Chagan Lal Tiwari vs Ganga Apartments (P) Ltd. And ...
1998 Latest Caselaw 766 Del

ORDER

Dr. M.K. Sharma, J.

1. The present suit was instituted by the plaintiff praying for a decree of declaration declaring as null and void any and all documents including any agreement, general power of attorney executed by defendants 3 to 6 in favour of any third parson including defendant No.1 in respect of plots No.1/50 and 2/71, Lalita Park, Vikas Marg, Delhi. The plaintiff has also sought for a decree of permanent injunction restraining the defendants No.3 to 6 from executing and getting registered any document evidencing transfer of their respective shares in the aforesaid plots and also restraining the defendant No.1, its servants, agents from in any manner selling, transferring, alienating, encumbering and parting with possession and/or disposing of the said suit property. The plaintiff has also sought for a decree directing defendant No.1 to render accounts pertaining to the aforesaid plots disclosing therein the amount paid to defendants No.3 to 6 and also money received against the said property.

2. It is pleaded in the plaint that defendants No.3 & 4 were the joint owners with 1/2 share belonging to each in respect of the land covered by plot No.50 of the suit property. Similarly the defendants No.5 & 6 are also stated to be joint owners to the extent of 1/2 share belonging to each in respect of the land covered by plot No.71 located at the rear of the land covered by plot No.1/50. It is further pleaded that by separate agreements to sell dated 28.11.1990 defendants No.3,4, 5 & 6 agreed to sell the suit land to the plaintiff and defendants 2 & 3. It is further pleaded that in pursuance of and in furtherance to the aforesaid agreements to sell the plaintiff alongwith defendant No.2 entered into a collaboration agreement dated 3.12.1990 with the defendant No.1 whereby the defendant No.1 undertook to and was granted license to raise and/or construct a multi-storeyed building with a total covered area of approximately 1600 Sq. Ft. of the said plots. The plaintiff has set out and reproduced some of the relevant clauses of the said collaboration agreement in paragraph 5 of the plaint. In pursuance thereof physical possession of the suit property was also handed over to defendant No.1 for implementing the said collaboration agreement and for raising construction thereon. Subsequent thereto defendant No.1 started raising construction of the multi-storeyed building on the said plots which is yet to be completed. It is stated that since defendants 3 to 6 have already sold their respective shares in the said plots neither of the defendants 3 to 6 are entitled to sell their respective portions in the said plots or any part thereof to defendant No.1 or to anyone else, nor the defendant No.1 is entitled to sell, transfer or dispose of any portion or portions comprised within the said property contrary to the terms of the said collaboration agreement and without the express consent of the plaintiff. Since such actions are allegedly being taken the present suit has been instituted by the plaintiff against the defendants. The defendants No.1 & 2, on service of summons and notices appeared in the suit.

3. On perusal of the records I find that on 26.7.1995 counsel appearing for defendant No.1 sought for time before the court to file documents, reply and written statement. On such prayer being made on behalf of the defendant No.1, the court granted 4 weeks time to defendant No.1 to file documents, reply and written statement. However, immediately thereafter, the defendant No.1 filed an application in this court under Section 34 of the Arbitration Act which was registered as I.A.No.8591/1995. The defendant No.2 also filed a similar application under Section 34 of the Arbitration Act registered as I.A. No.8711/1995.

4. I have heard the learned counsel appearing for the parties on the aforesaid two applications which were listed for arguments. Counsel appearing for defendant No.1 submitted that the plaintiff has suppressed material facts in his plaint inasmuch as although he has extracted several relevant clauses in respect of the collaboration agreement, he has wilfully and deliberately omitted to extract therein clause 19 of the agreement which contains an arbitration agreement. It is stated in the said application filed by defendant No.2 under Section 34 that the plaintiff has referred to different paras of the above said agreement in order to obtain an ex parte injunction but with malafide intention omitted to mention paragraph 19 of the collaboration agreement which in unequivocal terms lays down an arbitration agreement between the parties. He has extracted paragraph 19 of the said collaboration agreement, relevant portion of which is reproduced below:-

"That in case of dispute in any manner in respect of the further clarification or interpretation of any clause in this agreement in between the parties, in such an event the dispute shall not be carried to the Courts of law, but shall be referred to arbitration. In such case, one arbitrator each can be appointed by each of the parties and the decision of the arbitrators shall be final and binding on both the parties.........."

Counsel appearing for defendant No.2 further submitted that in view of aforesaid arbitration agreement between the parties the present suit is liable to be stayed under Section 34 of the Arbitration Act and the parties should be directed to take recourse to arbitration proceedings since the defendant No.2 is ready and willing to do all the necessary things for settlement of any or all the disputes by arbitration and has also issued a notice to the plaintiff and defendant No.1 and also stated in the application that the defendant No.2 proposed to appoint Shri Pramod Kumar Khurana as his Arbitrator. A similar application was also filed by defendant No.1 which was registered as I.A. No.8591/1995. The defendant No.1 has also stated in the application that the plaintiff has malafidely and deliberately withheld to mention clause 19 of the Collaboration Agreement which is an arbitration agreement and sought for stay of the present proceedings contending inter alia that the defendant No.1 was and is always willing and ready to do all the acts necessary for the arbitration proceedings.

5. Counsel appearing for defendants No.1 & 2 have submitted that the provisions of Section 34 of the Arbitration Act are squarely applicable to the facts and circumstances of the present case and therefore, the present suit instituted by the plaintiff is required to be stayed by this Court as provided for under Section 34 of the Arbitration Act. The counsel further submitted that the defendants did not take any step in the suit nor filed any written statement and therefore, in the facts and circumstances of the case provisions of Section 34 are clearly applicable and the parties are bound by clause 19 of the Arbitration agreement.

6. Counsel appearing for the plaintiff however, contested the aforesaid submissions of the counsel appearing for the defendants. Counsel drew my attention to the order dated 26.7.1995 passed by this Court granting 4 weeks time to defendant No.1 to file documents, reply and written statement. Counsel submitted that since the aforesaid time was granted to defendant No.1 at the request made by his counsel the defendant No.1 took steps in the suit to contest the same and therefore, the provisions of Section 34 are clearly inapplicable to the facts and circumstances of the present case. Counsel further submitted that the arbitration clause being clause 19 of the Collaboration Agreement does not cover the entire dispute and the reliefs sought for in the plaint and therefore, the provisions of clause 19 are not applicable nor such disputes could be referred for arbitration and therefore, the suit is maintainable and required to be proceeded with. He further submitted that the defendants No.3 to 6 are not parties to the Collaboration Agreement and therefore, the reliefs sought for in the suit cannot be decided effectively by an arbitrator in absence of the defendants No.3 to 6 who cannot be made parties to the arbitration proceedings, being not parties to the collaboration agreement. Counsel also submitted that the plaintiff has pleaded fraud and when such fraud is pleaded in the plaint parties should not be directed to take recourse to arbitration proceedings and the disputes arising between the parties should be tried under the common law and therefore, the present suit cannot be stayed. Counsel for the plaintiff further submitted that neither the defendant No.1 nor the defendant No.2 were ready and willing to do all things necessary for the proper conduct of the arbitration proceedings and that they did not act and appoint their arbitrators inspite of giving notice by the plaintiff to the defendants No.1 & 2.

In the light of the aforesaid submissions of the learned counsel for the parties, let me consider the merits of the rival submissions.

7. The Supreme Court in the case of Rachappa Gurudappa Bijapur Vs. Gurudiddappa Nurandappa & others; reported in 1989 (3) S 295, had occasion to deal with the provisions of Section 34 of the Arbitration Act. In the said decision the Supreme Court analysed the provisions of Section 34 and held that in order to have the proceedings in the suit stayed there must be an arbitration agreement between the parties covering the disputes in question. It was further held that Section 34 stipulates that in order that stay may be granted under the Section, it is necessary that certain conditions are fulfillled. In paragraph of 4 this decision the said conditions have been stated by the Supreme Court which are extracted below:-

(i) the proceedings must have been commenced by a party to an arbitration agreement against any other party to the agreement;

(ii) the legal proceeding, in this case the suit, which is sought to be stayed must be in respect of a matter agreed to be referred;

(iii) the applicant for stay must be a party to the legal proceeding, the suit in this case;

(iv) the applicant must have taken no steps in the proceeding after appearance;

(v) the applicant must satisfy that only the applicant was at the time when the proceedings were commenced, ready and willing to do every thing necessary for the proper conduct of the arbitration; and

(vi) the court must also be satisfied that there was no sufficient reason why the matter should not be referred to arbitration.

8. In the facts of the said case the Supreme Court found that the proceedings were commenced by a party to an arbitration agreement against another party to the agreement and the legal proceedings were sought to be stayed in respect of the matter which was agreed to be referred to arbitration. It was however, found that the petitioner was a party to the arbitration agreement and therefore, only question which was to be examined was whether the petitioner in that case had taken no steps after appearance. On examination of the records and all facts of that case the Supreme Court came to the conclusion that the counsel appearing for the petitioner sought adjournments specifically for filing written statement and obtained time on more than one occasions for such purpose and that it was not only the time to consider whether written statement should be filed as a defense to the plaint to enter into an arena of controversy, but it was time taken to have the matter decided by the suit. In that view of the matter and in view of the fact that the parties evinced an intention to have the matter adjudicated by the court, the party has disentitled itself to ask for stay of the said suit.

9. The ratio of the aforesaid decision thus is clearly applicable to the facts of the present case so far the defendant No.1 is concerned, the counsel appearing for defendant No.1 took time to file its written statement as also documents in support of its case and therefore the defendant No.1 evinced an intention to have the matter adjudicated by the court. However, the same conclusion cannot be arrived at so far defendant No.2 is concerned. No steps were taken by defendant No.2 to have the matter decided by the Civil Court. There is nothing on record to show that the defendant No.2 at any point of time after filing of the present suit and appearance therein evinced any intention or desire to have the matter adjudicated by the Court. Therefore, even though the defendant No.1 could be said to have disentitled itself to ask for stay of the said suit, the same conclusion cannot be arrived at so far defendant No.2 is concerned. Under the circumstances I hold that defendant No.2 has not disentitled itself to ask for stay of the said suit and thus the application under Section 34 filed by defendant No.2 is maintainable and is required to be considered on its merits.

10. Counsel for the plaintiff submitted that the suit has been instituted with certain reliefs as set out in the relief portion of the plaint. According to him the disputes raised in the suit and the reliefs sought for are not covered by the arbitration clause inasmuch as apart from seeking a declaration and permanent injunction in respect of the collaboration agreement as set out in paragraphs 3 & 4 of the relief portion of the plaint wherein the plaintiff has also sought for rendition of accounts in respect of the collaboration agreement. The plaintiff has further sought for a declaration declaring all agreements executed by defendants No.3 to 6 in favour of any third person including the defendant No.1 as null and void and has also sought for injunction in respect of the same.

11. The allegations made in the plaint have been set out above. The agreements and general power of attorneys have been executed by said defendants No.3 to 6 in favour of the plaintiff and defendants No.1 & 2 which are also part of the recitals in the collaboration agreement. Recitals of the collaboration agreement have been set out in paragraph 5 of the plaint. It is required to be mentioned at this stage that while setting out the various clauses of the collaboration agreement in the plaint the plaintiff omitted to reproduce clause 19 which is an arbitration agreement, although he has reproduced all other relevant clauses. In my considered opinion the plaintiff has sought to frame the present suit in a manner in order to avoid the arbitration agreement as found in the collaboration agreement entered into between the plaintiff, defendant No.1 and defendant No.2. The reliefs sought for by the plaintiff in the present suit when read in the context of the pleadings in the plaint prove and establish that the plaintiff in reality is making an effort through the present suit to rely upon and give effect to the terms of the collaboration agreement and that disputes have arisen between the parties while giving effect to and executing the collaboration agreement alone. The reliefs sought for in the plaint, in my considered opinion are disputes arising between the plaintiff, defendant No.1 and defendant No.2 and since there is an arbitration agreement between the parties to adjudicate upon and decide such disputes through arbitration proceedings, all the said disputes, in my considered opinion, as sought to be raised through the present suit, could be effectively and meaningfully decided through arbitration proceedings. The contention that the defendants No.3 to 6 are not parties to the collaboration agreement is in fact immaterial in view of the fact that the disputes as raised in the present suit revolve around the collaboration agreement and not the agreements to sell dated 28.11.1990. Even the aspects of the agreements as executed by defendants 3 to 6 in favour of defendant No.1 and/or defendant No.2 could also be dealt with within the terms and conditions of the collaboration agreement between the plaintiff, defendant No.1 and defendant No.2 as they are part of the recital of the collaboration agreement. This submission of the learned counsel for the plaintiff is also found to be baseless.

12. With regard to the next submission of the learned counsel for the plaintiff that since fraud has been pleaded by the plaintiff in the case, arbitration proceedings is not the proper forum to decide such allegation of fraud. In my considered opinion, the said submission is also baseless and without any merit. The only pleading in respect of the allegation of fraud is found in paragraph 9 of the plaint, wherein the plaintiff has stated that a conspiracy to defraud the plaintiff has been hatched by defendant No.1 alongwith rest of the defendants in order to illegally and wrongfully oust the plaintiff from the entire deal and to illegally and wrongfully deprive the plaintiff of his share in the said property. The said statement is also stated to be reasonably true to the belief of the plaintiff. The law relating to pleadings as laid down in the Civil Procedure Code is that when fraud is pleaded it must be pleaded specifically and full details of the fraud have to be set out in the plaint itself. All material facts needed for establishing fraud must be stated. In Bishnudeo Vs. Seogeni Rai; , it was held that general allegations are insufficient even to amount to an averment of fraud, of which any court, ought to take notice, howsoever strong the language in which they are couched may be. Plaintiff cannot make a good cause of action of fraud merely by alleging that the act was done maliciously or for defrauding the plaintiff. In my considered opinion, the facts pleaded prima facie are not sufficient to establish a case of fraud and the same prima facie appear to be based merely on conjectures and surmises and pleaded for avoiding the arbitration clause. Counsel for the plaintiff states that both the defendants 1 & 2 were not ready and willing to do all things necessary for the proper conduct of arbitration. The defendant No.2 in his application under Section 34 has stated that it is ready and willing to do all necessary things for settlement of any or all the disputes by arbitration and also issued a notice to the plaintiff and defendant No.1 and that the said defendant No.2 has also named his arbitrator in the application. Thus the defendant No.2 ex facie appears to be ready and willing to do all necessary things to get the disputes decided through arbitration.

13. In this view of the matter all the contentions raised by the plaintiff as against the application filed by defendant No.2 seeking for stay of the proceedings of the suit are found to be without any merit. The plaintiff is admittedly one of the parties to the collaboration agreement. The reliefs sought for in the suit are also matters agreed to be referred to arbitration. The defendant No.2 is admittedly a party to the collaboration agreement and is also a party in the present suit. The defendant No.2 has not taken any steps in the proceedings after his appearance except for filing of application under Section 34 of the Arbitration Act. He has also satisfied that he is ready and willing to do anything necessary for the proper conduct of arbitration. On the facts and circumstances of the present case, I am satisfied that the disputes as raised in the present suit could be effectively decided through arbitration proceedings as well and there is no sufficient reason as to why the matter should not be referred to arbitration.

14. Thus all the conditions for staying the proceedings as envisaged under Section 34 of the Arbitration Act are fulfillled in the present case and thus the application filed by defendant No.2 under Section 34 of the Arbi-

tration Act stands allowed. The suit filed by the plaintiff as against defendant No.2 stands stayed in terms of the provisions of Section 34 of the Arbitration Act.

15. As a result the application filed by defendant No.1 under Section 34 of the Arbitration Act stands dismissed whereas the application filed by defendant No.2 stands allowed. The suit shall stand stayed as envisaged under Section 34 of the Arbitration Act.