S. Tech Info. Pvt. Ltd. vs Convergys India Services Pvt. ...
2004 Latest Caselaw 1014 Del

JUDGMENT

Mukul Mudgal, J.

1. This is a petition under Section 9 of the Arbitration & Conciliation Act, 1996(hereinafter referred to as the `Act') praying for interim orders of protection in favor of the petitioner and against the respondent pending arbitration. Application, IA.No.4122/04 has also been filed by the petitioner in the said OMP, praying for direction to respondent No.1 to deposit the sum of Rs.51,09,000/- (Rupees Fifty One Lakhs Nine Thousand per month pending arbitration and till such time the security guards of the respondent are deployed in the premises in question. Application, IA.No.5250/04 is also filed by the petitioner, praying for similar relief as claimed in IA.No.4122/04 as well as direction to respondent No.1 and its agents and assignees to hand over the vacant and physical possession of the premises in question to the petitioner within a reasonable time as deemed fit by the Court.

2. The petitioner has entered into an Agreement to Lease executed on 28th July, 2003(in short the `Agreement') with the respondent No.1 by which the petitioner was required to construct a building, having a floor area of 1,31,000 square feet, approximately, to be leased out to the first respondent. The first respondent, M/s S. Converys India Services Pvt. Ltd is a company engaged in the activity of `Business Process Outsourcing' and is running call centres and the respondent No.2, M/s Jones Lang Lasalle is a leading Estate Agency and a Consultant in the area of Civil Engineering and Real Estate.

3. The main prayer made by Mr. Chandhiok, the learned Senior Counsel, appearing on behalf of the petitioner during the course of the arguments that the respondents should be directed to deposit a sum of Rs.51,09,000/- (Rupees Fifty One Lakhs Nine Thousand) per month toward rent payable for the premises while they are in occupation pending arbitration. Mr. Chandhiok has further submitted that while this is being done, the matter be referred to the arbitration by an arbitrator to be nominated by the Court.

3. Mr. Kapur, the learned Senior Counsel, appearing on behalf of the respondents has submitted that the respondents need three or four months time with effect from 5th August, 2004 to vacate the premises in question, i.e., A-25, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi and the respondents are seeking appropriate permission from the Customs Authorities for bonding and re-bonding their goods stored in the disputed premises. He also states on instructions that the respondents have no objection if the disputes between the parties are referred to a Court appointed arbitrator.

4. The only dispute which therefore survives in the present petition and the applications is whether the respondents pending the reference to arbitration can be directed to deposit the sum of Rs.51,09,000/- in this Court towards monthly rent for the aforesaid premises during the period of their continued occupancy.

5. It is not disputed before me that the disputes between the parties arose only on account of coverage/treatment of an open drain adjoining the premises. There were certain clauses in the agreement which govern the treatment of the drains.

6. The relevant clauses 11, 20, 36 and 41 of the Agreement relating to the drain read as follows:-

" 11. Penalties for Delay:

In case Tech Info fails to handover the Premises - First Tranche for fit-outs to Convergys as contemplated in Clause 9 above by December 15, 2003, Tech Info will be liable to provide an additional rent free period of three (3) days for every day of delay in handing over Premises - First Tranche beyond December 15, 2003. In the event tech Info fails to handover the Premises- First Tranche for fit-outs to Convergys by January 01, 2004, Tech Info will be liable to provide an additional rent free period of five (5) days to Convergys, for every day of delay in handing over the Premises-First Tranche for fit-outs beyond January 01, 2004.

If Tech Info hands over the Premises-First Tranche by December 15, 2003, but fails to complete the Premises-First Tranche in all aspects by March 07, 2004(i.e., beyond a grace period of seven (7) days from the Building Completion date of March 1st 2004), Convergys will be entitled to enjoy a rent free period of five (5) days for every day of delay from the 8th of March 2004, till the date of completion of the Premises-First Tranche in all respects. This rent free provision will be over and above the rent free agreed to by Tech Info for the delay in handing over the Premises-First Tranche to Convergys for fit outs by December 15, 2003.

Convergys shall have the right to terminate the Lease Deed if Tech Info fails to provide the Occupancy Certificate and/or any other necessary approvals within sixty (60) days from the Lease Commencement date and Tech Info will be liable to "purchase" all non-movable improvements made by Convergys on the Plot/Building. The cost of these improvements will be on actuals or Rs.4,00,00,000(Rupees Four Crores Only), whichever is higher. However, if Convergys makes any changes in the Building plans or other specifications during the period of construction, after they have been agreed upon with Tech Info and Vipul Infrastructure, any delay caused in handing over the Premises-First Tranche by December 15, 2003 for fit outs or Occupancy Certificate on Building Completion Date(i.e., March 01, 2004) due to the implementation of the proposed changes will not constitute failure on the part of Tech Info. Tech Info and Vipul Infrastructure agree with Convergys to freeze the base Building design and specification not later than the Effective date. Tech Info and Vipul Infrastructure confirm that freezing of the base Building design and specification by the Effective Date will not affect the current schedule of handing over the Premises-First Tranche on or before the Handover Dates for fit outs and for occupation and use by March 01, 2004. In the event Converygys requests for a change in the base Building design and specification after the same has been frozen as above, Tech Info and Vipul Infrastructure would accept these changes in writing. Further, if Tech Info feels that the changes requested by Convergys would result in delay in the current schedule and/increase in cost of the Building, Tech Info and Vipul Infrastructure would give Convergys twenty-four (24) hours to accept/withdraw the changes. In the event Convergys accepts the change, both Tech Info and Convergys would jointly discuss and agree on the period of delay and/the additional cost to be incurred due to the proposed changes. The above is subject to Clause 33 of the Agreement to Lease."

20. Property Maintenance:

VFM agrees to ensure that the Building and the surrounding areas are maintained to the best standards and further agrees to appoint appropriate property management services to achieve such standards.

In respect of the drain referred to in Recital G, Tech Info and Vipul Infrastructure specifically undertake to do the following:

(i) To gain approval from the relevant authority to implement engineering solutions described in Annexure VIII at the sole cost of Tech Info to obliterate any prospect of hazardous, unhealthy, odorous or unhygienic effects of the drain and prevent the occurrence of any nuisance caused by the drain including but not limited to vermin, insects, rodents, reptiles and rubbish;

(ii) To install at the sole cost of Tech Info, air scrubbers at appropriate air intake locations of the Building including provision of space for the same, their testing and commissioning/VFM shall carry out regular and periodic maintenance of such air scrubbers, to ensure the availability of odourless, clean and fresh air everywhere in the Building;

(iii) To cause proper maintenance of the said drain through or in conjunction with the relevant authority by informing the said authority of the need to take steps towards such maintenance as and when the need arises and to cause the said authority to timely take the necessary steps; and

(iv) To ensure that the drain will not cause any environmental hazards in general and shall not be the source of inconvenience.

Tech Info and Vipul Infrastructure further undertake that the implementation of the engineering solutions as in (i) above and the installation of air scrubbers in terms of (ii) above shall be completed to the satisfaction of Convergys not later than the date of obtaining the Occupancy Certificate. In the event Tech Info and Vipul Infrastructure fail to accomplish (i) and (ii) by this deadline. Convergys will have the right to install air scrubbers and pursue engineering solutions to completion on its own and any expenses incurred by Convergys in doing so shall be reimbursed by Tech Info.

Tech Info and Vipul Infrastructure agree that in the event they fail in accomplishing (iii) and (iv) to the satisfaction of Convergys, Convergy will have the right to get them done on its own and any expenses incurred by Convergys in doing so shall be adjusted against Maintenance Charges payable by Convergys to VFM. Convergys will constitute an internal specialist committee to regularly inspect, on its own, the maintenance activities undertaken by VFM, which undertakes to separately report the compliance of the conditions specified in Annexure VIII within the time frame specified therein. The decision of the said committee would be final in determining whether the maintenance of the drain is being carried out satisfactory. In the event the findings of the said committee are such that Convergys has to undertake maintenance activities on its own, it is agreed that any expenses incurred by Convergys towards the same shall be offset against Maintenance Charges payable by Convergys to VFM.

Further Tech Info agrees to indemnify Convergys against any harm and loss caused by the implementation of the engineering solutions specified in Annexure VIII either on account of any governmental action or third party actions, including any court proceedings against the drain management activities of Tech Info.

                     x   x   x   x    x  x
                   x   x   x   x    x x"

  

"36. Arbitration Clause:

 

In the event of a dispute between Tech Info and Convergys, the Parties agree that such dispute shall be referred to arbitration in the first instance in accordance with the Arbitration and Conciliation Act, 1996. The venue for the arbitration shall be New Delhi and the language of the proceedings shall be in English.

41. Condition Precedent:

The obligations of Convergys under this Agreement to Lease and the subsequent Lease Deed(s) shall be dependent upon Tech Info and Vipul Infrastructure implementing the engineering solutions specified in Annexure VIII in respect of the drain referred to in Recital G and Clause 20 of this Agreement to Lease."

7. Annexure VIII providing for the construction of the open sewerage drain referred to in Recital G and Clause 20 of the Agreement reads as follows:-

"Tech Info and Vipul Infrastructure, in respect to the remediation of the open sewerage drain and its surroundings to the front and side of the Plot commits to:

a) Construct a RC retaining  structure as per Tech Info engineers details, to retain the drain flow upstream at the east Corner of the site to cause water to be diverted into proposed underground pipe system.    Refer Drawings attached with this Annexure for exact location.

 

b)      Supply and install (within the existing drain reserve) 1.2M diameter concrete Hume pipes continuously to the full extent of the two boundaries, and extending beyond the corner West by an additional 20.0 M, complete with inspection  and cleanout pits/manholes at each change of direction, and at maximum 100m intervals in straight  sections of the pipe run.

 

c)      All Pipes shall be founded on suitable bedding material and backfilled and compacted with quality fill. All joints to be grouted and sealed as per common engineering practice.

 

d)      Pipes shall be covered with lean concrete to falls.

 

e)      Landscape the drain area and its surrounds with ground covering with plantings as per Architects details.

 

f)      Periodically and regularly maintain the upstream trash sieve with regular cleaning and insecticide treatment.(Minimum period every 2 months)

 

g)      Maintain surrounds of drain reserve and trash sieve regularly, free of waste and rubbish to ensure clean and odourless environment in the building.

  

 "The  Developer",  in respect to the provision of the proposed main access to the Site at the South corner commits to;

  

a)      Construct a RC bridge structure, approx. 70ft X 16ft in dimension, complete with adequate structural bearing system, beams and slabs.  Provide sealed asphalt roadway, pedestrian footpath (one side only), guard rails, storm-water collection system and suitable illumination.

 

b)      Maintain the bridge structure in a safe and clean manner for the duration of the lease period.

 

The Developer commits to complete the above construction of the drain enclosure, associated landscaping and bridge  construction by the date for Occupancy Certificate, XX-XX-2004."

 

8. Mr. Chandhiok, the learned senior counsel for the petitioner has submitted that the correspondence between the parties discloses that the technology initially suggested for the treatment/coverage of the adjoining drain was not found suitable by the respondents themselves and accordingly the respondents have never agreed to what the appropriate technology could be and thus the petitioner could not be held to be in default for coverage and solution of the drain problem as the respondents themselves were not sure of the appropriate solution. This was the essence of the dispute between the parties.

9. In my view a perusal of the clauses reproduced above indicates that the condition precedent for leasing of the premises by Converys was dependent upon Tech Info and Vipul Infrastructure providing the engineering solutions specified in Annexure VIII in respect of the drain referred to in Recital G and Clause 20 of the Agreement.

10. A perusal of the application, IA.No.5250/04 clearly shows in Para 6, the petitioner has admitted that the one task it could not perform and was outstanding is coverage of drain solely in view of the default of the respondents in performing their reciprocal obligations. This application, however, does not state that there was any change suggested or not found suitable by the respondents. The petitioner, however, stated so in Para 5 of the Section 9 petition which has been denied by the respondents in their reply. Thus there is a dispute between the parties which pertains to the question whether the petitioner had fulfillled its obligations about the drain problems. The petitioner refers to correspondence between the parties, whereas the respondent canvasses the mandatory provisions of the agreement and in particular the condition precedent referred to in Clause 41. In my view whatever be the effect of the correspondence it cannot override the mandatory terms of the contract between the parties.

11. Considering the provisions of Clause 11 of the agreement which provides for penalty for delay and which provides that if the agreement is not completed by the petitioner within the time stipulated, the respondent No.1 will be entitled to an additional rent free period of 3 or 5 days for every day of delay in handing over the premises, and the fact that the petitioner had itself disclosed the fact that the solution for drain was not found, though there are explanations given for the delay on account of the respondents refusal to provide appropriate solution, I am satisfied that the petitioner's prayer, directing the respondent No.1 to deposit the monthly rent by respondents in this Court during the period of their stay in the premises in question cannot be granted at this stage. However, in the judgment of the Hon'ble Supreme Court in Sundaram Finance Ltd. Vs NEPC India Ltd., , it has been held as follows:-

" Once it is so satisfied, the court will have the jurisdiction to pass orders under Section 9 giving such interim protection as the facts and circumstances warrant. While passing such an order and in order to ensure that effective steps are taken to commence the arbitral proceedings, the court while exercising jurisdiction under Section 9 can pass a conditional order to put the applicant to such terms as it may deem fit with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings. What is apparent, however, is that the court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under Section 21 of the 1996 Act."

This is also the position of law laid down in a recent judgment of the Hon'ble Supreme Court in Firm Ashok Traders & Another Vs Gurumukh Das Saluja and Others which reads as follows:-

"17. There are two other factors which are weighing heavily with us and which we proceed to record. As per the law laid down by this Court in Sundaram Finance Ltd. Vs NEPC India Ltd., an application under Section 9 seeking interim relief is maintainable even before commencement of arbitral proceedings. What does that mean? In Sundaram Finance Ltd.(supra) itself the Court has said: (SCC P.488, Para 19)

"It is true that when an application under Section 9 is filed before the commencement of the arbitral proceedings, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings."

Section 9 permits application being filed in the court before the commencement of the arbitral proceedings but the provision does not give any indication of how much before. The word "before" means, inter alia, "ahead of; in presence or sight of; under the consideration or cognizance of". The two events sought to be interconnected by use of the term "before " must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or "within-sight" certainty. The party invoking Section 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the court that the arbitral proceedings are actually contemplated or manifestly intended (as Sundaram Finance Ltd.puts it) and are positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses. The purpose of enacting Section 9, read in the light the Model Law and UNCITRAL Rules is to provide "interim measures of protection". The order passed by the court should fall within the meaning of the expression "an interim measure of protection" as distinguished from an all-time or permanent protection."

Thus Court is thus required to ensure that effective and prompt steps are taken by the applicant for commencing the arbitration.

12. In this view of the matter and the provision of Clause 36 providing for arbitration and in view of the statements made by both the counsel for the parties for appointing an arbitrator to adjudicate the disputes between the parties, Mr. R. Subramaniam, Chief Engineer(Civil), CPWD, Nirman Bhavan, New Delhi(Tel.23017284) is appointed as the arbitrator to adjudicate the disputes between the parties. Statements of claims shall be filed by either party on or before the next date before the arbitrator. Parties to appear before the arbitrator on 5th November, 2004 at 4.30 PM. The arbitrator to dispose of the reference not later than 6 months from the date of the first hearing of the reference. Mr. Kapur has sought three to four months time with effect from 5th August, 2004 to vacate the premises in question. He further states that it is depending upon the grant of permission from Customs Authorities. Such a permission as and when received by the respondents shall be communicated to the petitioner's counsel. It will be open to the parties to press for further interim orders before the arbitrator.

13. The OMP and the IAs stand disposed of accordingly.