Rani Parvati Devi & Anr. vs Turner Morrison Ltd. & Ors.
2009 Latest Caselaw 774 Del

                 * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                          Date of Reserve: 23.1.2009
                                                          Date of Order: 06.3.2009

IA No. 13444/2007 in CS(OS) No. 1650/2007
%                                                                               06.03.2009

        Rani Parvati Devi & Anr.                       ... Plaintiffs
                         Through: Ms. Shayamla Pappu, Sr. Advocate
                   with Mr. R.Krishnamorthi, Advocate

                 Versus


        Turner Morrison Ltd. & Ors.                ... Defendants
                         Through: Mr. Sandeep Sethi, Sr. Advocate with
                         Mr. Lalit Gupta, Advocate


JUSTICE SHIV NARAYAN DHINGRA

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

2. To be referred to the reporter or not?

3. Whether judgment should be reported in Digest?

ORDER

IA No. 13444/2007

This application has been made by defendant no.2 under Section 8 of the

Arbitration and Conciliation Act, 1996 for referring the matter in question to the Arbitrator.

2. The plaintiff no. 2 society (hereinafter referred as plaintiff) was allotted on

lease a plot B-25, Qutub Institutional Area by DDA measuring 5324.40 sq. m (1.32 acre)

for furtherance of its objects for a consideration of Rs.10,56,000/- on yearly rent of

Rs.26,400/-. It is submitted by plaintiff society that in lieu of this, Archeological Survey of

India had acquired Royal Palace owned by plaintiff society. Society had no funds for

making construction over this plot. So, the society entered into an agreement dated

11.12.1995 with Turner Morrison Ltd. defendant no.1, this agreement was named as

'construction agreement'. As per this construction agreement, the entire work of

construction, including appointment of architect, preparation of plans for building,

seeking permission/approvals from different authorities and utilization of maximum FAR

including construction of basement and other floors was to be done by the defendant at

its own cost. The only obligation on plaintiff was to cooperate with the defendant for

necessary approvals and for that purpose to sign all applications, power of attorneys and

affidavits. The defendant no. 1 was to do all work including obtaining of completion

certificate. The cost of construction was initially assessed @ Rs.1200 per sq. ft. The

total area constructed by defendant under the agreement was as under:

Area (in Sq. ft.)

Basement = 13,510

Ground Floor = 13,430

First Floor = 13,938

Second Floor = 8,502

Third Floor = 8,502

Fourth Floor = 6,156

Fifth Floor = 3,237

Terrace = 527 (6th Floor)

(as per assessment made by Joint Assessor & Collector MCD)

3. The entire amount on the construction of the building was spent by the

defendants from their own pocket and as per defendants, the defendants had spent

around Rs.6,90,00,000/- on the construction of the building.

4. In terms of construction agreement, this amount was to be paid back by

the plaintiff to the defendants as per schedule of payment annexed with the agreement

and in the event of delay of payment, plaintiff was to pay interest @ 36% p.a. The

plaintiff was also to deposit original title deeds of the property with the defendants, who

was to retain the title deeds as security till the payment of entire construction amount

and other dues and expenses were not cleared by the plaintiff. The agreement also

provided that the defendant (second party to the agreement) shall have a lien over the

plot of land as well as over the construction till the entire construction cost was paid by

the plaintiff and in case plaintiff failed to discharge this liability, the defendant would have

authority to recover all its construction cost, interest and expenses incurred by it by

sale/transfer or lease of the constructed area.

5. The agreement also provided that the second party shall carry out the

construction either itself or the construction could be carried out through its nominee or

nominees, as per the building plans sanctioned by the competent authority. The

construction was to be carried out within a period of 24 months from the date of sanction

of the plans and plaintiff had agreed and undertaken to execute a general power of

attorney in favour of second party to enable the second party to commence and

complete the construction and to let out the building or part thereof at the discretion of

the second party. It was further agreed that in case an additional construction was

permitted on the plot on a future date, the second party only shall be empowered to

make such additional construction through its own funds and out of such additional

construction an area maximum upto 1/6th of such additional construction will be given to

the first party i.e. plaintiff and remaining area shall be retained by the second party or by

its nominee for which second party shall pay a sum of Rs.1300/- per sq. ft. to the first

party as security deposit and shall also pay rent @ 0.50 for such area. The second party

i.e. M/s Turner Morrison Ltd. shall have full authority and power to let out the additional

area to any prospective tenant and in the event, the additional area could be transferred

in future, the first party shall transfer the said additional area in favour of the second

party or its nominee or nominees and in that event the sum of Rs. @ Rs.1300/- per sq.

ft. which was the security deposit lying with the first party shall be the adequate and

sufficient consideration.

6. The agreement contained an arbitration clause being clause no. 10

wherein it was agreed between the parties that in the event of any dispute or difference

between the parties relating to the terms of this agreement or in part thereof, the same

shall be referred to the sole arbitration of Shri P.V.Kapur, Senior Advocate, whose

decision shall be binding, the venue of the arbitration was kept at Delhi.

7. By a Deed of Assignment M/s Turner Morrison Limited (the second party)

assigned its rights and obligations under the agreement to M/s Turner Morrison Land

Limited which was a 100% subsidiary of M/s Turner Morrison Limited, constituted for this

purpose. It was provided in the Deed of Assignment that all terms and conditions of the

construction agreement dated 11.12.1995 entered into with M/s Turner Morrison Land

Limited shall be treated to have been with M/s Turner Morrison Land Limited and it shall

fulfill each and every obligation of M/s Turner Morrison Limited in terms of the

construction agreement including the acceptance of arbitration clause. This Deed of

Assignment was signed by Jigmit Wangchuk Namgyal, attorney of plaintiff on behalf of

plaintiff and also by Shri Ravindra Maheshwari, authorized signatory of M/s Turner

Morrison Limited.

8. After the construction was complete, the basement and ground floor

possession was handed over to the plaintiff where the plaintiff opened its museum and

started other activities. Rest of the floors i.e. 1st floor to 6th floor were retained by

defendant no.1 for its own use and for further letting.

9. There is no dispute about the fact that plaintiff society had not paid the

above amount to the defendant towards construction or towards other expenses. The

claim of plaintiff is that the defendant recovered cost of construction by retaining the 1st

floor to 6th floor for its company use as well as for letting out some of the parts of above

floors to different tenants. Plaintiff states that after the cost of construction was got

recovered, plaintiff served notice on defendant no.1 to hand over the portions retained

by it but defendant no.1 did not return the floors (1-6th floors) to the plaintiff and kept on

collecting huge amount as rent from the tenants. Defendant no.1 also illegally inducted

its sister concern i.e. defendant no.2 into the building with which plaintiff had no

commercial agreement. Delhi Development Authority (DDA) took strong objections to

various unauthorized occupants in various portions of the building and in the first week

of May'06 the perpetual lease of plaintiff was cancelled without notice to the plaintiff on

the ground of sub-letting, in excess of permissible limit. Plaintiff challenged cancellation

of the lease by filing a writ before this Court. However, on 15th November, 2006 the

premises was sealed and all unauthorized occupants of defendants no. 1 & 2 vacated

their respective portions after giving undertaking before a Division Bench of this Court in

CWP 4582/2003 Kalyan Sanstha Social Welfare v. Union of India & Ors.. The ground

floor and basement were also sealed so the building was now lying vacant. Defendant

no.2 filed a CWP in High Court in December, 2006 through Mr. R. Maheshwari, one of

its Directors. The plaintiff then filed an application under Section 340 Cr.P.C. for taking

action against Mr. R.Maheshwari. Proceedings under section 340 Cr.P.C. are stated to

be pending. Defendants No. 1 & 2 also filed an application under Section 9 of the

Arbitration and Conciliation Act before the Court resorting to the arbitration clause in the

construction agreement and also referred the matter to arbitration of Mr. P.V.Kapur, Sr.

Advocate in terms of the agreement. Mr. P.V.Kapur entered upon the reference and

sent a notice of hearing of the claims to plaintiff and defendant no.2. The plaintiff

claimed that Mr. P.V.Kapur had no jurisdiction to act as Arbitrator as there was no

agreement between plaintiff and defendant no.2, also because plaintiff had not

consented to the arbitration of Mr. P.V.Kapur who was an advocate representing

defendants. Plaintiff submitted that despite plaintiff not submitting to the jurisdiction of

the Arbitrator, the Arbitrator was continuing with the hearing, although, there was no

commercial agreement between plaintiff and defendant no.2. Plaintiff therefore, filed this

suit seeking a decree of permanent injunction in favour of plaintiff and against the

defendants.

10. Smt. Rani Parvati Devi, who is plaintiff no.1 in fact has no locus standi in

the matter because the suit land was not allotted in the personal name of Smt. Rani

Parvati Devi, neither it is the case of society that this suit land was allotted to Smt. Ram

Parvati Devi or there was any construction agreement between Smt. Rani Parvati Devi,

in her individual capacity, and defendant no.1. The Construction Agreement was

entered into between the society (plaintiff no. 2) and defendant no.1. By making Smt.

Rani Parvati Devi as co-plaintiff without any specific right in her, would make no

difference to the factual situation.

11. It is in the above context that defendant had filed this application under

Section 8 of the Arbitration and Conciliation Act for referring the matter to the Arbitrator.

Defendant (Turner Morrison Limited) has also filed an independent Arbitration

Application 446/2007 wherein a prayer has been made for referring the dispute between

the parties to the Arbitrator.

12. The claim of the plaintiff is that there was no arbitration agreement

between the plaintiff society and defendant no.2. There is no dispute that defendant

no.2 is a fully owned subsidiary of defendant no.1 and was in fact constituted for the

specific purpose of carrying out the construction under the agreement and an Assigning

Agreement was also executed between plaintiff no.2 and defendant no.1 thereby

assigning the rights and obligations under construction agreement in favour of defendant

no.2. The plaintiff had taken a plea that the assignment agreement was not signed by

the attorney of the plaintiff and the signatures on this were forged. However, I have

perused the other correspondence between the parties. Prima facie, it does not seem

that the Assigning Agreement was the result of a forgery. The correspondence between

the parties also showed that the plaintiffs were fully aware of this Assigning Agreement.

In any case the plaintiff society would be at liberty to raise this issue as well before the

Arbitrator.

13. The rights of defendant no.1 & 2 and that of plaintiff vis-à-vis this

construction agreement are yet to be crystallized. There can be no doubt that the entire

amount on construction of the building was spent by defendants no. 1 & 2. The amount

carried huge interest of 36% in case of non-payment by plaintiff. This agreement was

signed by the plaintiff with open eyes. The plaintiff has not assailed the correctness of

this agreement with defendant no.1 nor has stated that any clause of this agreement

was unconscionable or voidable. Under these circumstances, unless and until the rights

of the plaintiff no.2 and the defendants no. 1 & 2 are not adjudicated vis-à-vis

construction agreement and a conclusion is arrived at as to what was the amount

payable by the plaintiff no. 2 to the defendants no. 1 & 2 in order to terminate the lien of

defendants no. 1 & 2 over the property and to get the papers of the property back, the

issue of user of the property by the plaintiffs cannot be decided.

14. There is no dispute that the plaintiff society was peacefully enjoying

basement and ground floor of premises in terms of the agreement and was satisfied with

the operation of the agreement, it is only when the sealing started and plaintiff found that

the action was being taken by DDA for cancellation of the lease, the plaintiff thought it

necessary and proper to issue notice to the defendants. Prior to that, there was not a

single letter written by the plaintiffs to the defendants showing its willingness to pay

anything or asking the defendant no. 1 & 2 about accounts showing adjustment of the

construction cost. I, therefore, consider that it is a case where entire dispute between

the parties revolves around the construction agreement and the assignment agreement

and the matter is required to be referred to the Arbitrator only, in terms of Section 8 of

the Arbitration and Conciliation Act.

15. The plaintiff has raised a doubt about the impartiality of Mr. P.V.Kapur

Advocate, who is the nominated Arbitrator in the agreement. The defendant in

Arbitration petition no. 446/2007 has prayed that any other independent Arbitrator may

be appointed. I consider that appointment of an independent Arbitrator would be proper

in this case to douse all apprehensions. I, therefore, nominate Justice A.B.Saharya

(Retd.) (former Chief Justice of High Court of Punjab & Haryana) as the Arbitrator in this

case, who, if having no reservations, shall enter the reference and shall charge fee from

the parties as per the standard set by Indian Council of Arbitrators. The parties shall file

their claim before the Arbitrator within 60 days from today. The Arbitrator shall endeavor

to pass the award as early as possible.

In terms of above, the application as well as the suit of the plaintiff stand

disposed of.

Copy of this order be sent to Mr. Justice A.B.Saharya (Retd.).

March 06, 2009                                           SHIV NARAYAN DHINGRA, J.
vn