M.M. Mittal vs M/S Paliwal Developers Ltd. And ...
2014 Latest Caselaw 4484 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                          Order delivered on: 16th September, 2014

+             I.A. No.14962/2014 in CS(OS) No. 2320/2012

      M.M.MITTAL                                        .....Plaintiff
                       Through    Mr. P.K.Agrawal, Adv. with
                                  Ms. Mercy Hussain, Adv.

                       versus

      M/S PALIWAL DEVELOPERS LTD AND ANR .....Defendants
                   Through Mr. Rajiv Nayar, Sr. Adv. with
                           Mr. Abhijeet Swaroop, Adv.

      CORAM:
      HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. The plaintiff has filed a suit for mandatory injunction and recovery of money against the defendants.

2. Brief facts of the case as stated in the plaint are that the defendant No.1 Company is engaged in developing and construction of real estate and selling the same to various consumers/users. The defendant No.2 Company is engaged in maintenance and security of the buildings constructed by defendant No.1. The defendant No.1 constructed a Shopping Mall cum Entertainment Complex named as "The DLF Galleria", on the plot of land measuring 5495 sq. mtrs. bearing plot No. 01B, Mayur Place, District Centre, Mayur Vihar, Delhi. On 15th July, 2010, an agreement was arrived at between the plaintiff and defendant No.1 for the sale of office space bearing No. DGO-238 measuring 3879 sq. ft. on the second floor of the building

"The DLF Galleria" plot No. 01B, Mayur Place, District Centre, Mayur Vihar, Delhi (hereinafter referred to as the "suit property") for a total consideration of Rs.3,87,90,000/-. Apart from the sale consideration it was agreed between the parties that the plaintiff would also make payment of maintenance security at Rs.500/- per sq.ft. of the area of the suit property.

3. It is stated that on 15th July, 2010 the plaintiff made a payment of Rs.97,07,500/- vide two cheques to the defendant No.1. The defendant No.1 issued a receipt in respect of the said payment of Rs.97,07,500/- and confirmed the sale of the suit property vide letter dated 17th July, 2010.

4. It is stated that vide letter dated 30th July, 2010, the plaintiff informed the defendant No.1 that the plaintiff was interested in making the entire balance payment in lumpsum on 2nd August, 2010. The plaintiff requested the defendant No.1 to accept the entire payment in lumpsum and grant necessary rebate/discount for making the early payment. Consequently, the defendant No.1 agreed to grant rebate in the sum of Rs.8,61,848/- on account of preponement of the remaining three instalments. Thereafter the plaintiff made a payment of the entire balance amount of Rs.2,90,00,000/- vide demand draft dated 2nd August, 2010.

5. It is stated that under the terms of the agreement, the sale was to be completed, i.e. the possession was to be delivered and the sale deed was to be executed, within a period of six months i.e. on or before 15th January, 2011. However, the plaintiff preponed the payment of the last three instalments and made the entire payment on 2nd August, 2010. It has been averred that despite the receipt of

the entire sale consideration the defendant No.1 did not deliver the possession of the suit property by December, 2010 and in any case by 15th January, 2011. After repeated requests and reminders by the plaintiff, the defendant No.1 delivered the possession of the suit property on payment of Rs.19,39,500/- in the name of M/s DLF Utilities Ltd. and Rs.17,29,491/- in the name of defendant No.1 on 29th April, 2011 i.e. after nine months from the date of agreement. The delay in delivery of possession was about 3 ½ months.

6. It is further stated that on 29th April, 2011, before handing over/delivery of possession of the suit property and after receiving the entire sale consideration and an amount of Rs.36,68,991/- in addition to the entire sale consideration, the plaintiff under coercion and threat of non delivery of possession of suit property from defendant No.1 signed the Commercial Space Buyers Agreement dated 29th April, 2011.

7. It is stated that in order to avoid and delay the execution of the sale deed in favour of the plaintiff and continue to enjoy the amount paid by the plaintiff towards stamp duty and registration charges in the sum of Rs.22,79,300/-, the defendant No.1 vide its letter dated 9th February, 2012 raised a wholly false, frivolous and illegal additional demand of Rs.65,57,308/- on account of increase in the super area. It is contended by the plaintiff that after the possession of the suit property had been handed over to the plaintiff, the area of the same cannot increase after ten months.

8. It is alleged that the defendant No.1 can neither raise any additional demand in respect of the suit property nor can it refuse to execute the sale deed and register the same in favour of the plaintiff

on the ground of not making the payment of wholly wrongful and illegal demand of the defendant No.1 in the sum of Rs.65,57,308/-. The defendant No.1 is thus liable to be directed by means of mandatory injunction to execute sale deed and register the same in favour of the plaintiff. The defendants are thus liable to refund the excess amount recovered by them and pay interest to the plaintiff i.e. in all including interest till the date of filing of the suit a sum of Rs.49,48,269/- and Rs.1,08,832/- respectively to the plaintiff.

9. After the service of summons to the defendants, they filed an application under Section 5 and 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act")read with Order VII Rule 11 CPC. The said application was considered by the Court and by order dated 31st March, 2014, the following order was passed:

"1. Learned counsel for the plaintiff on instructions has stated that he has no objection to the appointment of a former Judge of this Court as a sole Arbitrator to adjudicate all the disputes between the parties. He has suggested five names of the former Judges of this Court.

2. Learned counsel for the defendants has gone through the said names and stated that he has no objection to the appointment of HMJ O.P. Dwivedi (Retd.) as a sole Arbitrator to adjudicate all the disputes between the plaintiff and the defendants.

3. It is ordered accordingly.

4. The arbitration proceedings shall be governed by the rules and regulations of the Delhi High Court Arbitration Centre including the fees of the learned Arbitrator.

5. The parties or their authorized representatives are directed to appear before the learned Arbitrator on 28th April, 2014 at 4:30 P.M."

10. An application being I.A. No. 14962/2014 under Section 151 read with Section 14 and 15 of the Act by the plaintiff has been filed wherein it is stated that despite there being no Arbitration Agreement between the plaintiff and the defendant No.2, the defendants filed an application under Section 8 of the Act for referring of the disputes to arbitration. It is contended by the plaintiff that the disputes were not referable to arbitration as there was no Arbitration Agreement between the plaintiff and the defendant No.2. During the course of hearing of the said application, the plaintiff had agreed for the appointment of a former judge of this Court as a Sole Arbitrator to adjudicate all disputes between the parties out of five names suggested by the plaintiff and therefore Justice Mr. O.P.Dwivedi (Retd.) was appointed as Sole Arbitrator. During the pendency of the arbitration proceedings, Justice Mr. O.P.Dwivedi (Retd.) died on 24th July, 2014.

11. It is stated in the application that since the mandate of the Arbitrator is terminated on account of the death of the sole arbitrator, another Arbitrator be appointed under Section 14 and 15 of the Act out of the five names suggested by the plaintiff as per Annexure A of the application.

12. Reply has been filed to the application by the defendants wherein it was stated that this Court vide order dated 31st March, 2014, with the consent of the parties had appointed Justice Mr. O.P.Dwivedi (Retd.) as the Sole Arbitrator to adjudicate all the

disputes between the plaintiff and the defendants and that the arbitration proceedings shall be governed by the rules and regulations of the Delhi High Court Arbitration Centre.

13. It is stated that Justice Mr. O.P.Dwivedi (Retd.) unfortunately expired on 24th July, 2014 and accordingly, the mandate of the arbitration proceedings was terminated. In view of Section 15(2) of the Act pursuant to the termination of the mandate the substitute arbitrator had to be appointed according to the rules that were applicable to the appointment of the arbitrator which are contained in the arbitration agreement between the parties i.e. Clause 50 of the Retail Buyers Agreement dated 29th April, 2011 and Clause 17 of the Tripartite Agreement for Operation and Maintenance dated 29th April, 2011 (hereinafter referred to as the "Arbitration Agreement"). It is further stated that Justice Mr. O.P.Dwivedi (Retd.) was appointed as the Sole Arbitrator by this Court only after the defendants had consented to such appointment in exercise of their right under Clause 50 and Clause 17 of the Arbitration Agreement.

14. It is stated that post termination of mandate in view of Section 15(2) of the Act the substitute arbitrator was to be appointed as per the rules i.e. arbitration agreement and amongst the members which are enrolled on the Delhi High Court Arbitration Centre Panel and therefore, the defendants in conformity with the Delhi High Court Arbitration Rules and in exercise of their right under the Arbitration Agreement appointed Justice Rekha Sharma (retired Judge of this Court) as the Sole Arbitrator to adjudicate upon the disputes. It is further stated that the letter dated 30th July, 2014 the learned sole Arbitrator vide order dated 4th August, 2014 entered reference and

directed the parties to attend the preliminary hearing on 13th August, 2014. It is therefore argued by Mr.Rajiv Nayar, learned Senior counsel appearing on behalf of the defendants, that the appointment made by the defendants is strictly in terms of the procedure contemplated under the Act and the Rules governing the earlier arbitration proceedings i.e. Arbitration Rules. It is argued by Mr.Nayar that the application preferred on behalf of the plaintiff is not only misconceived but also contrary to the provisions of the Act and same deserves to be dismissed.

15. The learned counsel for the plaintiff states that the substitute arbitrator could have been appointed only with the consent of both the parties and out of the five names suggested by the plaintiff as per Annexure A of the application and that the defendant could not have unilaterally appointed a new arbitrator in the matter. Learned counsel for the plaintiff has referred the decision of the Supreme Court in the case of Sukanya Holdings Pvt. Ltd. vs. Jayesh H. Pandya and Anr., AIR 2003 SC 2252 in this regard.

16. Mr.P.K. Aggarwal, learned counsel appearing on behalf of the plaintiff, has not disputed the fact that as per clause 50 of the agreement, the sole Arbitrator was appointed by the defendants. However, he submits that once the mandate of the Arbitrator is terminated, the procedure prescribed under Sections 14 and 15 of the Act has to be applied strictly. The defendants' right to appoint the Arbitrator has ceased after the said termination. However, the plaintiff has no objection if the substitute Arbitrator is appointed by this Court.

17. As far as merit of the case is concerned, I am of the view that once the disputes are referred for arbitration then the procedure under the Act has to be followed by the parties.

18. In Afcons Infrastructure Ltd. vs. Cherian Varkey Construction Co. (P) Ltd. (2010) 8 SCC 24 wherein it was held as under:

"11. If the reference is to be made to arbitration, the terms of settlement formulated by the court will be of no use, as what is referred to arbitration is the dispute and not the terms of settlement; and the Arbitrator will adjudicate upon the dispute and give his decision by way of award."

19. Even if there was no pre-existing arbitration agreement, the parties to the suit can agree for arbitration when the choice of ADR processes is offered to them by the Court under Section 89 CPC. Such agreement can be by means of a joint memo or joint application or a joint affidavit before the Court, or by record of the agreement by the Court in the order sheet signed by the parties. Once there is such an agreement in writing signed by parties, the matter can be referred to arbitration under Section 89 CPC; and on such reference, the provisions of Act will apply to the arbitration, and as noticed in Salem Advocate Bar Association vs. Union of India, AIR 2003 SC 189, the case will go outside the stream of the court permanently and will not come back to the court.

20. Thus, in view of the above, the technical objection raised by the plaintiff with regard to appointment of the substitute Arbitrator has no force.

21. In view of the above said facts and circumstances, I am of the considered view that the appointment of the sole substitute Arbitrator

by the defendants shall be considered as the sole Arbitrator appointed by this Court, as it is admitted by the learned counsel for the plaintiff before me that the substituted Arbitrator has no interest or connection with the defendants. Under these circumstances, the Court appoints Ms.Rekha Sharma (retired Judge of this Court), as substitute Arbitrator to adjudicate the disputes between the parties. The other terms and conditions shall remain the same as indicated in the order dated 31st March, 2014. The appointment of the learned substituted Arbitrator shall take effect from today and her appointment shall be treated as an appointment by the Court itself.

22. The application is disposed of as such.

23. Parties to appear before the learned Arbitrator on 13th October, 2014 at 4:30 pm.

24. Copy of the order be given dasti to both the parties.

(MANMOHAN SINGH) JUDGE SEPTEMBER 16, 2014