M/S Era Landmarks (India) Ltd vs Shri Dhanroop Mal Mehta
2009 Latest Caselaw 3929 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   OMP 457/2009

%                       Date of decision: 24th September, 2009

M/S ERA LANDMARKS (INDIA) LTD                              ....Petitioner
                        Through: Mr. Manoj K. Singh and Mr. Vishal, Advocates.

                                    Versus

SHRI DHANROOP MAL MEHTA                                   ... Respondent
                        Through: Mr. N.M. Sharma and Ms. Shivani Sanghi,
                        Advocates

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

1.    Whether reporters of Local papers may
      be allowed to see the judgment?                      No

2.    To be referred to the reporter or not?               No

3.    Whether the judgment should be reported              No
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. This petition has been preferred under Section 9 of the

Arbitration and Conciliation Act, 1996 (hereinafter to be referred as

„the Act‟) for interim measures. The parties hereto were parties to a

document titled „Memorandum of Understanding‟ (for short „MOU‟)

dated 26th February, 2008 whereunder the petitioner herein agreed

to develop the land of the respondent at Udaipur in Rajasthan. The

petitioner, under the said agreement, has paid a sum of

Rs.75,00,000/- to the respondent by way of a refundable deposit.

Clause 19 of the said agreement between the parties is as under:-

"19. THAT in the event of this MoU being rescinded or otherwise becoming inoperative for whatever reason, all amounts paid by the Second Party to the First Party pursuant to this MoU shall forthwith become payable by the First Party to the Second Party. Any delay in refunding the same by the First Party to the Second Party beyond 7 days of its becoming due shall attract an interest @15% p.a. for the entire period from

the day it shall fall due."

2. It is the case of the petitioner that owing to breaches by the

respondent, it is not possible for the petitioner to go forward with

the agreement and the petitioner had as such called upon the

respondent to refund the sum of Rs.75,00,000/- which the

respondent had failed to do. The petition is filed for restraining the

respondent from alienating, encumbering or parting with the

property, subject matter of the aforesaid agreement, on the

contention that if the respondent succeeds in doing so, the petitioner

shall have no other way/means to recover its money.

3. Vide an ex parte order dated 11th August, 2009, the respondent

was restrained from selling, alienating, transferring or encumbering

the property, subject matter of the aforesaid agreement.

4. The counsel for the respondent has filed a reply opposing the

petition.

The counsel for the parties have been heard.

5. The counsel for the petitioner has contended that the petition

is not maintainable because the petitioner has not evidenced any

intention to commence arbitration proceedings. Reliance is placed

on Sundaram Finance Ltd. vs. NEPC India Ltd. AIR 1999 SC 565

in this regard.

6. Secondly, it is contended that the petitioner has concealed the

material facts from this Court and is not entitled to the discretionary

relief. It is contended that the petitioner has alleged that it is not

possible to go forward with the agreement and/or that the petitioner

has renegated from the contract for a defect in title of the

respondent. The said statement in the petition is stated to be false in

view of the annexures to the agreement wherein the alleged defect

in title of the respondent is stated to have been disclosed.

7. Thirdly, it is contended that the petitioner was to pay a total

sum of Rs.4, 50,00,000/- towards the refundable deposit and is in

breach of the agreement and the respondent has claims, therefor

against the petitioner and the petitioner is not entitled to refund of

the sum of Rs.75,00,000/- for this reason.

8. Per contra, the counsel for the petitioner has urged that the

respondent had in reply to the legal notice admitted his liability to

refund the sum of Rs.75,00,000/- and is now falsely denying the

liability. The counsel for the petitioner has also controverted the

other contentions recorded aforesaid of the counsel for the

respondent.

9. I have put to the counsel for the respondent that the petition

cannot be dismissed owing to concealment by the petitioner for the

reason that the petitioner has approached this Court on the basis

that under the agreement, it is entitled to refund of Rs.75,00,000/-

irrespective of the reason for which the MOU has been rescinded or

has become inoperative; thus, the correctness of the reason for

which the petitioner renegated from the contract is not relevant.

Similarly, it has been put to the counsel for the respondent that the

fear of the respondent of the petitioner holding up the property of

the respondent by obtaining an interim order without commencing

arbitration can be allayed by direction with respect thereto being

made herein. The counsel for the petitioner states that an Arbitrator

may be appointed by this Court only.

10. Faced with the aforesaid, the counsel for the respondent states

that the respondent will furnish a bank guarantee in the sum of

Rs.75,00,000/- in favour of the Registrar General of this Court within

four weeks from today to ensure the payment of the said sum of

Rs.75,00,000/- to the petitioner in the event of Award finding such

money payable to the petitioner attaining finality. It is stated that

upon such bank guarantee being furnished, the interim order be

vacated. He has also agreed that the Arbitrator be appointed by this

Court only and the arbitration proceedings be directed to be

disposed of in a time bound schedule.

Accordingly, this petition is disposed of with the directions:

(i) That the interim order made on 11th August, 2009 to continue

till the respondent furnishes the bank guarantee in the aforesaid

terms to the satisfaction of the Registrar General of this Court; upon

the said bank guarantee being accepted by the Registrar General,

the said order shall stand vacated and the respondent shall be

entitled to deal with the property subject matter of the MOU dated

26th February, 2008; the bank guarantee be valid for a term of one

year in the first instance and to be kept alive till the Award attains

finality; however if the Award finds the petitioner not entitled to the

said sum of Rs.75,00,000/-, and the petitioner prefers a petition

under Section 34 of the Act, the respondent shall be entitled to seek

modification of this order;

(ii) The agreement between the parties being of a sole arbitrator

and the parties being unable to agree upon an Arbitrator, Justice

A.B. Saharya (Retd) is appointed as the sole Arbitrator to adjudicate

the disputes and differences, subject matter of the arbitration clause

in the agreement aforesaid between the parties. It is clarified that

the petitioner shall be entitled to make claims besides that for refund

of Rs.75,00,000/- and the respondent shall also be entitled to make

claims against the petitioner. The maximum fee of the Arbitrator is

fixed at Rs.5,00,000/- (besides out of pocket expenses), to be shared

equally by the parties and subject to award as to costs. The

Arbitrator is requested to dispose of the arbitral proceedings within

a period of one year from the date of first appearance of the parties

before the Arbitrator. The parties to appear before the Arbitrator

with prior appointment on 23rd October, 2009.

RAJIV SAHAI ENDLAW,J th September 24 , 2009 sb