M/S Reliance Builder vs Om Satyam Co-Operative Group H/S ...
2010 Latest Caselaw 3716 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+              IA No. 7859/2008 in CS(OS) NO. 528/2008

                                     Date of Decision : 10.08.2010

M/s Reliance Builder                            ......      Plaintiff

                             Through:    Mr. R. S. Tomar, Advocate

                                Versus

Om Satyam Co-operative
Group H/S Ltd. & Anr.                    ....... Defendants
                                         Through: Mr.     Madhukar
                                         Pandey,   Adv.    for the
                                         defendant no. 1.
CORAM :

HON'BLE MR. JUSTICE V.K. SHALI

1.

Whether Reporters of local papers may be allowed to see the judgment? YES

2. To be referred to the Reporter or not ? NO

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

V.K. SHALI, J. (oral)

IA No. 7859/2008

1. This order shall dispose of an application bearing no.

7859/2008 filed by the defendant no. 1 under Section 8 of

the Arbitration and Conciliation Act, 1996 for reference of the

dispute between the plaintiff and the defendants to Arbitral

Tribunal in terms of the agreement.

2. Briefly stated the facts of the case are that the

plaintiff/Reliance Builders filed a suit for recovery of

Rs.55,50,000/- against the defendant no. 1 and made the

Registrar Co-operative Society, Government of NCT of Delhi

as defendant no. 2. It was alleged in the suit that the plaintiff

had entered into an agreement for construction of 90 flats on

a plot of land measuring 6733.32 sq. meters situated at Plot

No. 13, Sector-4, Dwarka, New Delhi for the benefit of the

members of the society. This agreement was entered into

between the plaintiff and the defendant no. 1 on 30.12.1998.

The details of the work to be executed are given in the said

agreement which are not of much relevance for the purpose of

deciding the present application.

3. In the said agreement there was an arbitration clause

contained in Clause 34 of the agreement which reads as

under:

"Except where otherwise provided for in the contract all questions and disputes relating to the meaning of the specification, designs, drawings and instruction herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter or thing whatsoever in any way arising out of or relating to the contract, design, drawings, specification, estimates, instructions orders of these conditions or otherwise concerning the

works or the execution or failing to execute the same whether arising during the progress of the work or after the completion or a bodement thereof shall be referred to a sole Arbitrator to be appointed by the Secretary of the owner, in case of the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason whatsoever, the Secretary of the owner shall appoint another person to act as arbitrator in accordance with the terms of the contract. It is also a term of this contract that no person other than the secretary of the owner shall appoint an arbitrator, and if for any reason, that is not possible the matter is not to be referred to arbitration at all. The arbitrator so appointed shall be an approved Arbitrator of the Institute of Arbitrator and approved for the valuation of matter to be so referred."

4. It is alleged by the plaintiff that the despite having executed

the work, the defendant no. 1 did not clear the 10th running

bills of the plaintiff as a consequence of which dispute arose

between the plaintiff and the defendant no.1. The plaintiff

refused to hand over the possession of the flats to the

defendant no.1 society. The Managing Committee of the

defendant no.1/society in order to break impasse held

meeting with the plaintiff and arrived at a settlement and

executed a fresh agreement on 12.06.2003. This fresh

agreement was called as a supplemental agreement, the

defendant no. 1 had agreed to make the balance payment to

the plaintiff in two installments by way of 90 cheques, each

cheque for a sum of Rs.1,75,000/- while as the plaintiff was

to carry out certain works in the individual flats numbering

90, the details of which are given in the agreement. It is

stated that despite the 90 cheques having been issued by the

plaintiff only 70 cheques were honoured while as the

remaining 20 cheques were dishonoured which necessitated

the filing of the present suit Rs.50,55,000/- which included

principal amount of Rs.35,00,000/- of 20 cheques @

Rs.1,75,000/-.

5. The learned counsel for the plaintiff has stated that the

possession of all the flats had been handed over to the

members of the defendant no.1/society after execution of the

works as stipulated in the supplement agreement but the

balance payment of 20 cheques were not released.

6. The defendant no. 1 on being served on the very first date

filed an IA no. 7859/2008 wherein it took the plea that

according to the agreement dated 30.12.1998 there is an

arbitration clause between the plaintiff and the defendant

no.1, and therefore, the dispute deserves to be referred to an

arbitrator and the present suit cannot continue. It was stated

by the learned counsel for the defendant no.1 during the

course of his oral submissions that the new agreement was

executed on 12.06.2003 but it was only supplementary

agreement, and therefore, the said agreement cannot override

the first agreement dated 30.12.1998 as a consequence of

which the arbitration clause which existed between the

parties originally came into operation. Apart from this legal

submission made by the defendant in the application is that

there have been averments in extenso making the allegation

of embezzlement, fraud and collusion against one Sh. Lal

Chand, Ex-Secretary of the defendant no.1/Society, Sh. K. P.

Singh allegedly unelected President and Sh. Rajbir Singh, the

proprietor of the plaintiff in defrauding the defendant

no.1/society for siphoning off the funds of the society. All

these averments are not relevant for deciding the present

application under Section 8 of the Arbitration and

Conciliation Act.

7. The plaintiff has filed a reply to the application raising the

plea that there is no arbitration agreement in as much as the

supplement agreement between the parties did not envisage

the settlement of the dispute between the parties by way of a

Arbitral Tribunal. Reference was made to a clause of the

supplementary agreement wherein it was stated that Courts

only in Delhi will have the jurisdiction and the said clause

read as under:-

"All disputes arising out of or in any way connected with the agreement shall be deemed to have arisen in Delhi and only the Court in Delhi have the jurisdiction or to determine the same."

8. In the event of any dispute arising between the parties only

Delhi Courts would have the jurisdiction which would clearly

mean that the intention of the defendant at no point of time

was to have the dispute adjudicated by the Arbitral Tribunal

as envisaged in the original agreement.

9. The main contention of the learned counsel for the defendant

is that the second agreement which was executed on

12.06.2003 in pursuance to which 90 cheques were issued

was a supplement agreement to the first agreement dated

30.12.1998. That being so the second agreement does not

obliterate the arbitration clause in Clause 34 of the first

agreement. If at all the plaintiff has any grievance with

regard to the additional amount he had to have the dispute

adjudicated by the Arbitral Tribunal .

10. The learned counsel for the defendant has in order to

substantiate this point has referred a judgment titled A. K.

Jaju Vs. Avni Kumar AIR 2003 DELHI 364 wherein under a

somewhat similar circumstances, the second agreement

which was executed between the parties had specifically made

a mention that the agreement was in continuation of the first

agreement and it was held that the second agreement which

was in continuation of the first agreement did not mean to

override the first agreement. Since the first agreement

contains an arbitration clause, therefore, the dispute had to

be referred to the Arbitral Tribunal.

11. I have considered the submissions made by the learned

counsel for the defendant no. 1 and have also gone through

the judgment cited. So far as the judgment title A. K. Jaju

Vs. Avni Kumar (Supra) is concerned, no doubt, the learned

Single Judge of this Court has held that the second

agreement which was entered into between the parties was a

continuing agreement, and therefore, by using of said term

continuing agreement the arbitration clause which was

contained in the initial agreement did not get obliterated as a

consequence of which the dispute was referable to arbitration,

does not apply to the facts of the present case. In the

present case, the word which has been used is supplemental

agreement. It may be pertinent here to mention that under

the original agreement dated 30.12.1998, the details and the

type of construction which was expected to be carried out by

the plaintiff were mentioned in extenso in the first agreement.

In the second agreement between the parties certain jobs or

works which were allegedly not completed in addition to the

earlier work were agreed to be executed by the plaintiff

subject to payment of Rs.1,75,000/- by each of the

allottee/member of the defendant no.1/society. It may also

be relevant to mention that out of the 90 cheques each for a

sum of Rs.1,75,000/- nearly 70 cheques were already

encashed by the present plaintiff, and therefore, it could not

be said that the arbitration clause which was contained in the

original agreement dated 30.12.1998 is deemed to be

extended to supplement agreement also and consequently the

plea of the defendant under Section 8 (i) of the Arbitration

and Conciliation Act would act as a bar to the entertainment

of the suit. This view also gets support from the fact that in

the supplement agreement the parties have specifically stated

that all the disputes which may arise between the plaintiff

and the defendant no.1 would be within the jurisdiction of the

Delhi Courts only. Thereby meaning that the parties in the

event of any dispute between them on account of

supplemental agreement could invoke the jurisdiction of Delhi

Courts. If that be the condition this was contrary to the

condition contained in Clause 34 of the original agreement

dated 30.12.1998 under which the dispute had to be referred

to Arbitral Tribunal. Therefore, the factum of having a new

clause of jurisdiction in the agreement and the fact that the

agreement is a supplemental agreement only with regard to

the works to be executed does not necessarily place the facts

of the present case at par with facts of the reported case so as

to adopt the interpretation of that case.

12. I, accordingly, feel that there is no merit in the contention of

the learned counsel for the defendant no. 1 that the present

dispute is covered by the arbitration agreement and

consequently has to be referred for adjudication by an

Arbitral Tribunal. The application of the defendant no. 1 is

dismissed as being without merit.

13. There are two IAs bearing no. 7859/2008 and 10317/2009 by

virtue of which the proceedings before the learned Arbitrator

who has been appointed by the defendants during the

pendency of the proceeding and is a former Additional District

Judge (Punjab) he is restrained by way of an ex-parte ad

interim injunction from proceeding ahead with the arbitration

dispute. So far as the said application of the proceedings

before the Arbitral Tribunal is concerned, that is also allowed.

The learned Arbitrator cannot adjudicate the dispute between

the parties as the suit continues to be in the High Court.

With these observations all the three IAs stand disposed of.

V.K. SHALI, J.

AUGUST 10TH , 2010 KP