Delhi High Court

Harjyot Kaur & Ors. vs Today Homes And Infrastructure ... on 23 January, 2012

Author: Manmohan Singh

*            THE HIGH COURT OF DELHI AT NEW DELHI

%                                    Judgment delivered on:      23.01.2012

+             I.A. No.4210/2010 in C.S. (OS). No.2405/2009

HARJYOT KAUR & ORS                                              ...... Plaintiffs
               Through                       Mr. Dhruv Mehta, Sr. Adv. with
                                             Ms. Amrita Sanghi and Mr. Sameer
                                             Abhyankar, Advs.

                            Versus

TODAY HOMES AND INFRASTRUCTURE PVT LTD
                                         ..... Defendant
              Through Mr. Arvind K. Nigam, Sr. Adv.
                      with Mr. Rahul Sharma, Adv.

CORAM:
HON'BLE MR JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. By this order I propose to decide the present application filed

by the defendant under Section 8 of the Arbitration and Conciliation Act,

1996 (hereinafter referred to as the Arbitration Act). The instant suit is for

recovery of Rs.1,43,22,000/-.

2. The facts of the case as per the parties are that Ludhiana

Improvement Trust (in short, called the "LIT") invited tenders from

eligible contractors for development of the project called as "City Centre

Ludhiana". Thereafter, the defendant was accepted and the bid was given

to the defendant and the same was confirmed through a Letter of Intent

dated 18.5.2005 and on that basis, an agreement was executed by the

defendant with the LIT on 24.5.2005.

3. As per the terms of the Concession Agreement dated

24.05.2005, the LIT granted and authorized the defendant to investigate,

study, design, engineers, procure finance, enter into joint ventures, to

construct, sell, lease license, operate and maintain the entire project and

facilities and also to enjoy the right, powers privileges, authorizations and

entitlement.

4. On the basis of the said Concession Agreement dated

24.5.2005, the defendant executed an agreement to sell with the plaintiffs

on 28.4.2006, for selling unit number GF-13 (C) on the ground floor of the

building to be constructed, admeasuring 1250 sq. ft. Super Area, which

was fully described in the schedule property, annexed with the agreement

to sell dated 28.4.2006. The total consideration paid to the defendant was

Rs.77,00,000/-, the details regarding the said payment is mentioned in para

6 of the plaint.

5. It is averred in the plaint that as per the agreement to sell, the

plaintiffs No.1 & 2 are the owners of 33% each respectively. Plaintiffs

No.3 & 4 are owners of 17% each of the Unit.

6. The payment of Rs.77,00,000/- was made in the following

manner to the defendant :

a. Cheque No.377376 dated 30.4.2006 for a sum of Rs.25,41,000/- drawn on Bank of Punjab by plaintiff No.1, Mrs. Harjyot Kaur.

b. Cheque No.642577 dated 28.4.2006 for the sum of Rs.25,41,000/- drawn on Canara Bank, by plaintiff No.2, Mrs. Prakash Kaur.

c. Cheque No.648071 dated 28.4.2006 for sum of 13,09,000/-

drawn on Canara Bank by plaintiff No.3, Mrs. Premdeep Bhinder.

d. Cheque No.651731 dated 28.4.2006 for sum of 13,09,000/-

drawn on Canara Bank by plaintiff No.3, Mrs. Premdeep Bhinder.

The above mentioned considerations were accepted by the

defendant as full and final towards the consideration of the said property.

7. According to the plaintiffs, as per clause 10 of the Agreement

dated 28.4.2006, the defendants were liable to give possession of the said

property on or before 31.12.2007 provided all payments were made as per

the agreement and the plaintiffs made all payments as mentioned above

and the same was acknowledged by the defendant.

8. The plaintiffs also state that as per the agreement, the plaintiffs

were liable to pay holding charges @ Rs.100 per sq. ft. if the plaintiffs

failed to take possession within 15 days, after the receipt of written notice

of possession. According to the plaintiffs, the defendant did not hand over

possession to the plaintiffs, though the defendant was supposed to hand

over possession of the said premises on or before 31.12.2007. In case, the

plaintiffs failed to pay the amount, then 24% p.a. would be charged from

them.

9. As per clause 57 of the agreement to sell, the defendant had

agreed to pay rent to the plaintiffs, in case the said premises has not given

in possession on or before 31.12.2007, the rent has to be equivalent to the

intending tenant i.e. M/s Liberty Retail Revolutions Pvt Ltd. However, the

defendant did not pay any such rent as agreed to the plaintiffs and also

failed to fulfill the contractual obligations and liabilities.

10. The plaintiffs visited the office of the defendant many times.

The representatives of the defendant gave false promises and evasive

replies. Despite various requests, the defendant did not give rent to the

plaintiffs as per Clause 57 of the agreement.

11. Therefore, the plaintiffs sent a legal notice date 22.12.2008 to

the defendant under Sections 433 & 434 of the Indian Companies Act,

1956. The defendant replied to the notice saying that it was not liable to

pay the rent/amount to the plaintiffs.

12. Hence, the plaintiffs filed the present suit for recovery of

Rs.77,00,000/- with interest 24% p.a. from the maturity date i.e. 28.4.2006

till date of filing of this suit which comes to a total of Rs.66,22,000/-.

Hence, the plaintiffs have claimed a sum of Rs.1,43,22,000/- along with

pendente lite and future interest @ 24% p.a.

13. After receiving the notice in the suit filed under Order

XXXVII CPC, the defendant filed the present application.

14. It is stated by the defendant that there was an agreement to sell

dated 28.4.2006 for sale of GF-13 (C) on the ground floor admeasuring

1250 sq. ft. Super Area in Ludhiana City Centre at Ludhiana.

15. The said agreement to sell also contains an arbitration clause as

per which the parties have agreed that any dispute arising or accruing in

respect of the agreement, the same shall be referred to arbitration in

consonance with the provision of the Arbitration Act.

16. It is further stated by the defendant that when there is an

arbitration clause between the parties, the Court has a duty to refer the

parties to arbitration, when the defendant has disputed the entitlement of

the plaintiffs to recover the said amount in the present proceeding.

Hence, the Civil Court has no jurisdiction to entertain any suit, once an

application is filed under Section 8 of the Act.

17. It is also stated that the plaintiffs have booked a space in the

Ludhiana City Centre admeasuring about 1250 sq. ft. super built. It was

also stated that there was an arbitration clause in case any disputes arises

between the parties. Hence, the defendant has filed this present application

under Section 8 of the Arbitration Act and prays that this Court be pleased

to direct the parties to refer them to arbitration.

18. In reply, the plaintiffs state that the application filed by the

defendant is false and the defendant has suppressed facts from this Court.

The plaintiffs state that to enforce arbitration clause, there has to be a

dispute between the parties, but in the present case there is no dispute

regarding the payment of money and the same is acknowledged by the

defendant. Further, there is no dispute that the defendant failed to

complete the project in stipulated time. Hence, the plaintiffs are duly

entitled to recover the full amount paid. Thus, according to the plaintiffs,

there is no dispute at all and hence, there is no need for an application

under Section 8 of the Arbitration Act.

19. The plaintiffs also state that it is a settled principle of law that

even if an agreement stipulates resolution of dispute through arbitration,

still, existence of a dispute is a pre-requisite before invoking the arbitration

clause. In other words, the presence of a dispute is mandatory for

arbitration proceeding. Hence, the present application should be dismissed

on this ground alone.

20. The present suit filed by the plaintiffs is under Order XXXVII

CPC, a summary procedure, which is to recover the lawful amount

(admitted debt) due from the defendant. Hence, the application filed by

the defendant should be dismissed.

21. The plaintiffs also state that the Arbitration Act does not put

any impediment on the Civil Courts. The Courts have to indentify whether

there is indeed any actual issue involved to refer to arbitration. Moreover,

Section 8 is mandatory in nature, and onus lies upon the defendant to

prove that there is an actual dispute involved.

22. The suit filed by the plaintiffs is not for specific performance or

enforcement of rights. Hence, no question of arbitration arises. The

plaintiffs do not deny that there is an arbitration clause in the

agreement but their contention is that the defendant has failed to narrate

the exact ground for arbitral reference. Simply because the plaintiffs have

now asked for recovery of the amount, the, question of arbitration clause

does not arise in the absence of any dispute.

23. I have heard the learned counsels for the parties. As far as the

existence of agreement and the arbitration clause is concerned, there is no

dispute between the parties. The plaintiffs have also not denied the fact

that they are the signatories of the said agreement.

24. The contention of Mr. Dhruv Mehta, learned Senior counsel for

the plaintiffs is straight and simple. He submits that it is a suit for the

recovery of the amount which has been received by the defendant. As

there is no dispute about the amount received by the defendant, hence the

plaintiffs are entitled to recover the amount and the question of arbitration

proceedings does not arise. In support of his submissions, the learned

Senior counsel has referred the judgment of the Supreme Court passed in

the case of Sukanya Holdings Pvt. Ltd. vs. Jayesh H. Pandya and

Another; AIR 2003 Supreme Court 2252. The relevant para reads as

under:-

"15. The relevant language used in S. 8 is - "in a matter which is the subject matter of an arbitration agreement." Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of "a matter" which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of S.8. The words „a matter‟ indicate entire subject matter of the suit should be subject to arbitration agreement."

25. The learned Senior counsel has further contended that the

present application is also not maintainable, as the defendant has failed to

file the original agreement, as required under the provisions of Section 8 of

the Arbitration Act.

26. Mr. Nigam, learned Senior counsel for the defendant, on the

other hand, has referred the pleadings of the case and has submitted that it

is the admitted position that the agreement to sell dated 28.04.2006 is a

tripartite agreement between the plaintiff, defendant and the LIT who

permitted the defendant to construct at the site and to receive

consideration for and on behalf of the LIT. As far as the obligations, if

any, arising out of the agreement dated 28.04.2006 are concerned, the

same cannot be enforced against the defendant, as the defendant has

already put Rs.125 crores in the construction of the project. However, due

to certain reasons, the said project has been stalled and today faces

majeure conditions.

27. Mr. Nigam refers Clauses-57 and 58 of the agreement which

are reproduced here as under:-

"57. In the event, the said building LUDHIANA CITY CENTER is not ready for possession for fit outs within a 31 st December, 2007 the company will be liable to pay the rent to the Intending Purchaser, from 31st December, 2007 till starts M/s. Liberty Retail Revolutions Ltd paying rent or the said tenant refuses to take on rent the said premises on any ground, the Company will be liable to arrange for a tenant with the consent of the buyer/Intending Purchaser on the same rent as agreed with M/s. Liberty Retail Revolutions Ltd.

58. In case of any dispute arising or accruing in respect of this Agreement, the same shall be referred for arbitration in consonance with the provisions of the Arbitration and Conciliation Act, 1996, and the decision of the Arbitrator shall be binding upon both the parties. The Seat of Arbitration shall be Delhi."

28. Mr. Nigam submits that the amount received from the

plaintiffs, the details of which are mentioned in Clause-1 of the agreement,

is as per the terms and conditions of the agreement which is in existence

between the parties. He submits that as far as the filing of the original

agreement is concerned, the plaintiffs themselves have filed the original

agreement between the parties along with the plaint, therefore, the

objection raised by the plaintiffs is without any force. He has referred the

reply dated 11.12.2008 given by the defendant to the legal notice dated

22.10.2008 issued by the plaintiffs, wherein the defendant has specifically

mentioned that due to controversy which has been raised, the works have

been stopped and it is beyond the control of the defendant to complete the

project and there is no question of any claims being made by the plaintiffs

in this regard and further, there is an arbitration clause in the agreement to

sell, entered into between the plaintiffs and the defendant.

29. Mr. Nigam, learned Senior counsel has strongly relied upon

the order passed by this Court in the similar dispute of City Centre

Ludhiana decided in the petition filed under Section 11 of the Arbitration

Act for appointment of arbitrator, being Arbitration Application No.113 of

2008 filed by M/s Mapletree Property Pvt. Ltd. against the defendant

herein. The facts of that case are almost same as that of the present case.

In the said case also, there was a Memorandum of Understanding dated

04.05.2005 with the LIT and the LIT had put the defendant herein a

member of the Consortium in physical possession of the plot according to

the agreement executed on 24.05.2005 along with the power of attorney

dated 29.08.2005 executed by LIT in favour of the defendant herein. It

was alleged in the said suit that by an agreement dated 10.01.2006, the

Mapletree purchased the property measuring 1,50,000 sq. ft. area on the

lower ground floor of the building proposed to be constructed by the

respondents including the defendant herein. The said agreement recorded

total sale consideration of Rs.51,84,00,000/- out of which a sum of

Rs.15,55,20,000/- was paid by the Mapletree by way of two demand

drafts in favour of the then respondents No.1 to 4 and there was a clause

50 in the said agreement containing an arbitration clause which is similar

to the arbitration clause in the present suit, as the then respondents No.1 to

4 could not develop the said City Centre on account of the dispute having

arisen between the said respondents with LIT due to certain difficulties

including the change of Government in the State of Punjab.

Therefore, in view of the said agreement, the Mapletree had

filed the application for appointment of an arbitrator, as the respondents

(including the defendant herein) had failed to appoint the arbitrator. This

Court vide order dated 29.01.2010 allowed the said petition and appointed

the sole arbitrator for adjudication of the dispute between the parties.

30. Learned counsel for the plaintiffs has not disputed the facts

mentioned in the order dated 29.01.2010 which according to him are

similar, however, he states that still the dispute between the parties has to

be decided by the civil court as in other proceeding between the defendant

and LIT, the LIT has levelled serious allegations of fraud and malpractices

against the defendant herein, thus, in view of settled law the dispute

between the parties is not liable to be referred to the arbitrator. In support

of his submissions, the learned Senior counsel has referred the judgment of

the Supreme Court in the case of N. Radhakrishnan vs. Maestro

Engineers and others, reported in (2010) 1 Supreme Court Cases 72.

The relevant paras reads as under:-

"23. In our view and relying on the aforesaid observations of this Court in the aforesaid decision and going by the ratio of the abovementioned case, the facts of the present case does not warrant the matter to be tried and decided by the Arbitrator, rather for the furtherance of justice, it should be tried in a court of law which would be more competent and have the means to decide such a complicated matter involving various questions and issues raised in the present dispute.

24. This view has been further enunciated and affirmed by this Court in the decision of Haryana Telecom Ltd. vs. Sterlite Industries (India) Ltd.[ AIR 1999 SC 2354], wherein this court under para 4 observed :

"4. Sub-section (1) of section 8 provides that where the judicial authority before whom an action is brought in a matter, will refer the parties to arbitration the said matter in accordance with the arbitration the said matter in accordance with the arbitration agreement. This, however, postulates, in our opinion, that what can be referred to the Arbitrator is only that dispute or matter which the Arbitrator is competent or empowered to decide."

31. He submits that since there are serious allegations of fraud and

malpractices, the dispute can only be settled by the Court through

furtherance of detailed evidence by either parties and such a situation

cannot be properly gone into by the arbitrator.

32. Both the parties have also informed that so far as order dated

29.01.2010 is concerned, the same has been challenged by the LIT in the

Supreme Court by filing of a Special Leave Petition bearing SLP (Civil)

No.26173/2010 in which the Apex Court has issued notice and also passed

the order thereby staying the arbitration proceedings initiated by the

arbitrator appointed under the impugned order.

33. On the other hand, Mr. Nigam, learned Senior counsel for the

defendant has argued that the alleged allegations of fraud and serious

malpractices are not mentioned in the present case nor LIT is a party in the

suit. The said allegations of fraud and malpractices on the defendant are

yet to be determined by the Court, as raised by the LIT against the

defendant. In any case, he says, that the allegations of fraud even if raised