary to the agreement of 7.9.2012. Each of these 6 supplementary
Memoranda of Settlement mention that the agreements are supplementary to
the parent Memorandum of Settlement dated 29.9.2016.
5. The respondent's resistance for opposing the application for appointment
of an arbitrator is primarily on the ground that the arbitration agreement dated
7.9.2012 as well as 29.9.2016 is insufficiently stamped and the agreements
should be impounded for assessment on stamp duty. Learned counsel for the
respondent relies on the Supreme Court decision in N.N. Global Mercantile
Private Limited vs. Indo Unique Flame Limited; (2023) 7 SCC 1
6. Learned counsel appearing for the petitioner seeks to argue that the first
agreement dated 7.9.2012 was novated by the Memorandum of Settlement
dated 29.9.2016 and further that the petitioner is not required to pay any
stamp duty in respect of the latter.
7. From the arguments advanced by counsel appearing for the parties, the
first issue which falls for adjudication is whether the Memorandum of
Settlement executed on 29.9.2016 novated the agreement dated 7.9.2012. If
the answer is in the affirmative, the Court would then have to consider whether
the petitioner is under an obligation to have the agreement impounded and
assessed for stamp duty.
8. The Memorandum of Settlement (MoS) dated 29.9.2016 is the best guide
to answer the first question, that is, whether the MoS novated the agreement
dated 7.9.2012. Although the MoS describes itself as supplemental to the
agreement dated 7.9.2012, the recital to the agreement clearly records that the
petitioner cancelled the earlier agreement of 7.9.2012. The recording of
cancellation and the petitioner's looking back to the earlier agreement fits in
with the sense of "DEJA - VU" - which happens to be the name of the building
complex.
9. Further, clause 1 of the MoS records that the "petitioner (purchaser)"
agreed to surrender her right and interest in respect of the flat by cancelling
the earlier agreement subject to the "respondent (developer)" paying a sum of
Rs. 4800/ sqft. to the petitioner on account of refund of the advance money
alongwith penalty and refund of cost paid by the petitioner. Clause 2(a) further
records that the respondent would pay a sum of approximately Rs. 96.99 lakhs
within 31.3.2017. Clause 3 of the MoS is also significant and records the
following :
"That the said Agreement dated 07.09.2012 upon completion of the
financial commitments as aforesaid shall automatically stand
cancelled, void, ineffective and inoperative and shall have no effect
and none of the parties shall be liable to perform anything in any
manner or nature whatsoever in terms of the said Agreement and
none of the parties shall have any claim, demand, right or interest
arising out of the same against the other party. However, in case the
developer fails and/or neglects to pay the amount within the
stipulated time as aforesaid, this memorandum of settlement shall
stand cancelled at the discretion of the purchaser and in such event
this memorandum of settlement would no more be enforceable by the
party of the first part."
10. Clause 3 makes it clear that the Memorandum of Settlement will stand
cancelled at the discretion of the purchaser (the petitioner herein) and if the
purchaser does so, the MoS would no longer be enforceable by the respondent
/ developer. Admittedly, the petitioner did not cancel the MoS and instead
relies on it to say that there is an existing dispute between the parties. The
petitioner also invoked the arbitration clause in the MoS as well as in the other
agreements including of 7.9.2012 in its letter of invocation dated 25.7.2022.
11. Hence, the respondent's argument that the parties did not give effect to
the MoS or that the MoS did not novate the agreement dated 7.9.2012 is not
acceptable. The terms of the MoS including the first part of clause 3 that the
agreement dated 7.9.2012 shall automatically stand cancelled, void, ineffective
and inoperative upon completion of the financial commitments of the MoS is
further testimony to this view. The terms of the MoS shows that the parties
entered into a new agreement with a set of fresh obligations upon the
respondent's failure to honour the terms of the first agreement dated 7.9.2012.
The fact that the MoS was treated as a new agreement would also appear from
the order of the Co-ordinate Bench dated 3.11.2016. The order records that the
disputes between the parties were settled in terms of the Memorandum of
Settlement and that there was no live dispute by reason of the MoS.
12. The intention of the parties, as reflected in the MoS, was to completely
detach themselves from the original agreement and a complete severance from
the original agreement of 7.9.2012. The termination letter issued by the
petitioner on 21.1.2016 of the agreement dated 7.9.2012 makes the intention
of the parties specific. The parties intended that the parties would enter into a
fresh agreement by way of the MoS and jettison the earlier agreement.
13. The intention of the parties as revealed from the MoS is also significant.
The subject matter of the MoS was no longer the sale and purchase of the flat
as under the agreement dated 7.9.2012 but the mode and manner of payment
of money by the respondent to the petitioner. As stated above, the MoS records
that the petitioner / purchaser had relinquished her right in respect of the
purchase of flat by cancelling the previous agreement and was now only
interested in the money which was to be paid by the respondent to the
petitioner on account of the respondent's failure to deliver possession of the flat
to the petitioner within the agreed time-frame.
14. It is also of utmost importance that by the time the petitioner invoked the
arbitration agreement contained in the MoS, the said flat had already been sold
by the respondent to the third party. Hence, the subject matter of the first
agreement dated 7.9.2012 had already been frustrated and the substratum
demolished (building analogy) at the time of invocation i.e. on 25.7.2022.
15. The above reasons lead to the definite conclusion that the parties agreed
to substitute the agreement dated 7.9.2012 by the MoS dated 29.9.2016. The
agreement dated 7.9.2012 was thus novated by the agreement dated
29.9.2016.
16. Section 62 of the Contract Act, 1872 gives primacy to the intention of the
parties to agree to substituting a contract with a new one where the earlier
contract is rescinded with the intention that the earlier / original contract need
not be performed at all. In Heyman vs. Darwins; 1942 AC 356, The House of
Lords held that the arbitration clause in the contract perishes with the contract
where the parties thereto agree to bring the contract to an end. The Supreme
Court in Young Achievers vs. IMS Learning Resources Private Limited; (2013) 10
SCC 535 held that the arbitration clause also falls with the superseded
contract where the arbitration clause is a component of the earlier contract.
The Supreme Court relied on Heyman vs. Darwins in that decision. Lata
Construction vs. Dr. Rameshchandra Ramniklal Shah; (2000) 1 SCC 586 also
came to the same view where the substitution of a new contract in place of the
old contract would have the effect of rescinding or completely altering the terms
of the original contract.
17. Since the Court is of the view that the Memorandum of Settlement
novated the agreement dated 7.9.2012, the second issue would be whether the
petitioner would be required to pay the requisite stamp duty for the new
contract/MoS.
18. The MoS contains an arbitration clause. The Court is in agreement with
the contention of the petitioner that the MoS does not create any right and
interest on any property and instead it is concerned with payment of money.
Therefore, the MoS would not fall under Schedule I-A to the Indian Stamp Act,
1899 which provides for stamp duty for instruments in West Bengal. Article
5(d) of Schedule I-A relates to agreements for sale or lease-cum-sale of
immovable property and provides for payment of stamp duty. Schedule I-A
however does not provide for payment of any stamp duty for a Memorandum of
Settlement. Article 55(b) of Schedule I-A relates to release of title and is hence
not applicable to this case.
19. The Court is therefore of the view that the petitioner cannot be brought
within the four corners of the Supreme Court judgment in N.N. Global where
the document in question was a Work Order which contained a bank guarantee
and was an unstamped document. The document hence fell under Schedule 1-
A of the Indian Stamp Act. Since, the petitioner has not relied on the agreement
for sale dated 7.9.2012 in the present case, which was novated by the
Memorandum, the petitioner would not come within the stranglehold of N.N.
Global.
20. There is admittedly an existing dispute between the petitioner and the
respondent which would be evident from the petitioner's payment of purchase
money to the respondent for delivery of the flat. The respondent failed to deliver
the flat and the parties entered into a Memorandum of Settlement thereafter.
Several supplementary Memoranda of Settlement were also executed between
the parties culminating in the notice dated 25.7.2022 invoking the arbitration
clause. The entire dispute is set out in that notice. Admittedly, the respondent
issued a post-dated cheque dated 30.6.2019 of Axis Bank for payment of the
admitted dues of approximately Rs. 87 lakhs to the petitioner but the cheque
was dishonoured upon presentation. It is relevant that the respondent's reply
to the petitioner's section 21 notice does not dispute the arbitration agreement
but simply states that the respondent is not agreeable to the petitioner's choice
of arbitrator.
21. The dispute between the parties is directly relatable to the arbitration
agreement in the Memorandum of Settlement and subsequent Memoranda
executed between the parties. The dispute is required to be resolved as the
respondent is in admitted default of its obligations under the MoS and the
arbitration agreement contained therein.
22. AP 557 of 2023 is accordingly allowed and disposed of by appointing
Ms. Urmila Chakraborty, Advocate, to act as the learned Arbitrator for
resolving the disputes and differences between the parties. This judgment and
order shall be communicated to the learned Arbitrator within 3 weeks from the
date of this judgment and the learned arbitrator shall communicate her
consent to the Registrar, Original side of this Court within 3 weeks from the
date of such communication in accordance with the prescribed format under
the 1996 Act and the Schedules thereto. The petitioner shall also communicate
the particulars of the contact person of the petitioner to the learned Arbitrator.
Urgent photostat certified copies of this judgment, if applied for, be
supplied to the parties upon fulfillment of requisite formalities.
(Moushumi Bhattacharya, J.)
