A.K. Jaju vs Avni Kumar
2003 Latest Caselaw 463 Del

JUDGMENT

B.N. Chaturvedi, J.

1. In a suit for recovery of possession, mesne profits and permanent injunction, the plaintiff filed an IA.11417/01 under Order XXXIX Rule 7 CPC seeking a direction to the defendant to pay to him use and occupation charges in respect of the suit property @ Rs.80,000/- per month during the pendency of the suit. The defendant, on the other hand, on his appearance, came up with an IA.1008/02 under Section 8 of the Arbitration and Conciliation Act, 1996 seeking reference of disputes forming subject matter of the suit to arbitration or in the alternative to stay the proceedings in the suit. In the event of aforesaid application made by the defendant being allowed, it may not be open to take up IA.No.11417/01 as it will be for the arbitrator concerned to adjudicate upon all the disputes, including the entitlement of the plaintiff to recover use and occupation charges in respect of the suit premises at the rate stated aforesaid. It would, therefore, be appropriate to deal with IA.1008/02 first.

2. Facts relevant for disposal of IA.1008/02 may be stated briefly. One Ms. Rachna Sethi owned a plot of land bearing No.D-125, Anand Niketan, New Delhi admeasuring 262.85 sq. yds. being a perpetual sub-lessee thereof. She entered into a property development agreement dated 30.7.1997 with the plaintiff, in pursuance of which the plaintiff constructed a two storeyed building with basement, on the said plot at his own costs. In consideration, in terms of the said property development agreement, the entire second floor of the suit property fell to the share of the plaintiff with a right to sell the same. An agreement to sell was executed between the parties on 9th of January, 1999 in respect of the second floor of the property for a total sale consideration of Rs.65 lakhs, out of which a sum of Rs.20 lakhs was paid by the defendant to the plaintiff on the very date when the agreement to sell was executed and the balance of Rs.45 lakhs was payable as stipulated under the agreement. This agreement contained an arbitration clause. Transfer by sale was to be effected on conversion of the land from leasehold to freehold in favor of Ms. Rachna Sethi. Another agreement to sell came to be executed between the parties on 3rd of April, 1999. Unlike the agreement dated 9.1.1999, the second one did not contain any arbitration clause. With the execution of the said agreement dated 3.4.1999, the possession of the flat on second floor of the property was handed over by the plaintiff to the defendant and the defendant was to make payment of Rs.20,000 per month as license fee till such time the balance consideration amount of Rs.45 lakhs was paid. In a course of time, conversion from leasehold to freehold of the land underneath the building, was permitted by the Delhi Development Authority and a conveyance deed in that respect was executed in favor of Ms. Rachna Sethi on 10th of August, 2001. The plaintiff, thereafter, by a letter dated 15.10.2001 called upon the defendant to pay the balance consideration amount of Rs.45 lakhs to facilitate transfer of the flat on the second floor in his favor. The defendant, however, failed to make the payment of the balance consideration amount to get the suit premises transferred in his favor. On the contrary, the defendant got a legal notice dated 30.10.2001 issued to the plaintiff through an Advocate making certain claims against him on account of the aforesaid transaction. According to the plaintiff, as the defendant is not prepared to perform his obligation under the agreement by paying the balance consideration amount of Rs.45 lakhs, he is liable to pay in addition to Rs.1.20 lakhs on account of liquidated damages as per agreement, the amount of Rs.45 lakhs with interest thereon @ 36% per annum from October/November, 2001 or in the alternative, he is liable to immediately surrender vacant physical possession of the suit premises to the plaintiff since his license has already been revoked through a legal notice dated 3.12.2001. It is claimed that out of part payment of Rs.20 lakhs, an amount of Rs.5,20,000/- stands adjusted on account of license fee for the period from October, 1991 to December, 2001 @ Rs.20,000/- per month. This apart, the defendant is pleaded to be liable to pay mesne profits @ Rs.80,000/- per month or at such higher rate as determined by the Court so long the defendant continues in occupation of the suit premises.

3. The defendant on the other hand pleads that time was essence of the contract and as the plaintiff failed to discharge his obligation under the agreement in that respect and further as the suit premises was subject to litigation, which the defendant came to know at a subsequent point of time after entering into the said agreement with the plaintiff, the agreement could not be performed. It is claimed that since non-performance of the agreement was attributable to the plaintiff, he is liable to refund all the amount received by him from the defendant, which includes a sum of Rs.20 lakhs plus interest @ 36% per annum from the date of receipt of the said amount, apart from damages to the tune of Rs.1 crore. The defendant asserts that the delivery of possession of the suit premises was in part performance of the contract and, therefore, he is entitled to continue to hold possession of the suit property until his entire claim, as aforesaid, is satisfied by the plaintiff.

4. The defendant sent a letter dated 4.10.2001 to the plaintiff invoking the arbitration clause and calling upon the plaintiff either to make payment of the amount as aforesaid or to accord his consent to arbitration for adjudication of the disputes by one Shri Vinod Srivastawa, Advocate. The same, however, failed to evoke any positive response from the plaintiff.

5. The plaintiff felt that he has been wronged by the defendant as he is neither agreeing to transfer of the suit premises in his favor by paying the balance consideration amount of Rs.45 lakhs nor he is handing back the vacant possession of the suit premises to him. He, therefore, filed the present suit for recovery of possession, mesne profits and permanent injunction.

6. I have heard the parties' counsel.

7. In the context of application under Section 8 of the Arbitration and Conciliation Act, 1996(IA.1008/02), the question to be answered is a short one. The plea on behalf of the plaintiff against the defendant seeking to invoke arbitration clause contained in the agreement dated 9.1.1999 is that with the supersession of this agreement by a fresh agreement to sell dated 3.4.1999, the arbitration agreement contained in the first agreement in paragraph 14 thereof did not survive and, therefore, in the absence of an arbitration agreement, Section 8 of the Act has no application. On the contrary, it was contended on behalf of the defendant that subsequent agreement dated 3.4.1999 was simply in continuation of the first agreement dated 9.1.1999 and, therefore, the same constitutes part and parcel of the agreement dated 9.1.1999 containing the arbitration clause. In short, nucleaus of the plaintiff's argument is that since there is no arbitration agreement, the plea for reference of disputes to an arbitral tribunal for adjudication, is misconceived.

8. Normally, where one agreement is followed by another it is specifically indicated in the subsequent agreement if the earlier one stands superseded. There is, however, no mention, in the present case, in the second agreement dated 3.4.1999 that the first agreement dated 9.1.1999 stood superseded. The copies of both these agreements have been placed on record by the plaintiff himself and no part of either of these agreements was subjected to any challenge by him. At the top of the agreement to sell dated 3.4.1999 there appears a handwritten addition in the following terms:-

" IN CONTINUATION TO AGREEMENT DT. 9.1.99."

This handwritten addition is significant in the context of the plaintiff's contention that this agreement was executed in supersession of the first one incorporating the arbitration clause. It may be noticed that the first agreement is quite exhaustive while the second one is relatively shorter. Notably, in terms of agreement dated 9.1.1999, physical vacant possession of the suit premises was to be handed over by the plaintiff to the defendant only on full and final payment of the total consideration amount. The said condition was, however, modified in the second agreement, by virtue of which possession of the suit property was handed over to the defendant on payment of monthly license fee of Rs.20,000/- per mensem till such time the payment of balance consideration amount of Rs.45 lakhs was made. It was further stipulated that in case of any delay in payment of that amount, the defendant would be liable to pay liquidated damages of Rs.1,20,000/- without prejudice to the rights of the plaintiff to resume possession of the suit premises. This apart, while under the first agreement the title deed in favor of the defendant was to be executed by the plaintiff within 15 days of receipt of conveyance deed related to conversion of land from leasehold to freehold and on balance consideration amount of Rs.45 lakhs being paid, the second agreement does not contain any such stipulation. In para 2 of the second agreement, simply this much is provided that if conversion of leasehold rights into freehold was not granted within three clear months from the date of the agreement, the plaintiff would be liable to refund the whole advance amount of Rs.20 lakhs subject to handing over of vacant possession of the suit property. There is no mention of the time by which the title deed was to be executed by the plaintiff. The omission in the second agreement in this respect cannot be treated to be accidental, rather the same appears to be a deliberate one. Besides, certain other terms and conditions, which constituted part of the first agreement to sell, did not find mention at all in the second agreement. The handwritten endorsement at the top of the agreement to sell dated 3.4.1999 to the effect that the same was in continuation to the agreement dated 9.1.1999 clearly shows that the same was to constitute part and parcel of the agreement to sell dated 9.1.1999 and it was not intended to be independent of or in supersession of that agreement. The second agreement, as it appears, was necessitated to modify certain terms and conditions in the first agreement and not to over-ride the agreement as such. The omission to mention the time schedule in regard to execution of title deed in relation to the suit premises and certain other conditions incorporated in the first agreement, make it quite evident that since the subsequent agreement was indeed intended to be a part and parcel of the earlier agreement, no necessity of repeating the same was felt by the parties. The second agreement being in continuation of the agreement to sell dated 9.1.1999, the plaintiff cannot seek to escape the arbitration agreement contained in paragraph 14 thereof. There is thus no substance in the contention raised on behalf of the plaintiff that the agreement to sell dated 3.4.1999 superseded the earlier agreement dated 9.1.1999.

9. Before the Court exercise its powers under Section 8(1) & 8(2) of the Act, the conditions to be satisfied are:

1) existence of an arbitration agreement;

 2)  a party to the agreement initiates action in the court                   against the other party; 
 

 3)  subject matter of the action is the same as the subject matter of the agreement; 
 

 4)  the other party moves the court for referring the  party to arbitration before it submits his first statement on the substance of the subject.  
 

 The case on hand tests positive as far as the aforesaid conditions essential for application of Section 8 is concerned.  In " S. Anand Gajapathi Raju Vs. PVG Raju", , the Supreme Court declared: 
   "  The language of Section 8 is peremptory.  It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement...... " (Para 8)  
 

Holding that provisions of Section 8 are all comprehensive and of a mandatory character, in yet another decision in " Malaysian Airlines System II Vs. SHC Travels (P) Limited", (2001) 1 SCC 509, the Supreme Court reiterated the same legal position. In " Kalna Kothari Vs. Sudha Yadav", , same principle of law is enunciated wherein it was held that Section 8 of the Act mandates that the judicial authority before which an action has been brought in respect of a matter, which is the subject matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement.

10. The plaintiff was approached by the defendant to agree to reference of the disputes and adjudication thereon by a sole arbitrator suggested by him. The plaintiff, however, did not respond. In the circumstances, the Court must step in to discharge its obligation by appointing an independent arbitrator. Accordingly, Shri N.C. Kochar, a retired High Court Judge, is appointed as sole Arbitrator to enter upon reference and adjudicate upon the disputes relating to the subject matter of the present suit and agreements for sale dated 9.1.1999 and 3.4.1999 and make his award in accordance with law. The arbitrator's fee is fixed at Rs.50,000/-, to be shared equally by both the parties. Justice N.C. Kochar be informed of his appointment.

11. IA.1008/02 stands disposed of in the aforesaid terms.

12. Disputes including the one relating to claim of the plaintiff in regard to use and occupation charges being subject matter of arbitration, merits of claim in this respect cannot be gone into by this Court. The application(IA.11417/01) is, therefore, disposed of accordingly.