M/S. Today Homes & Infrastructure ... vs M/S. Mapletree Property Pvt. Ltd. ...
2015 Latest Caselaw 3174 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI
                                           Judgment reserved on April 10, 2015
                                          Judgment delivered on April 21, 2015
+                              O.M.P. 236/2015
M/S. TODAY HOMES & INFRASTRUCTURE PVT. LTD. &
ORS.
                                            .....Petitioners
                  Through: Mr.Sandeep Sethi, Sr. Adv.
                           with Mr.Vivek Sibal and
                           Mr.Jitender Ratta, Advocates
                  versus
M/S. MAPLETREE PROPERTY PVT. LTD. AND ANR.
                                        ....Respondents
                  Through: Mr.Gaurav Pachnanda, Sr.
                           Adv. with Mr.Ashok
                           Rajagopalan and Ms.Shruti
                           Gupta, Advocates for R-1
+                              O.M.P. 240/2015
LUDHIANA IMPROVEMENT TRUST
                                                            .....Petitioners
                               Through:     Mr.Salil Sagar, Sr. Adv. with
                                            Mr.Ajay Pal, Mr.S.Sagar,
                                            Mr.Vishal, Mr.Sankalp
                                            Sagar, Advs.
                               versus
M/S. MAPLETREE PROPERTY PVT. LTD. AND ANR.
                                       ....Respondents
                  Through: Mr.Gaurav Pachnanda, Sr.
                           Adv. with Mr.Ashok
                           Rajagopalan and Ms.Shruti
                           Gupta, Advocates for R-1
CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.

1. The challenge in both these petitions is to the interim award dated

November 29, 2014 passed by Justice R.C.Lahoti, former Chief Justice of

India as a Sole Arbitrator in the matter of disputes between the parties

pending adjudication before him, whereby the learned Arbitrator has

held that the respondent No. 1 in these petitions is entitled to the recovery

of Rs. 15,55,20,000/- from the petitioners herein with simple interest

calculated at 12.5% per annum from the date of payment till the date of

realization. The 70% of the above amount with interest was directed to

be paid by the petitioner No. 1 in OMP 236/2015 and 30% of the amount

with interest was directed to be paid by the petitioner in OMP 240/2015.

2. For the purpose of convenience, the petitioner No. 1 in OMP No.

236/2015 shall be referred as "M/s. Today Homes" and all the petitioners

in OMP No. 236/2015 (who are also respondent Nos. 2 to 5 in OMP No.

240/2015) as the "Consortium"; Petitioner in OMP No. 240/2015 (who is

respondent No. 2 in OMP No. 236/2015) as "LIT" and the respondent

No. 1 in both the petitions as the "claimant".

3. The facts as noted by the learned Arbitrator in the impugned

interim award dated November 29, 2014 are as under:

4. The claimant and the Consortium are all companies registered

under the Companies Act. The LIT is a Trust within the meaning of

Section 3 of the Punjab Town Improvement Act, 1922. On June 28,

1999, the State Govt. published a Developmental and Housing

Accommodation Scheme under Section 41 of the Punjab Town

Improvement Act, 1922. On September 13, 1999, the LIT decided to

embark upon a project to build an international city centre market with

modern facilities, called as Ludhiana City Centre (LCC) on land

measuring 28.5 acres (approx.).

5. On January 14, 2005, the Govt. granted permission to LIT for

calling expression of interest for the purpose of LCC. The LIT published

advertisement vide which various parties were invited to present their

bids. Pursuant thereto, on being found successful, on May 18, 2005, a

Letter of Intent was issued to M/s. Today Homes by the Chairman, LIT.

Accordingly, an agreement dated May 24, 2005 was signed by the then

Chairman of LIT with M/s. Today Homes. An Escrow Account was

opened with HDFC Bank on the basis of a tripartite agreement executed

between M/s. Today Homes & LIT and HDFC bank on August 25, 2005,

whereby, it was decided that the entire proceeds from the booking of

saleable area had to be deposited in the Escrow Account opened with

HDFC Bank and 30% of the amount was to be credited to the trust and

70% to the M/s. Today Homes.

6. That on August 29, 2005, the then Chairman of LIT executed a

power of attorney in favour of the respondent No. 1 authorizing the

respondent No. 1 to sell units on behalf of the LIT. It is noted that on

September 14, 2006, a notification was issued by the Department of

Local Govt. dissolving the trust and appointing Mr.Kaler as

Administrator of the Trust. On October 4, 2006, LIT vide resolution No.

204 resolved to cancel the GPA executed by the Chairman in favour of

M/s.Today Homes. The said GPA was thereafter revoked on October 5,

2006. The fact of revocation of GPA was communicated to the claimant.

It is necessary to state here that vide agreement dated January 10, 2006,

the claimant purchased an area admeasuring 1,50,000/- sq. ft. super area

on the lower ground floor of the building to be constructed in the said

Centre for a total consideration of Rs. 51.84 Crores at Rs. 3456 per sq. ft.

along with the undivided proportionate share in the land in the said

Centre from the Consortium. The said agreement was executed by M/s.

Today Homes as an attorney of LIT. The transaction between the LIT and

M/s. Today Homes failed which has given rise to several disputes.

7. In an Arbitration Case No. 76/2007 between M/s. Today Homes

and LIT, the Punjab and Haryana High Court vide its order dated

October 25, 2013 appointed the Sole Arbitrator to adjudicate all the

disputes arising between the parties relating to concession agreement

dated May 24, 2005 along with jurisdiction/power to the Sole Arbitrator

to decide the issue of validity of the concession agreement dated May 24,

2005 and jurisdiction of the Arbitrator.

8. The claimant sent a notice dated October 19, 2007 to the

Consortium, calling upon them to settle the disputes by referring the

matter to arbitration. The Consortium did not reply to the legal notice.

The claimant filed an Arbitration Application No. 113/2008 in this Court.

The matter was taken to the Supreme Court of India. As noted by the

learned Arbitrator, the LIT had submitted an affidavit stating that the

entire money was lying in an Escrow Account. The Supreme Court

directed that, the money be kept in Fixed Deposit. Before the Supreme

Court, the LIT had admitted of having received 30% of the amount paid

by the claimant, it disputed its liability under the said agreement.

Thereafter, the claimant issued a statutory notice dated January 18, 2010

under Section 98 of the Punjab Town Improvement Act, 1922, wherein, it

was stated that LIT having admittedly received 30% of the amount paid

by the claimant to the Consortium/LIT, the LIT cannot now dispute the

existence of the agreement or its liability to pay the amount received by

the Consortium/LIT. The adjudication of the disputes between the parties

before the learned Arbitrator was in view of an order passed by this Court

on March 14, 2014, whereby Justice R.C.Lahoti was appointed as a Sole

Arbitrator to adjudicate all claims and counter claims of the parties

arising out of the agreement to sell dated January 10, 2006. In fact, as

noted by the learned Arbitrator in para 19.1 of the impugned interim

award, the Punjab and Haryana High Court vide its order dated October

25, 2013 in Arb. Case No. 76/2007 had also appointed Justice R.C.Lahoti

to carry out the task of settlement of disputes inter se between the parties

through the mode of arbitration. Suffice to state, the learned Arbitrator is

considering the disputes between the claimant and the Consortium/LIT in

terms of agreement dated January 10, 2006 and also disputes inter se

between the Consortium and LIT in terms of concession agreement dated

May 24, 2005 between the M/s.Today Homes and LIT.

9. In the statement of claim filed by the claimant, the principal relief

sought is recovery of Rs. 15,55,20,000/- with interest @ 12.5 % p.a.

compounded quarterly. The claimant has also claimed damages including

loss of interest and rental income. The said amount is being claimed

from the Consortium and LIT jointly and severally. The learned

Arbitrator on the basis of the pleadings has framed the following issues

on July 25, 2014:

1. Whether in view the plea taken by respondent No. 5, the present claim petition is maintainable under the law?

           2(a)          Whether the agreement dated 10.01.2006 is
           valid in law
           (b)        Whether the said agreement is legally enforceable
           against respondent No. 5?

3. Whether the sale and transfer of the site/space in the city LCC Project by the respondent No. 1 i.e. M/s. Today Homes and Infrastructure Pvt. Ltd. to the claimant, M/s. Mapletree Property Pvt. Ltd. is legal and binding on the respondents or any of them?

4(a). Whether the Concession Agreement dated 24.05.2005 between respondent No. 1 i.e. M/s. Today Homes and Infrastructure Pvt. Ltd. and respondent No. 5 i.e. Improvement Trust, Ludhiana is valid in law?

(b) Whether the power of attorney dated 19.08.2005 issued by respondent No. 1 to respondent No. 2 is valid and legal?

5(a) Whether the claimants are entitled to refund of the principal amount of Rs.15,55,20,000/-?

(b) If yes, from which of the respondents?

6. Whether the claimants are entitled for interest @12% p.a. compounded quarterly, as per Cl. 4(h) of the Agreement dated 10.01.2006?

7. Whether claimants are entitled to differential interest as claimed in para 21(c) of the SoC?

8. Whether the claimants are entitled to loss of rental income?

9. Whether respondent No. 1 has failed to fulfil its obligations under the Agreement dated 10.01.2006?

10. Relief and Costs?

10. That in the meantime, the claimant had filed an application under

Section 31(6) of the Arbitration and Conciliation Act, 1996 (Act) and

had sought for an interim award for refund of 70% of Rs.15,55,20,000/-

with interest @ 12.5 % p.a. from the Consortium and for refund of

balance from LIT. The learned Arbitrator was of the view that the factum

of agreement dated January 10, 2006 in favour of the claimant, the

payment of Rs. 15,55,20,000/- by the claimant to the M/s. Today Homes

and a deposit of the amount in Escrow Account have not been denied.

The learned Arbitrator noted the principal defence of Consortium that the

M/s. Today Homes was acting as a power of Attorney holder of LIT a

disclosed principal and thereafter, whatever would be the liability, it

would be of the LIT. The learned Arbitrator also noted that LIT on the

other hand sought to shift the entire responsibility on the M/s. Today

Homes by submitting that the entire series of transactions entered into by

the Consortium with LIT through its the then Chairman was vitiated by

fraud and illegality. The learned Arbitrator noted the stand of the

claimant and the reliance placed by the claimant on the agreement dated

January 10, 2006 and the judgment of the Supreme Court dated October

14, 2008 in Civil Appeal No. 6104/2008, Ludhiana Improvement Trust

and Anr. Vs. Today Homes and Infrastructure Pvt Ltd. The learned

Arbitrator has also noted that the facts as noted, have not been disputed.

He has also noted the stand of the M/s. Today Homes that the money

withdrawn from the Escrow Account has been invested in the project and

there is no balance money available in the hands of the M/s. Today

Homes. Further, the M/s. Today Homes was acting only in the capacity of

agent of LIT whose name having been disclosed to the claimant, it is only

the LIT which can be held liable to the claimant and the claimant can

enforce its right only against LIT. The learned Arbitrator was of the

opinion that as far as the claimant is concerned, its claim is rightful and

cannot be denied. The dispute is only between the Consortium and LIT

inter se and that is the dispute which would really call for adjudication

and that adjudication would determine the apportionment of liability

between them along with the liability of payment of interest. The

payment of compound interest would call for consideration of certain

legal and equitable issues but payment of simple interest cannot be

denied, and he was of the view that the liability of the Consortium and

LIT towards the claimant should be satisfied in the proportion of 70%

and 30% and the precise liability and other equitable issues can be left

open at the stage of final adjudication. The learned Arbitrator has also

observed that the principles for passing an interim award are akin to

Order XII Rule 6 of the Code of Civil Procedure, and being convinced

that the relief sought by way of an interim award is the one which in any

case, cannot be denied at the stage of the final award, the Arbitrator shall

not hesitate in passing of an interim award, and went on to grant the relief

to the claimant which is already referred to above.

Submissions in OMP No. 236/2015

11. Mr. Sandeep Sethi, learned Senior Counsel appearing for the

Consortium would submit that his clients had a right to sell the space to

the third party. The revenue was to be deposited in an Escrow Account

and the amount was to be proportionately divided in the ratio of 70% and

30% between them and LIT respectively. The power of Attorney which

was executed in favour of the M/s. Today Homes, was cancelled. He

would state that the M/s. Today Homes had received an amount of Rs.54

Crores against 70% revenue received by them for selling the space. It is

his submission that the Consortium has put in their own money over and

above Rs.54 Crores in the project. According to him, the claim of the

claimant cannot be adjudicated without determining the inter se disputes

between Consortium and LIT. In other words it is his case that the

liability of the claims has to be determined. He would also state that the

interim award of the learned Arbitrator is pre mature as the learned

Arbitrator framed issues on the arbitrability/maintainability of the claims

and also whether the claimant perse is entitled to refund of the amount

15,55.20,000. According to him, till such time, issues of these nature are

decided by recording evidence of all the parties concerned, the claim of

the claimant for Rs.15,55,20,000/- could not have been allowed. He

would state that there is serious issue of force majeure. According to him

when it is not the case of the claimant that the possession of the property

has to be delivered by Consortium then the liability of the claim made by

the claimant cannot be fastened upon Consortium even to the extent of

70%. He would state that all the acts of Consortium before the

termination of the agreement dated May 24, 2005 and Power of attorney,

dated August 29, 2005 would bind the LIT. If that be so, then the liability

to the extent of the claim of the claimant need to be discharged by the

LIT. It is his contention that an interim award under Section 31 (6) can

only be rendered on an admission. Mere saying that they had received

money is not an admission of liability to pay back He would also state

that the admission must be clear unequivocal and would refer to the

judgment of the Supreme Court in the case reported as 2010 (6) SCC 601

Jeevan Diesels and Electricals Vs. Jasbir Singh Chadha and another

(HUF). He would state that the Arbitrator has not referred to the

pleadings of the parties to form an opinion on admission on the part of

the Consortium. In the last, it was his case that the claimant was in the

knowledge of the nature of relationship between the Consortium and the

LIT i.e. of an agent and principal and the claim cannot be directed against

the agent. He would rely upon Section 204, 222, 223, 230 of the

Contract Act to contend that the liability cannot be fastened upon his

clients.

Submissions in OMP 240/2015

12. Mr. Salil Sagar, learned Sr. Counsel appearing for LIT, the

petitioner in OMP 240/2015 would also on similar lines, contend that the

learned Arbitrator having framed issues which included the issues on the

maintainability of the Claim petition; validity of agreement dated January

10, 2006; enforceability of the agreement; entitlement of the claimant for

refund of the principal amount of Rs.15,55,2000/-, the learned Arbitrator

could not, till such time evidence is led and the maintainability is

determined, have rendered the interim award. According to him, it was

the case of the LIT that the agreement dated May 24, 2005 and power of

attorney dated August 29, 2005 were vitiated by fraud and in violation of

the statute and the rules made thereunder. Hence, any right accrued to

the third party based on such agreement/power of attorney would also be

actuated by fraud and being illegal cannot be enforced against the LIT.

Submissions on behalf of the claimant (respondent No. 1, in both the petitions):

13. On the other hand, Mr. Gaurav Pachnanda, learned Sr. Counsel

appearing for the claimant in both the petitions would justify the interim

award by stating that it was not the case of the opposite parties, the

agreement dated January 10, 2006, was actuated by fraud/wrong doing on

the part of the claimant. In other words it was his case that the claimant

is a bona fide purchaser having purchased the area on a consideration. He

would also state that the receipt of the money by M/s. Today Homes and

the LIT has been accepted by them. He would also state that the said

parties have also accepted that the amount so received from the claimant

was deposited in the Escrow account from where 70% of the amount was

transferred to M/s. Today Homes. According to him even LIT has

accepted the deposit of its 30% which is now lying in an FDR pursuant to

the directions of the Supreme Court. It is his case that none of the

opposite parties have denied the entitlement of the claimant to the

amount paid by the claimant pursuant to the agreement dated January 10,

2006. He has drawn my attention to the pleadings in Claim Petition and

the reply filed by LIT and Consortium to submit that the receipt of

money and entitlement to the claim not being disputed is a sufficient

admission to enable the learned Arbitrator to grant the amount of

Rs.15,55,20,000/- with interest @ 12.5% per annum. He has also drawn

my attention to the averments made in paragraphs No. 2 , 4, 5, 6 of the

application filed by the claimant under Section 31(6) of the Act and the

corresponding reply of the opposite parties to highlight that the opposite

parties shifting the liability of payment on each other. He would also

draw my attention to the award given by the learned Arbitrator more

specifically, paras 26 and 28 to state that the learned Arbitrator had

rightly come to a conclusion that the Consortium/LIT except shifting the

liability on each other have not denied the claim of the claimant which

itself is an admission. He would rely upon the provisions of Sections 64

and 65 of the Indian Contract Act, 1872 to state that it is a case of

restitution and have been rightly awarded by the learned Arbitrator.

14. Having heard the learned counsel for the parties, insofar as the

submission of Mr. Sandeep Sethi, in view of the issues, the interim award

could not have been rendered, is concerned, suffice to state, the same

have to be seen and understood from the perspective at whose instance,

the same have been framed. It is noted, the said issues were framed on

the objections of the LIT in para 64 and 65 of its reply wherein it has

averred that the agreement dated May 24, 2005 and the power of attorney

dated August 29, 2005 executed by the then Chairman of the LIT in

favour of M/s. Today Homes were in violation of instruction/statute/rules

and are non-est in law. Similarly, the consequential agreements entered

by the M/s. Today Homes with the third parties including the claimant are

also hit by fraud being against statutory provisions and such agreements

are not enforceable against LIT and claim need to be dismissed on the

ground of lack of jurisdiction. Meaningfully read, it is the case of LIT

that any claim of the third party cannot be enforced against it. I note

from the petition, OMP No. 236/2014, the Consortium has conceded that

the issue of maintainability is based on the pleadings of LIT. The said

issues relate to the maintainability, enforceability of the claims and

agreement dated January 10, 2006 against the LIT only. The said issues

even if decided in favour of LIT, would not absolve the Consortium of its

liability towards the claimant.

15. Further, from a reading of the respective stand of the

Consortium/LIT, it is clear, they are trying to shift the liability on each

other. The aforesaid aspect has been dealt with by the learned Arbitrator

in para 26 and 28 of the impugned interim award with which I am in

agreement.

16. I agree with the submission of learned Senior Counsel for the

claimant, that the Consortium/LIT has not denied the receipt of money

from the claimant nor stated that the claimant was not entitled to the

amount claimed. This negates the submission of Mr.Sethi that there was

no admission of the Consortium, accepting the liability towards the

claimant. Further, I note, the learned Arbitrator in para 29, was of the

view that any interim award by the Arbitrator can be passed on principles

akin to Order XII Rule 6 of the Code of Civil Procedure on admissions or

on the availability of adequate material on record with a satisfaction that

the relief sought for by way of interim award is one which cannot in any

case, be denied at the stage of final award. In this regard, I note for

benefit, the Supreme Court in Uttam Singh Duggal and Co. Ltd. Vs.

United Bank of India and Ors., 2000 (7) SCC 120, that admissions are

of many kinds including, implied from pleading by non-traversal. The

judgment of the Supreme Court in the case of Jeevan Diesels and

Electricals (supra) would not be applicable to the facts of this case. In

that case, as noted by the Supreme court in para 12, the parties have

confined their case of admission to their pleadings only; whereas, in the

case in hand, the conclusion of the learned Arbitrator is that, an interim

award can be on the basis of admission or on availability of adequate

material on record, and is satisfied that the relief sought for by way of

interim award cannot be denied at the final stage. There is a conclusion

of the learned Arbitrator that, to the extent interim award is being passed,

the entitlement of the claimant cannot be denied.

17. On the submission of force majeure and the one related to Sections

204, 222, 223, 230 of the Contract Act, the same would not effect the

claim of the claimant. Similarly, the submissions made by Mr.Sagar are

primarily inter-se issues with the Consortium, which would be

adjudicated by the learned Arbitrator and, to that extent, the learned

Arbitrator has kept the issues open by observing as under:

"29. The principles for passing an interim award are akin to Order XII Ru1e 6 of the Code of Civil Procedure. Rather, I feel that the power vesting in an arbitrator to make an interim award is wider in its scope. Once the arbitrator forms an opinion, either based on admissions on or availability of adequate material on record and is satisfied that the relief sought for by way of interim award is one which cannot in any case be denied at the stage of the final award, the arbitrator shall not hesitate in passing an interim award. All the relevant facts providing foundation for passing of an award are set out in para 27 herein above. To the extent to which the interim award is being passed, the entitlement of Claimants cannot be denied, not even doubted. There is no reason why the Claimants should wait till the stage of passing of final award for such monetary relief as is legitimately and undoubtedly due to them. To the extent to which the dispute may be arguable, calling for adjudication after a detailed hearing, is being left open and untouched."

20. In view of the above discussion, I do not see any merit in the

petitions. The same are accordingly dismissed.

(V.KAMESWAR RAO) JUDGE APRIL 21, 2015 akb