M/S D.C.M. Ltd vs M/S R.K. Towers (India) Pvt Ltd
2008 Latest Caselaw 1420 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI


+                          Arb.A.415/2006 & OMP 362/2006

%                                Date of decision : 22.08.2008


M/S D.C.M. LTD                                      ....... Petitioner
                    Through:   Mr. Jayant Bhushan, Sr. Advocate
                    & Mr. Siddharth Silwal, Advocate.



                                    Versus


M/S R.K. TOWERS (INDIA) PVT LTD                       ....... Respondent

Through : Mr. Upamanyu Hazarika, Mr. Neeraj Malhotra Advocates

CORAM :-

HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

     1. Whether reporters of Local papers may                       YES
        be allowed to see the judgment?

     2. To be referred to the reporter or not?                       YES

     3. Whether the judgment should be reported                      YES
        in the Digest?


RAJIV SAHAI ENDLAW, J

1. This common order is made on AA.No.415/2006 filed under

Section 11(6) of the Arbitration and Conciliation Act, 1996 for

appointment of arbitrator and OMP 362/2006 under Section 9 of the

said Act for interim measures during the proposed arbitration

proceedings.

2. The petitions are opposed on the grounds (i) that the claims for

the adjudication of which appointment of arbitrator is sought, are

barred by time; (ii) that the petitioner did not raise the claims now

being raised, in spite of being so entitled to, at the time of earlier

Arb.A.415/2006 & OMP 362/2006 Page no. 1 of 16 arbitrations arising out of the same agreement; (iii) on the ground of

estoppel, waiver and constructive res judicata; (iv) on the ground of

the petitioner having no locus to raise the disputes alleged. If there is

to be no arbitration, the question of interim measures does not arise.

3. For adjudication of the aforesaid disputes, reference may be

made to the agreement between the parties. The petitioner as the

owner of a plot of land bearing No.16, Barakhamba Road, New Delhi,

entered into an agreement dated 13th January, 1978 with the

respondent whereunder the respondent at its own cost and expense

agreed to construct a multi storied building comprising of basement,

ground floor, first floor, upper first floor and second to 9th floors and

10th service floor on the said plot of land. It was further agreed that

upon completion of the building the petitioner shall be entitled to 63%

of the entire saleable space between the second and the ninth floor

and 63% of usable area(s) in basement of the building and shall be

entitled to transfer the same. The respondent was to retain the

remaining saleable area and was entitled to transfer the same. The

agreement also contained an arbitration clause.

4. It is not in dispute that (i) the construction of the building was

completed in the year 1989; (ii) that Shri Dharma Vira, the agreed

nominated arbitrator on 1st January, 1988, gave an award with respect

to the disputes between the parties of allocation of space, finalization

of the amount to be paid by the petitioner towards fire fighting and

electric sub-station, settlement of accounts and provision to the

petitioner of area which had been taken out of their share towards fire

Arb.A.415/2006 & OMP 362/2006 Page no. 2 of 16 fighting as refuge area; (iii) the agreed nominated arbitrator gave

another award dated 22nd June, 1998 on the claims of the petitioner

for recovery of loan, amount paid by the petitioner on behalf of the

respondent, damages, share in ground rent etc and on the counter

claims of the respondent for refund of security deposit, maintenance

charges, additional expenses etc.

5. The agreed nominated arbitrator who had given two awards

(supra) having expired, the petitioner, in this petition, raised the

following disputes and sought resolution of the same through

arbitration of an independent arbitrator: (a) that the respondent has

illegally and unauthorizedly retained control over common areas and

facilities in the building and is charging exorbitant amount as

maintenance charges in contravention of the agreement of the said

common areas and facilities to be maintained by a holding

organization. It is alleged that the respondent has thereby wrongfully

withheld and enjoyed the monies and properties belonging to the

holding organization; (b) that the respondent has committed

fundamental breach of the agreement by violating mandatory terms

thereof. The L&DO being the lessor of the land underneath the

building has issued notices to the petitioner as lessee of the land, for

unauthorized construction on the property, wrongfully covering of

open areas and misuse and as a consequences of which L&DO has

now threatened to terminate the lease and to re-enter the premises

and impose penalty. The said notices are stated to be dated 27th

December, 2004, 23rd January, 2006 and 16th March, 2006; (c) that the

respondent has put up an unauthorized construction on the roof of the

Arb.A.415/2006 & OMP 362/2006 Page no. 3 of 16 10th floor of the building thereby constructing 11th floor against the

terms of the agreement and sanctioned plan. The respondent has also

allowed the building to be misused by the occupiers of the basement,

ground and first floor - the said occupiers have been put into

possession by the respondent.

6. The respondent in paras 14-15 of its reply has, inter alia, stated

that the petitioner cannot agitate the issue of maintenance of common

areas and amenities as the petitioner is not in possession of any

portion of the building and has no locus to raise the said issues; the

petitioner in the year 1990-91 sold of its entire space allocation in

respect of the said building in respect of third parties and walked out

of the said building - the said fact has been admitted by the petitioner

and in the absence of any presence of the petitioner in the said

building, it could not have contributed to the upkeep and maintenance

of the building.

7. The petitioner filed a rejoinder to the aforesaid reply in which,

in response to the averments aforesaid in paras 14 and 15, the

petitioner has stated that physical presence of the petitioner is not

required as obligations of upkeep and maintenance of the building are

those of the holding organization to be constituted and with respect to

which the claims have been raised. In spite of specific averment of

the respondent, that the petitioner in the year 1990-91 sold of its

entire space allocation in respect of the building to third parties and

walked out of the said building, the petitioner neither controverted

the same nor made any averment that it was holding /owning any

Arb.A.415/2006 & OMP 362/2006 Page no. 4 of 16 portion of the built up space allocated to it in the building. The

petitioner in the rejoinder in para 4 of preliminary submissions stated

that the disputes are now two fold, i.e., firstly of misuse and

unauthorized construction and secondly of failure of respondent to

constitute holding organisation.

8. Article VI of the agreement provides as under :

"Article VI - Holding organization:

(1) BUILDER shall in consultation with OWNER either reconstitute, re-organise and/or otherwise do all that shall be necessary to authorise an existing society, company, firm or other body authorized to take charge of the BUILDING for the purposes of managing the same rendering necessary services and/or shall constitute a new society, company, firm or other body for the purpose.

(2) That the capital of the Holding Organisation shall be Rs one lakh which shall be contributed by the OWNER and the transferees of the BUILDER, the OWNER contributing 63% thereof and the balance to be contributed by such transferees in the ratio of their holdings.

(3) The costs and expenses for preparing, engrossing, stamping and registering any Deed and/or other documents required for formation of Holding Organization (inclusive of stamp duty payable) shall be borne by the Holding Organization, the same to meet by it from the above said capital.

(4) The Holding Organisation shall invest the balance of the capital in a proper manner and the income thereof shall be first utilized for payment of its office expenses and services rendered and the balance of the amount of such charges shall be paid by the OWNER to the extent of 63% and the transferees of the builder to the extent of the balance of 37%.

(5) The OWNER shall join the other transferees of space in the BUILDING to reconstitute, re-organise or constitute or form, as the case maybe, such society, company, firm or body and shall become a member of shareholder thereof.

(6) Said society, company, firm or body, as the case may be, shall upon its re-constitution / re-organization or upon its constitution / formation be the Holding Organisation.

Arb.A.415/2006 & OMP 362/2006                              Page no. 5 of 16
       (7)    The    Memorandum      constitution,  Articles,   Rules,

Regulations and/or bye-laws, as the case may be, and other documentation of an relative to the reconstitution or formation of the Holding Organization and relative to the registration and organisation thereof shall be prepared by the Advocates or Attorney designated by BUILDER, but must be approved by the OWNER.

(8) Upon the completion of the BUILDING by the BUILDER, the OWNER shall apply for permission under the relevant provisions specially Section 27, of the Urban Land (Ceiling & Regulation) Act, 1976 for transfer of the saleable space allocated to the Builder under the terms of this agreement.

(9) That as and when any transfer of any space purchased by the transferee of the Builder, is made in favour of such transferee, the stamp duty, transfer charges under the Punjab Municipal Act, or equivalent legislation and any other charges including Registration Fee, shall be borne by such transferees.

(10) That on and after the said building is completed, the transferees of the Builder shall be liable to pay proportionate charges on account of ground rent/less money for the proportionate area of the plot at the rate as may be fixed from time to time, but this shall not be construed as transfer of any right or interest in the plot or any part thereof."

9. The agreement envisages the maintenance of common areas and

amenities in the building by a society, company or other body and not

by the petitioner. The said society, company or body was to also have

the participation of transferees of built up space in the building. The

said society, company or other body is referred to in the Agreement as

the holding organisation. The said holding organisation was to collect

common maintenance charges from transferees or occupiers of built

up space in the building. The question which arises is whether the

petitioner can raise any dispute with respect to non formation of such

holding organisation or with respect to the alleged exorbitant charges

being collected by the respondent from the transferees/ occupiers of

Arb.A.415/2006 & OMP 362/2006 Page no. 6 of 16 built up space in the building.

10. After the parties entered into the agreement dated 13.01.1978

agreeing inter alia to formation of a holding organisation for

maintenance of common areas and amenities in the building, the

legislature enacted the Delhi Apartment Ownership Act, 1986.

11. The said legislation was enacted to provide for the ownership of

an individual apartment in a multistoried building and of an undivided

interest in the common areas and facilities appurtenant to such

apartment and to make such apartment and interest heritable and

transferable. It was not disputed by the petitioner also that the

saleable areas sold by the petitioner and the respondent in the

multistoried building are an apartment within the meaning of

Apartment Act. Even otherwise individual flats in a multistoried

commercial building fall within the definition of apartment as in

Section 3(c) of the said Act. Section 3(e) defines an apartment owner

as the person owning an apartment and an undivided interest in the

common areas and facilities appurtenant to such apartment. Section

3(f) defines an association of apartment owners as of all the owners of

the apartments therein. Section 3(j) defines common areas and

facilities as including the land on which the building is constructed,

foundations, stairways, lobbies, entrances, exits, common areas for

services, elevators, tanks, pumps and such other community facilities

as may be prescribed. Section 3(k) defines common expenses as the

sums assessed against the apartment owners by the Association of

Apartment Owners for meeting the expenses of administration,

Arb.A.415/2006 & OMP 362/2006 Page no. 7 of 16 maintenance and repair of common areas and facilities.

12. Under Section 4 of the said Act every person to whom any

apartment is allotted, sold or otherwise transferred shall be entitled to

the exclusive ownership and possession of the apartment so allotted

and such person also becomes entitled to an undivided interest in the

common areas and facilities. Section 5 makes the apartment heritable

and transferable. Section 15 provides for the management of common

areas and facilities to vest in the Association of Apartment Owners

and Section 24 makes the Act binding on apartment owners, tenants

etc.

13. This court in Sagar Apartments Flat Owners Society

(Regd.) and Ors. v. Sequoia Construction Pvt. Ltd. and Ors

1993 Raj LR 446 : 1993 26 DRJ 71 has held that the Apartment Act is

in force and rights of the parties created under the said Act have to be

taken into consideration and the purchasers of the apartments must

get protection and the court has to ensure that the legislative intent is

fulfilled rather than allow it to be flouted.

14. Thus, under the agreement of the petitioner with the

respondent, the petitioner merely had a right to subscribe to a certain

extent in the holding organisation which was to carry on the

maintenance of common areas and amenities. The petitioner itself

had no rights to manage the common areas and facilities or to

interfere in any manner in the same. The petitioner does not even

plead that it is so entitled. Grievance is made that the holding

Arb.A.415/2006 & OMP 362/2006 Page no. 8 of 16 organisation has not been constituted and the respondent is

continuing to maintain the common areas and amenities in the

building and profiteering therefrom.

15. The question which arises is, whether the petitioner has any

locus standi in the matter of maintenance, specially in the light of the

petitioner having sold of the entire built up area which under the

agreement had fallen to its share and further in the face of the

petitioner not being the owner of any apartment in the building and

also not being in possession of any space in the said building.

16. In my view, the right, if any, of the petitioner under the

agreement even to subscribe to the holding organisation, which under

the agreement was to carry on maintenance of common areas and

amenities, stands superseded by the Apartment Act. After coming

into force of the Apartment Act, this court cannot allow anything in

contravention thereof. The petitioner under the Apartment Act has no

right to be a member of the Association of Apartment Owners or to

interefere in any manner with the maintenance of the building. If the

respondent is in the wrong in continuing to maintain the common

areas and facilities in the building and in profiteering from the same,

the grievance, if any, is of the apartment owners and not of the

petitioner. Allowing this petition would tantamount to this court

holding that the petitioner has a locus to interfere in the maintenance

of common areas and amenities and which, as aforesaid, does not

exist under the law of the land. This court, whenever approached, has

been enforcing the rights of the apartment owners. See Star Estate

Arb.A.415/2006 & OMP 362/2006 Page no. 9 of 16 Management Pvt Ltd v Neo Securities Limited FAO(OS) 390/1996

decided on 31.10.1996 where Division Bench held that only an

Association of Apartment Owners has the right to maintain. The

Division Bench of this court again in Ganesh Prasad Seth v Karam

Chand Thapar 1998 IV AD Delhi 657 held that apartment owners

have a definite specific interest in the common areas and facilities

which form part of the building and cannot be deprived of the same

and these rights cannot be altered without the written consent of all

the apartment owners. Also Shri Om Prakash Charaya v Ashok

Kamal Capital Builders Pvt Ltd 2000 VII AD Delhi 67 where the

Association of owners/residents was held to have a right in lis with

respect to common areas and amenities in the building. Also see

Municipal Corporation of Delhi v A.M. Khanwilkar 2002 65 DRJ

38 where it was held that common areas and facilities cannot be the

separate property for the purposes of levy of property tax. In R.L.

Bhardwaj v. Shivalik Co-Operative Group Housing Society

Limited and Ors 56 1994 DLT 600 it was held that no one person has

exclusive right over the roof which falls in the definition of common

areas. Similarly in Dhawan Deep Resident Welfare Association v

Star Estate Management Limited IA 8139/2006 in CS(OS)

1474/2006 decided on 20th September, 2007 also the owners/residents

of a multistoried building were held to have a right of maintenance of

common areas and amenities.

17. It cannot also be lost sight of that though the building was

constructed in 1989 and the question of maintenance of common

areas and amenities arose immediately on occupation of the building

Arb.A.415/2006 & OMP 362/2006 Page no. 10 of 16 thereafter, the petitioner in 17 years prior to the institution of this

petition did not claim any such dispute and in spite of two previous

arbitration proceedings between the parties.

18. The petitioner has now for the first time sought to resurrect its

claim, if any, of formation of holding organisation in terms of the

agreement. The petitioner in the facts and circumstances is deemed

to have given up and abandoned the right, if any, of formation of

holding organisation in terms of the agreement. The claim for

formation of the holding organisation can no longer be called a live

claim. The senior counsel for the petitioner urged that no time for

formation of holding organisation has been provided in the

agreement and thus the claim, in the nature of specific performance

under Article 54 of Schedule I of Limitation Act can be made when

demand is made and performance is refused. In my view a party to

the agreement if does not claim performance for a long time, specially

when the other is acting contrary to the agreement, is still deemed to

have waived/given up claim for performance and cannot resurrect the

same on the ground that it had earlier not claimed performance.

Transaction cannot be left in such state of flux and be permitted to

extend indefinitely.

19. The counsel for the petitioner has contended that the present

petition is concerned only with the appointment of the arbitrator and

all these questions ought to be left to be decided by the arbitrator.

The Apex Court in SBP & Co v Patel Engineering Ltd Company

2005 8 SCC 618 in para 32 while interpreting Section 11(6) of the Act

Arb.A.415/2006 & OMP 362/2006 Page no. 11 of 16 held that the party ought not to be compelled to participate in

arbitration proceedings extending over a long period of time, by

incurring substantial expenditure and then to come to the court with

an application under Section 34 of the Act seeking setting aside of the

award on the ground that there was no arbitration agreement or that

there was nothing to be arbitrated upon when the tribunal was

constituted. The Apex court further held that the court can at the

stage under Section 11(6) of the Act decide whether the claim was a

dead one or a long barred claim that was sought to be resurrected

and whether the parties have concluded the transaction by recording

satisfaction of their mutual rights and obligations. In the present case

I find that the transaction between the parties relating to enforcement

of mutual rights and obligations under the agreement dated 13th

January, 1978 stood concluded and dead claims are now being sought

to be resurrected.

20. The senior counsel for petitioner relied upon Chunni Lal v RPG

Home Finance Pvt Ltd 134(2006) DLT 212, particularly on para 8

thereof. The Hon‟ble Judge in that case while referring to SBP & Co.,

reiterated that Judge exercising jurisdiction under Section 11(6) must

be, prima facie, satisfied that disputes for arbitral adjudication exist.

In the present case, for reasons recorded, I am not, prima facie,

satisfied. Though the petitioner in its list of citations also included

Shree Ram Mills v Utility Premises Pvt Ltd 2007 4 SCC 599,

Madhucon Projects Ltd v Indian Oil Corporation 2007 2 Arb. L.R.

227 (Delhi), and IVRCL Infrastructure & Projects Ltd v Bhanu

Construction Ltd MANU/AP/0230/2007 but no arguments were

Arb.A.415/2006 & OMP 362/2006 Page no. 12 of 16 addressed with reference thereto. The said judgments do not

persuade me to hold otherwise.

21. The claim of the petitioner of interference in maintenance of

common areas and facilities in the building is thus found contrary to

law. The Apex Court in ONGC v Saw Pipes Ltd AIR 2003 SC 2629

has held the award contrary to fundamental policy of Indian Law to be

against the public policy of India and liable to be set aside. The claim

of the petitioner for formation of holding organisation in terms of

agreement with the respondent is against the Apartment Act and thus

no purpose will be served in directing the parties to arbitration for the

said claim.

22. There is another aspect of the matter. Even the

agreement envisaged association of the transferees in the holding

organization. The said transferees are not parties to the arbitration

agreement. It is not even suggested that the said transferees are to

be involved in the arbitration. Can in the absence of the said

transferees, the arbitrator, even if appointed, make any order of

enforcement, formation or functioning of the holding organization.

The answer necessarily has to be „no‟. Inescapable conclusion is that

the dispute, as far as with respect to the holding organization, is not

arbitrable.

23. The next dispute raised is of unauthorized construction

including of the 11th floor and of misuse of various portions of the

property. The petition is conspicuously silent as to when the said

Arb.A.415/2006 & OMP 362/2006 Page no. 13 of 16 constructions were done. Reliance is sought to be placed on the

notices of L&DO, first of which is of 27th December, 2004 and on the

basis thereof it is argued that the claims / disputes are alive and not

stale or dead. The senior counsel for the petitioner has urged that the

cause of action for the removal of unauthorized construction is a

continuing cause of action, as long as the unauthorized construction

continues and for this reason also the claims are not barred by time.

24. I had during the hearing inquired from the counsel as to, under

the agreement, who was entitled to the terrace rights above the 10th

floor where unauthorized construction of 11th floor is alleged. I was

informed that under the agreement, the terrace rights above the 10th

floor belonged to the respondent. The petitioner for this reason also

has no locus to object to the same.

25. The only claim of the petitioner before the arbitrator can be for

mandatory injunction for removal of the said unauthorized

construction. It has been held by this court in the Rawal Singh v

Kwality Stores AIR 1986 Delhi 236 that the limitation for instituting

a claim for mandatory injunction for removal of unauthorized

construction is three years from the date of unauthorized

construction. In my view the existence of unauthorized construction

does not give a continuing cause of action to enable the persons

seeking to have the same demolished apply at any time for its

demolition as long as it existed. Here private and not public rights

are sought to be enforced. The position is different when public

authorities are seeking removal of unauthorized construction or when

Arb.A.415/2006 & OMP 362/2006 Page no. 14 of 16 court, in public interest is approached to have the same removed.

The respondent has stated that the 11th floor was constructed in the

year 1991. As aforesaid, the petitioner has not given any date of

construction thereof and only relied upon the L&DO having taken

objections to the same for the first time on 27th December, 2004.

However, the date on which the L&DO objects to the same for the

first time does not furnish any cause of action to the petitioner.

26. There is yet another aspect of the matter. The said 11th floor as

well as the other portions of the building allegedly having

unauthorized construction or being misused are in occupation of 3rd

parties. As aforesaid, they are not parties to the arbitration

agreement. Upon being confronted with the same, it was argued that

they being the assignees of the petitioner or the respondent in the

immovable property, would be bound by the arbitration agreement. I

have my doubt on the said proposition. However, I do not deem it

appropriate to decide this issue in the absence of the said persons. If

the petitioner considered the said persons being so bound by the

agreement, they ought to have been impleaded as parties. Sukanya

Holdings P Ltd v Jayesh Pandya & Another (2003) 5 SCC 531,

though on Section 8 of the Act is an authority on the proposition that

the parties cannot be referred to arbitration where the third parties

are also involved in the dispute. The counsel for the respondent has

rightly relied on India Household & Health Care Ltd v LG

Household & Health Care Ltd 2007 5 SCC 510. No rights with

respect to the unauthorized construction/misuse in portions of the

property/apartment which under the Apartment Act have vested in the

Arb.A.415/2006 & OMP 362/2006 Page no. 15 of 16 persons to whom the apartments have been sold can be adjudicated in

the absence of the said persons and it would again be an exercise in

futility.

27. The senior counsel for the petitioner has also contended that

perpetual lease of land underneath building is in the name of the

petitioner and notices have been issued by L&DO in name of

petitioner. The same however will also not entitle the petitioner to

raise dispute with the respondent. Under the Apartment Act the land

underneath the building is also common and vests in the apartment

owners and the petitioner cannot claim any right in the same or at

least without the presence of apartment owners.

28. Thus I hold that neither of the two fold disputes raised are

arbitrable.

29. The AA 415/2006 is thus dismissed. Axiomatically OMP

362/2006 is also dismissed. Parties are left to bear their own costs.

                                         RAJIV SAHAI ENDLAW
                                             (JUDGE)

August 22, 2008
M




Arb.A.415/2006 & OMP 362/2006                            Page no. 16 of 16