M/S Kaiser Lands vs Mrs. Ethel Robinson And Others
2008 Latest Caselaw 1751 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI


             +I.As. No. 2049/2007 and 13200/2007
                   in CS (OS) No. 2810/1999



%                                     Date of decision : 26.09.2008

M/S KAISER LANDS                                                 ....Plaintiff
                               Through:        Mr. Sanjeev Sachdeva,
                                               Advocate


                                   Versus



MRS. ETHEL ROBINSON AND OTHERS ....Defendants
                               Through:        Mr. Amitabh Chaturvedi and
                                               Mr. JeeveshNagrath,
                                               Advocates for the Defendant
                                               No. 5



CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

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

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

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


RAJIV SAHAI ENDLAW, J.

1. The Plaintiff has instituted the suit for specific performance of

an agreement of sale dated 19th April, 1993 by the Defendants in

favour of the Plaintiff of the Rear Duplex Flat comprising of 50% of

the ground floor and 50% of the basement in property no. E-7/14,

Vasant Vihar, New Delhi. Though there are 5 Defendants, the

Defendant No. 1 died during the pendency of the suit leaving,

besides the Defendants No. 2 to 5, her daughters also as her legal

representatives. Neither the other legal representatives of the

Defendant No. 1 nor the Defendants No. 2 to 4 have chosen to

appear in the suit and have been proceeded ex parte. The Defendant

No. 5 on being served, filed Criminal Misc. No. 1759/2000 which was

put up before the court first on 23rd May, 2000 and is still pending.

The counsel for the Defendant No. 5 thereafter on 12th September,

2000 stated that an application invoking the arbitration clause will

be filed and the Defendant No. 5 will not be filing the written

statement. The counsel for the Plaintiff on that date itself stated that

the Defendant No. 5 having already moved the application under

Section 340 of the Cr.P.C. (Cr.Misc. No. 1759/2000), was not entitled

to invoke the arbitration clause. The matter thereafter remained

pending for the service of the other Defendants. The Defendant No.

5 moved another application under Section 340 of the Cr.P.C. being

Cr.Misc. No. 2537/2000 notice whereof was also issued and which is

also still pending. The Defendant No. 5 after 5 years filed I.A. No.

8213/2005 under Section 8 of the Arbitration and Conciliation Act,

1996 notice whereof was issued and reply was filed by the Plaintiff.

However, on 8th February, 2007, it was found that I.A. No. 8213/2005

was signed by the wife of the Defendant No. 5 on the basis of a

Power of Attorney which did not pertain to the property, subject

matter of the present suit. The counsel for the Defendant No. 5 thus

sought permission to withdraw the application which was dismissed

as withdrawn. It was thereafter that the I.A. No. 2049/2007 also

under Section 8 of the Arbitration Act came to be filed by the

Defendant No. 5. The Plaintiff on the other hand filed I.A. No.

13200/2007 under Order 8 Rule 10 of the CPC for striking off the

defence of the Defendant No. 5 for having not filed the written

statement. This order disposes of the said two applications.

2. It is the admitted case of the Plaintiff and the Defendant No. 5

that the Agreement dated 19th April, 1993 was executed between the

deceased Defendant No. 1, predecessor of the Defendants No. 2 to 4

and the Defendant No. 5 on the one hand as owners of property no.

E-7/14, Vasant Vihar, New Delhi and the Plaintiff. Under the said

Agreement, the Plaintiff agreed to demolish the then existing single-

storeyed construction on the said property and to, at the cost and

expense of the Plaintiff, construct a basement, ground, 1st and 2nd

floor thereon, in consideration of the Plaintiff on completion of the

said construction acquiring rights with respect to 50% of the

basement and ground floor and in the 2nd floor. This is what in

common parlance is referred to as a collaboration agreement. The

said Agreement contains an arbitration clause as under:

"19. That in the event of any question or dispute arising in connection with or incidental to or in respect of interpretation or scope of this Agreement of any part thereof, then the same shall be referred to the sole Arbitration of an Arbitrator mutually decided by the two parties for decision. The sole Arbitrator shall give a speaking order/Award."

3. It is the case of the Plaintiff that the Defendants had

subsequently agreed to sell to the Plaintiff, the ground floor Rear

Duplex Flat for a consideration of Rs. 52 lacs. The Plaintiff in this

regard relies upon a document titled Receipt-cum-Agreement and

which the Plaintiff in the plaint has stated was executed on 29th June,

1994. The said document is purportedly signed by the deceased

Defendant No. 1, the Defendant No. 5 and the predecessor of the

Defendants No. 2 to 4 as well as on behalf of the Plaintiff. The two

applications aforesaid under Section 340 of the Cr.P.C. came to be

filed by the Defendant No. 5 with respect to the said document. It is

the case of the Defendant No 5 in the said applications under Section

340 of the Cr.P.C. that he was posted by the Indian Army at

Palampur and retired on 30th June, 1994 and on 29th June, 1994, the

Defendant No. 5 as well as the Defendant No. 1 were at Palampur

and as such could not have signed Receipt-cum-Agreement and the

document has been forged and fabricated by the Plaintiff.

4. In the aforesaid facts, the following questions have a bearing

on the disposal of the application of the Defendant No. 5 under

Section 8 of the Arbitration Act.

a) Whether the Agreement alleged by the Plaintiff of sale is part

and parcel of the Collaboration agreement containing the

arbitration clause or is a separate and independent

agreement?

b) Whether the Defendant No. 5 while denying the Agreement of

sale can invoke the arbitration clause?

c) Whether the filing of the applications under Section 340 of the

Cr.P.C. constitutes a first statement on the substance of the

dispute within the meaning of Section 8 the Arbitration Act and

debars the Defendant No. 5 from subsequently applying for

reference to arbitration?

d) Whether the Defendant No. 5 by not invoking Section 8 of the

Arbitration Act for nearly 5 years after service of summons has

waived the right to apply thereunder?

e) Whether the Defendant No. 5 by reason of having earlier filed

an application under Section 8 of the Arbitration Act and

having withdrawn the same, is debarred from filing the second

application?

5. In my opinion, the Defendant No. 5 merely for the reason of

having applied under Section 8 of the Arbitration Act after 5 years

from the service of the summons and for the reason of having earlier

filed an application and withdrawn the same, is not debarred from

now invoking the said provision. Section 8 itself lays down the time

and manner of applying. Under Section 8, the application is to be

filed not later than while submitting the first statement on the

substance of the dispute. Thus as long as the application is filed not

later than while submitting the first statement on the substance of

the dispute, the same cannot be dismissed for the reason of delay.

See M/s Everest Electric Works vs. Himachal Futuristic

Communications Ltd. 113 (2004) DLT 304. Similarly, the earlier

application was withdrawn for the reason of the same having been

signed by the wife of the Defendant No. 5 who was found to be not

authorized to do so. Thus, the same cannot be considered as an

application filed by the Defendant No. 5. Even otherwise there was

no adjudication at that stage as to whether the provisions of Section

8 of the Act are attracted or not.

6. I, however, find the application filed by the Defendant No. 5

under Section 340 of the Cr.P.C., the first statement of the

Defendant No. 5 on the substance of the dispute. It is significant

that the Arbitration Act of 1996 has made a departure from the

earlier law. The Legislature has not used the word „written

statement‟ but has chosen the words "first statement on the

substance of the dispute." Thus, it has to be determined as to what

was the substance of the dispute.

7. Substance of the dispute in the present case is an agreement of

sale of Rear Duplex Flat in the property. The Plaintiff is claiming

specific performance of the said Agreement. The Defendant No. 5 by

filing the applications has denied the Agreement to Sell itself and

has called the documents filed by the Plaintiff evidencing the

Agreement to Sell to be a forged and fabricated document. Even

though the Defendant No. 5 did not file the written statement but the

Defendant No. 5 in the said application accompanied by the

documents to show his presence on the date of the Agreement at

Palampur, has sought prosecution of the Plaintiff and its partners. A

suit for specific performance can be contested by the Defendant

either by denying the Agreement to Sell itself or its terms or

challenging the readiness or willingness of the Plaintiff or the

entitlement of the Plaintiff to the relief of specific performance. In

the present case, the Defendant No. 5 in response to the suit has

denied the existence of the Agreement to Sell. The Defendant No. 5

was satisfied for nearly 5 years after knowledge of the suit to deny

the existence of the Agreement and to call the Agreement to Sell

forged and fabricated. The Defendant No. 5, by filing the

applications under Section 340 Cr.P.C. called upon the court to

adjudicate upon the existence of the Agreement to sell. The court

under Section 340 Cr.P.C. is to direct prosecution only after prima

facie recording a finding on the allegation of forgery and fabrication.

The Defendant No. 5 having called upon the court to adjudicate his

defence to the claim of the Plaintiff, in my view, cannot subsequently

be permitted to reprobate and seek arbitration.

8. While holding so, I am conscious of Rashtriya Ispat Nigam

Ltd. vs. Verma Transport Company AIR 2006 SC 2800 where the

Apex court held the filing of an opposition to interim injunction to be

not precluding subsequent filing of an application under Section 8.

The reasoning therefor was that in the reply to injunction application

itself it was stated that the suit was not maintainable because of the

arbitration clause. It was further reasoned that when ex parte

injunction has been granted, the other party is forced to reply to

have the same vacated and such compulsion cannot disclose an

unambiguous intention to give up the benefit of arbitration

agreement. The Apex court thus held that taking step in the

proceeding must be confined to taking steps in the proceedings for

resolution of the dispute and not to taking steps for contesting

applications for interlocutory reliefs. However, in the present case

the Defendant No. 5 was not under any compulsion for filing

applications under Section 340 Cr.P.C. He, by calling upon the court

to adjudicate the said application, invited the court to under Section

340 (1) (a) Cr.P.C. to hold a preliminary inquiry and record a finding

to the effect that the document evidencing Agreement to sell of

which specific performance was claimed was forged and fabricated.

That is the very dispute which the arbitrator would be required to

adjudicate. The Defendant No. 5 having called upon the court to

return a finding on existence of Agreement to Sell, lost his right to

have the said question referred to arbitrator.

9. Even otherwise, I do not find the existence of any arbitration

agreement in the Agreement of sale of Rear Duplex Flat in the

property. The counsel for the Defendant No. 5 contended that the

Agreement of sale alleged by the Plaintiff was a change of allocation

of built-up areas from that provided in the Collaboration agreement.

I do not find so. The built-up areas were allocated under the

Collaboration agreement in lieu of the expense to be incurred by the

Plaintiff in executing the works of demolition and reconstruction of

the property. On the other hand, the subsequent Agreement was for

the sale by the owners of a part of their allocation of built-up area

under the Collaboration agreement, to the Plaintiff or its nominee.

10. It is significant that a Collaboration agreement is not

assignable. The same is entered into by the owner of a property with

a builder/contractor relying upon the personal skills and reputation

of the said builder or contractor. On the contrary, an agreement of

sale of immovable property is by its very nature, unless provides

otherwise, assignable by the purchaser. A perusal of the Receipt-

cum-Agreement relied upon by the Plaintiff also does not lead one to

hold that the parties intended the Agreement to Sell to be a part and

parcel of the earlier Agreement. Merely because the property,

subject matter of the said Agreement was to come into existence in

pursuance to the Collaboration agreement, would not make the

Agreement to Sell a part and parcel of the Collaboration agreement.

The counsel for the Defendant No. 5 has argued that on the date of

the Agreement to Sell, the property subject matter thereof, was not

even in existence and was to come into existence under the

Collaboration agreement and thus, the Agreement to Sell should be

deemed to be a change in allocation under the Collaboration

agreement itself. I, however, do not find so. Under the law it is

possible to enter into an Agreement to Sell with respect to a

property, under construction. Under the Collaboration agreement,

the Plaintiff was to acquire rights with respect to certain portions of

the built-up property in consideration of incurring expense on the

construction. There was to be no sale by the owners of the said

portions of the property to the Plaintiff. The Collaboration

agreement is an agreement of exchange. Upon the completion of

reconstruction of the property, the owners were to be the owners of

the land and the builder was to be the owner of the superstructure

and the owners in exchange of a portion of the superstructure had

agreed to create rights in a portion of the land in favour of the

builder or its nominee. The position with respect to the built-up area

of the owner‟s allocation was entirely different. The owners were

the owner of the land as well as the superstructure thereof and for

consideration had agreed to transfer the same to the Plaintiff or his

nominee.

11. The counsel for the Defendant has relied upon a notice dated

20th March, 1997 stated to be got issued by the Plaintiff/partner of

the Plaintiff to the deceased Defendant No. 1 and the Defendant No.

5 and in which it is stated that they were to get prepared a combined

agreement for the complete transaction including the transfer of the

Rear Duplex Flat to the Plaintiff. The said notice has been given in

reference to a MoU dated 14th December, 1996 stated to have been

executed by the Plaintiff and the predecessor of the Defendants No.

2 to 4 and the Defendant No. 5. A perusal of the said MoU also

shows that the parties have therein also treated the Collaboration

agreement and the Agreement of sale of Rear Duplex Flat separately.

The notice dated 20th March, 1997 definitely shows that according to

the Plaintiff there was a proposal to have a composite agreement of

collaboration and of sale of the Rear Duplex Flat but the fact remains

that no such agreement was admittedly executed. The question of a

composite agreement would arise only when the agreement for the

two transactions i.e. of collaboration and of sale were different. We

do not know what may have been settled by the parties in the

proposed composite agreement, whether the parties would have

provided for arbitration therein or not. One can also take judicial

notice of the fact that while Arbitration is generally the norm in

Collaboration agreements which may entail technical disputes as to

construction and its quality, the same is not the norm in Agreement

of sale of immovable property.

12. The Defendant No. 5 has in his application also not stated as to

how the disputes and differences, if any, between the parties, subject

matter of the present suit may be interlinked to the disputes and

differences under the Collaboration agreement. It is significant that

the present suit itself has remained pending for the last about 9

years and no claims under the Collaboration agreement are stated to

have been made by either party till date.

13. In the circumstances, I find the Agreement of sale, for specific

performance of which the present suit has been filed, to be separate

and distinct from the Collaboration agreement and I further find that

there is no averment of the Defendant No. 5/Applicant that the

adjudication of the present suit would, in any way, entail

adjudication of any claims under the Collaboration agreement.

Having found no arbitration agreement and having further found the

application under Section 8 of the Act to have been filed after the

Defendant No. 5/Applicant had filed his first statement on the

substance of the dispute, I.A. No. 2049/2007 is dismissed and in the

circumstances aforesaid, with costs of Rs. 5,000/- payable by the

Defendant No. 5 to Delhi Legal Services Authority.

14. The Plaintiff has applied vide I.A. No. 13200/2007 for striking

of the defence of the Defendant No. 5. Undoubtedly, there is a long

delay of 9 years in filing the written statement. The application

under Section 8 of the Act itself owing to which the written

statement is stated not to have been filed, was filed after 5 years of

service of the Defendant No. 5. However, since the Defendant No. 5

was never put to terms, I deem it appropriate to, by way of last

opportunity, give two weeks time to the Defendant No. 5 to file his

written statement to the suit. This shall further be subject to

payment of costs imposed on Defendant No. 5 while dismissing I.A.

No. 2049/2007. Upon the failure of the Defendant No. 5 to so file the

written statement within two weeks, his right to file the written

statement shall stand closed. I.A. No. 13200/2007 is disposed of

with these directions.

RAJIV SAHAI ENDLAW (JUDGE)

September 26, 2008 smp