Delhi High Court
Earthcon Constructions Pvt. Ltd. vs Mahamaya Infrabuild Pvt. Ltd. on 1 February, 2019
$~21
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 01.02.2019
+ O.M.P. (COMM) 51/2019
EARTHCON CONSTRUCTIONS PVT. LTD.
..... Petitioner
Through: Mr. Sachin Datta, Sr. Adv with
Dr.Farrukh Khan, Mr. Amique
Khalid and Ms. Affifa Atiq, Advs.
versus
MAHAMAYA INFRABUILD PVT. LTD.
..... Respondent
Through: Mr. Sandeep Aggarwal, Sr. Adv with
Mr. Rajesh Pathak, Adv.
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J. (ORAL)
I.A. No.1587/2019
1 Allowed, subject to just exceptions.
O.M.P. (COMM) 51/2019, I.A. No.1585/2019, I.A. No.1586/2019 & I.A.
No.1588/2019
2 This is a petition preferred under Section 34 of the Arbitration and
Conciliation Act, 1996 (in short „1996 Act‟) to assail a consent Award dated
30.03.2015 and the order dated 17.05.2018, whereby, arbitration
proceedings were ultimately terminated, albeit, once again with the consent
of senior counsel for parties.
3 I.A. No.1585/2019 has been filed to stay the operation of the
impugned award and order. I.A. No.1586/2019 is filed to seek exclusion of
141 days, spanning between 23.07.2018 and 10.12.2018 spent in, what I
would classify as frivolous litigation, for the purpose of calculating the
period of limitation under Section 34 of the 1996 Act. I.A. No.1588/2019
has been filed to seek condonation of delay of 13 days in filing the instant
petition (though in the prayer the expression used is „Written Statement‟).
4 The record shows that this case has a chequered history, a history
which is pockmarked with U-turns and prevarication on the part of the
petitioner. In order to appreciate, as to why I say so, it would be necessary
to give a brief background in which the instant petition has been lodged.
5 A Memorandum of Understanding dated 10.08.2011 (in short
„MOU‟) followed by agreement dated 09.01.2013 (in short „Agreement‟)
had been executed between the parties. The MOU required the petitioner to
develop and construct a group housing complex on a parcel of land
described as: GH-B (GH-14 to GH-17), located in Industrial Area,
Talanagari, Ramghat Road, Aligarh, U.P. The subject land admeasures
10742 sq. mts.
5.1 The respondent and the petitioner were to have financial interest in
the Group Housing Project in the ratio of 25:75.
5.2 Pertinently, UPSIDC had given the aforementioned parcel of land on
a 90 years lease to the respondent.
5.3 Under the agreement dated 09.01.2013, the petitioner agreed to pay
an aggregate sum of Rs.17.40 crores to the respondent in the manner
provided therein. Breach of the Agreement conferred a right on the
respondent to terminate the MOU and takeover construction and sale of
group housing complex.
5.4 Evidently, disputes arose between the parties in relation to the MOU
and the Agreement.
6 The petitioner, it appears, served a legal notice dated 28.06.2013 on
the respondent seeking specific performance of the MOU. The respondent
sent a reply to this notice on 07.08.2013.
6.1 Consequent thereto, the petitioner triggered the arbitration agreement
between the parties by serving a notice dated 28.01.2014 on the respondent.
In response, the respondent dispatched two letters to the petitioner. Via the
first communication dated 25.02.2014, the respondent replied to the
petitioner‟s notice dated 28.01.2014. Via the second communication, which
is dated 05.03.2014, the respondent terminated the Agreement and the
MOU.
7 The petitioner, in response thereto, served a reply dated 07.03.2014
on the respondent. Simultaneously, the petitioner also filed a petition under
Section 11 (6) of the 1996 Act for appointment of an Arbitrator.
7.1 This petition was numbered as: Arb. Petition No. 149/2014. Vide
order dated 21.04.2014, the petition was allowed and, a former Judge of this
Court was appointed as a sole Arbitrator.
8 The record shows that upon a joint application being filed under the
provisions of Order XXIII Rule 3 (though captioned under Rule 1) of the
Code of Civil Procedure, 1908 (in short „CPC‟) read with Section 30 of the
1996 Act, the learned Arbitrator passed an interim consent Award on
30.03.2015.
8.1 For sake of convenience, relevant terms of settlement and interim
consent Award are extracted hereafter:
Settlement
"...I. That the Claimant shall pay a sum of Rs.15.2 crores (Rs.
Fifteen crores twenty lakhs) to the Respondent and after
having received the aforesaid amount, the Respondent shall be
left with no right or interest in the Plot No.GH-B (GH-14 to
GH-17) admeasuring 10742.00 sq. mts. in housing sector
Industrial Area Talanagri, Ramghat Road, Aligarh.
II. That the Claimant also undertakes to pay the remaining
dues and interest thereon to the UPSIDC, in respect of the
said Plot in addition to the abovesaid Rs.15.2 crores payable
to the Respondent.
III. (A.) That out of agreed total amount of Rs.15.2 Crores,
the Claimant shall initially pay Rs.2 crores to the Respondent
on or before 31st January, 2015. The date of payment of Rs.2
crores i.e. 31st January, 2015 is the essence of this agreement.
If the Claimant does not pay the said amount of Rs.2 crores to
the Respondent on or before 31st January, 2015; the present
settlement shall become infructuous and the arbitration
proceeding shall be resumed forthwith. After receiving the
aforesaid initial amount of Rs.2 Crores, the Respondent shall
clear and pay, out of the received amount of Rs.2 Crores, the
remaining due amount/arrears, interest, if any, payable on the
due amount to the UPSIDC on or before February 15, 2015.
After clearance of the dues of UPSIDC as mentioned above,
the remaining amount out of Rs 2 Crores received by the
Respondent shall be adjusted towards the total amount of
Rs.15.2 crores payable to the Respondent. If the Respondent
fails to clear and pay the dues of UPSIDC as mentioned
above after receiving Rs 2 Crores, the Respondent shall pay
back and refund the so received entire amount of Rs.2 Crores
with interests @ 18 p.a. to the Claimant on or before 28
February 2015. In case the Respondent fails to pay back the
aforesaid amount with interest within the stipulated time till
February 28, 2015 as mentioned above, the counter claim and
defense of Respondent shall stand struck off and the
arbitration proceedings shall be resumed forthwith.
(B). The Claimant undertakes to pay the remaining/balance
sum out of Rs.15.2 crores on or before 31st August, 2015.
(C) If the Claimant fails or neglects to pay the entire
remaining amount that remains unpaid in terms of Para A
above out of Rs.15.2 crores payable to the Respondent
pursuant to this agreement by 31.8.2015; the Claimant shall
be liable to pay interest at the rate of 18% p.a. on the
remaining dues payable latest by 30.11.2015. The said
interest shall be computable w.e.f. 1.9.2015 till the date of
payment.
(D) If the Claimant does not make the payment of entire sum of
Rs.15.2 crores and that amount paid to UPSIDC pursuant to
this agreement as stated above to the Respondent by
30.11.2015; all amount given by the Claimant shall stand
forfeited by the Respondent and the present proceeding shall
be reinitiated from the stage prior to filing of this application.
It is clarified that the sum of Rs.15.2 Crores mentioned herein
includes the amount that remains with the Respondent after
making payments to the UPSIDC in terms of Para A above.
(E) Till the time, the Claimant does not make payment of
Rs.15.2. crores to the Respondent and the amount paid to
UPSIDC pursuant to this agreement as stated above to the
Respondent, the Claimant shall have no right to carry out any
construction on the plot. The Claimant shall maintain complete
status quo and will not create any third party right or interest
in the plot in any manner whatsoever.
(F) After having received the balance amount out of Rs.15.2
crores and the amount paid to the UPSIDC in terms of Para A
above and the Interest for any delayed payment, if any, the
Respondent will immediately transfer the lease and all other
rights in respect of the aforesaid plot in favour of the Claimant
without any demur. All the expenditure related with the transfer
of lease shall be borne by the Claimant.
(G) The parties hereto agree that the Claimant shall hand over
a demand draft of the balance amount by 31.08.2015 without
Interest, or with interest as agreed in sub-clause (C) by
30.11.2015 to Hon'ble Arbitrator. The Respondent shall be
entitled to receive the demand draft from Hon'ble Arbitrator
after execution of lease/transfer of lease of the said plot in
favour of the Claimant...."
xxxxxx
Award
"The order of 9th March, 2015 reads as follows:
"As per the order dated 13.01.2015, the Claimant has paid Rs.
2 Crores to the Respondent and the Respondent has paid
Rs.1,27,20,370/- as full and final payment against Plot No.GH-
B (GH-14 to GH-17) at Industrial Area, Tala Nagar, Ramghat
Road, Aligarh by RTGS on 03. 03.2015.
Accordingly the matter will be listed on 30.03.2015 at 4.00 p.m.
for final disposal of arbitration proceedings as per the terms of
settlement between the parties." Both the parties have appeared
pursuant to the above order and jointly state that the dispute is
finally settled and no part of the dispute survives.
Accordingly, Application under 023R23 CPC dated 12.01.2015
which is signed by both the parties and their Counsel and
supported by affidavits of both the parties have been perused by
me and is found to be lawful, just and reasonable.
Thus, the Application under 023R23 CPC dated 12.01.2015 is
allowed and the dispute stands disposed of in terms of the
settlement terms recorded in the Application dated 12.01.2015
and an award is passed in terms of the said Application which
shall form a part of this Award as Appendix 'A'."
9 It appears that since the petitioner could not fully comply with the
terms of the settlement, which, inter alia, required him to pay moneys to the
respondent, it moved an application before the learned Arbitrator on
30.11.2015 for extension of time. By this application, a month‟s extension
was sought by the petitioner to pay a sum of Rs.14,47,20,370/-.
9.1 On this application, the learned Arbitrator passed the following order
on that very date i.e. 30.11.2015:-
"An application has been moved on behalf of the
Claimant seeking extension of time to deposit the sum of Rs.
14,47,20,370/- (Rupees Fourteen Crore Forty Seven Lakhs
Twenty Thousand Three Hundred Seventy only) by one month
by extending it from 30/11/2015 to 31/12/2015 by suitably
awarding the interim award and the schedule.
Though the application states that the Respondent has
consulted (sic) to the modification, the respondent has agreed
subject to the interest @ 18 % for one month. Accordingly, the
application is allowed and the time to make the payment
extended upto 31/12/2015 subject to pay (sic) the amount with
18% interest. The interim award and the schedule stands
amended accordingly."
(emphasis is mine)
10 Concededly, the petitioner failed to make the payment despite the
extension of time being granted to it. The petitioner, instead, moved another
application on 28.12.2015 seeking extension of time till 31.01.2016.
10.1 Since, this application was sent via e-mail to the learned Arbitrator,
he responded to the petitioner in the like manner vide e-mail dated
31.12.2015. The learned Arbitrator, apparently, asked the petitioner to
obtain written consent of the respondent for extension of time.
11 Consequently, the learned Arbitrator held a hearing on 05.01.2016.
On that date, the learned Arbitrator, despite the objection of the respondent,
gave one last opportunity to the petitioner to comply with the settlement
agreement, which had, as noticed above, morphed into an interim Award.
11.1 Accordingly, the learned Arbitrator extended time for payment till
31.01.2016. Resultantly, Award dated 30.03.2015 was modified to that
limited extent.
12 The record shows that the petitioner failed to honour its obligation for
the second time. As a result on 24.02.2016, the petitioner, once again,
sought extension of time to make payment to the respondent.
12.1 At this hearing, though, the petitioner, tendered a sum of Rs.1 crore to
the respondent with the assurance that the remaining amount along with
interest, as awarded, would be paid by 31.03.2016. The matter was,
consequently, renotified for 07.04.2016.
13 Though, the proceedings of 07.04.2016 are not on record, it is the
petitioner‟s own stand that on 30.05.2016, an application was filed for
setting aside the interim consent Award dated 30.03.2015, as modified on
24.02.2016.
14 The record shows that on 07.07.2017 parties convened before the
learned Arbitrator when the following order was passed:
"While the settlement has not been reached, the Respondent
has been informed by the Claimant that an effort would be
made to arrive at a settlement before 30.08.2017. In case the
matter is not settled and since the Award has already been
passed, the parties are free to take consequential action in
accordance with law.
The parties are directed to furnish the details of the payments
already made along with payment of their share of the
Arbitrator's fee up to the 21st hearing on or before the next date
of hearing.
List on 30th August, 2017 at 4 pm."
(emphasis is mine)
14.1 Admittedly, despite the door of settlement being kept open at the
behest of the petitioner, since the petitioner failed to discharge its
obligations, the arbitration proceedings were revived by the learned
Arbitrator vide order dated 19.09.2017. This order reads as follows:
"The dispute has still not been settled despite vigorous
efforts by the parties and the Senior Counsel for the parties.
Accordingly, as per the order dated 30.03.2015 read with
Clause D of the application under Order 23 Rule 3 of CPC
read with Section 30 of the Arbitration Act filed by parties
which led to a consent award , the matter is to revive from the
stage prior to filing of the said application dated 13.01.2015.
It is agreed that the Claimant has filed its Affidavit of Evidence
and the Respondent is directed to file its Affidavits of Evidence
on or before 03.11.2017.
The application dated 30.05 2016 shall be considered after the
conclusion of evidence. However, it is made clear that the
revival of the proceedings shall not come in the way of parties
still trying to arrive at a fresh settlement.
List on 24th November 2017 at 4 pm, 13th December, 2017 at 2
pm, 14th December, 2017 at 4.30 pm and 15th December, 2017
at 4.30 pm for Cross Examination."
(emphasis is mine)
15 Apparently, thereafter, the petitioner filed another application, on
05.12.2017, to amend its Statement of Claims. To this application, the
respondent apparently filed its reply on 13.12.2017, which, though, is not on
record.
16 The record shows that the learned Arbitrator took up the two
applications filed by the petitioner (one for setting aside interim consent
Award dated 30.03.2015 and the other for amending its Statement of
Claims) and dismissed the same on 31.01.2018 by a detailed order.
17 Thereafter, the petitioner took his chance, in this Court, by moving a
fresh petition under Section 11 (6) of the 1996 Act. This petition was
numbered as Arb. Petition No. 351/2018. Via this petition, the petitioner
sought adjudication of all pending disputes between the parties including the
disputes which had arisen after the passing of the Award dated 30.03.2015.
This petition was, however, dismissed as withdrawn on 09.05.2018.
17.1 The learned Single Judge, while dismissing the petition as withdrawn,
indicated that the withdrawal of the petition would not prejudice the
petitioner in any other proceedings that it intended to embark upon.
18 It appears that it is, in this background, that the petitioner, thereafter,
served upon the respondent a notice dated 12.05.2018. By virtue of this
notice, the petitioner informed the respondent that it had appointed a former
Chief Justice of Patna High Court as its nominee. Furthermore, it called
upon the respondent to appoint its nominee Arbitrator, so that, once the two
nominee Arbitrators were appointed, a fresh Arbitral Tribunal could be
constituted to adjudicate upon the disputes obtaining between the parties.
19 The record discloses that since the proceedings before the learned
Arbitrator were still subsisting, a hearing was held on 17.05.2018. At this
hearing, the learned Arbitrator was informed by the senior counsel
appearing for the petitioner that a petition had been moved before this Court
under Section 11 (6) of the 1996 Act (inadvertently noted in the order of
even date as Order 11 Rule 6). The learned Arbitrator, after recording what
this Court had to say on 09.05.2018, in the operative part of the order passed
on 17.05.2018 recorded the following:
"Since the senior counsel for both the parties have stated
that nothing further survives before this Tribunal, these
proceedings stand concluded."
(emphasis is mine)
20 Evidently, the respondent, thereafter, moved for execution of the
Award. Consequently, an execution petition, being OMP (ENF.) (COMM.)
No.142/2018, was filed in this Court. On 30.05.2018, notice was issued in
the execution petition.
21 Furthermore, the respondent, via reply dated 04.06.2018, also
responded to the petitioner‟s request for constitution of a fresh Arbitral
Tribunal.
22 Given this exchange of correspondences qua the constitution of a
fresh Arbitral Tribunal, the petitioner moved this Court, once again, under
Section 11 (6) of the 1996 Act via an arbitration petition numbered as: Arb.
Petition No.515/2018.
23 On 23.07.2018, notice was issued in this petition and time was given
to the respondent to file a reply.
23.1 In the order, though, certain observations were made by the Single
Judge qua which the petitioner preferred a review petition. This petition
was numbered as: Review Pet. No.341/2018.
24 On 04.09.2018, the petitioner filed another petition, this time, under
Sections 14 and 15 of the 1996 Act. The prayer made in the petition was for
appointment of a substitute Arbitrator in exercise of powers under Section
15 (2) of the 1996 Act. This petition was pivoted on the ground that the
learned Arbitrator, who was appointed by this Court, by an order dated
21.04.2014, had terminated the proceedings without final adjudication of
claims preferred by the petitioner.
25 In the meanwhile, the Review Petition No.341/2018 along with Arb.
Petition No. 515/2018 came up for hearing before a Single Judge of this
Court on 05.09.2018.
25.1 On that date, the learned Single Judge dismissed the review petition
with costs of Rs.25,000/-, which was directed to be deposited with Kerala
Chief Minister‟s Distress Relief Fund.
25.2 Insofar the Arb. Petition No. 515/2018 was concerned, it was, at the
request of senior counsel appearing for the petitioner, directed to be relisted
on 14.09.2018.
26 On 14.09.2018, the learned Single Judge took up for hearing, not only
the Arb. Petition No. 515/2018 but also the petition filed under Sections 14
and 15 of the 1996 Act which was numbered as: OMP (T) (COMM.)
No.93/2018. After recording the entire history of the case, the learned
Single Judge dismissed both petitions.
27 Being aggrieved by the order dated 14.09.2018, the petitioner
preferred two Special Leave Petitions. These Special Leave Petitions were
numbered as: SLP (C) No.31826/2018 and SLP (C) No.31822/2018. The
Supreme Court dismissed both the SLPs in limine vide order dated
10.12.2018.
28 As indicated at the very outset, the instant petition has been filed in
the background of the aforementioned facts to assail, at this point in time,
the Award dated 30.03.2015 and the order dated 17.05.2018, whereby, the
learned Arbitrator had indicated that the arbitration proceedings stood
concluded.
29 Mr. Datta, who, appears for the petitioner, submits that the petitioner
was entitled to agitate its claims, which had not been adjudicated upon by
the learned Arbitrator. In this behalf, Mr. Datta contended that the
Arbitrator himself had reopened the proceedings and, therefore, there was
no occasion for him to terminate the proceedings. This, according to Mr.
Datta, railed against the notion of fair play and justice and, therefore, the
petitioner was entitled to assail not only the Award dated 30.03.2015 but
also the order dated 17.05.2018.
29.1 Mr. Datta further submitted that this was a fit case in which this Court
should exercise powers under Section 14 of the Limitation Act, 1963 (in
short „Limitation Act‟) and exclude the period of 141 days spent in pursuing
actions filed in this Court. A similar plea was made qua condonation of
delay application as well.
30 On the other hand, Mr. Aggarwal, based on the record, contended that
no interference was called for, on merits, and especially not after such a
long lapse of time.
31 As noticed by me at the very outset, the instant petition under Section
34 of the 1996 Act is, inter alia, accompanied by I.A. No.1586/2019
whereby the petitioner seeks exclusion of 141 days spanning between
23.07.2018 and 10.12.2018 and also I.A. No.1588/2019 whereby
condonation of delay of 13 days in filing the instant petition is sought. The
application for exclusion of time is preferred under Section 14 of the
Limitation Act, 1963. The said provision empowers the Court to exclude
time which is spent in prosecuting, with due diligence, another civil
proceeding, whether in a Court of first instance or of appeal or revision
against the defendant, where proceeding relates to the "same matter in
issue" and is "prosecuted in good faith" in a Court which on account of
defect of jurisdiction or other cause of like nature is unable to entertain the
action. Apart from anything else, while pressing its application under
section 14 of the limitation Act, the petitioner would need to demonstrate
that it had prosecuted its actions with due diligence and good faith.
32 The narration of facts, hereinabove, would show that the petitioner,
after obtaining the interim consent Award, failed to discharge its obligation
to pay moneys to the respondent. The petitioner, on three occasions,
between November of 2015 and February of 2016, sought, on its own,
extension of time to make payments. The petitioner having failed to make
the payments to the respondent, changed its tactics by seeking to project that
it had money ready for payment to the respondent, and that the respondent,
on the other hand, was not in position to handover the subject complex to
the petitioner, by virtue of an order of status quo with regard to its assets,
having been passed by the Company Law Board in a petition filed a third
party.
32.1 The petitioner, thereafter, once again, changed course by moving two
applications, one for setting aside the interim consent Award dated
30.03.2015 and other for amending the Statement of Claim. While, these
applications were still pending before the learned Arbitrator, the petitioner
gave the impression to the learned Arbitrator that it would discharge its
obligations by paying the agreed amounts to the respondent. The Arbitral
Tribunal, taking into account the fact that the interim consent Award had not
borne fruit, despite several opportunities, in its proceedings dated
19.09.2017, decided to revive the arbitration proceedings, which was in tune
with the terms of the settlement agreement arrived at between the parties.
32.2 The petitioner, instead of making use of this opportunity and
agitating its claims on merits before the learned Arbitrator, (as it now seeks
to contend) approached this Court for appointment of another Arbitrator.
This petition, however, was withdrawn on 09.05.2018.
33 The petitioner, as the narration of facts set out above, would show,
thereafter, filed another petition under Section 11 along with a petition
under Sections 14 and 15 of the 1996 Act. Both these petitions were
dismissed by this Court on 14.09.2018.
33.1 In these petitions, the stand taken was that the petitioner wishes to
have additional claims adjudicated which arose after passing of Award
dated 30.03.2015.
33.2 In the interregnum, i.e. on 17.05.2018, based on the consent of the
senior counsel for the parties, the learned Arbitrator terminated the
arbitration proceedings pending before him.
33.3 Besides this, on 30.05.2018, in an execution petition filed by the
respondent, notice was issued by the Court.
34 The malafides of the petitioner are demonstrable from the fact that on
the one hand, in the petition, it is averred that after passing the interim
consent Award dated 30.03.2015, the Arbitrator had become functus officio
and on the other hand, applications, as noticed above, were filed, not once
but on three occasions to extend the time frame for making payments under
the very said Award to the respondent. The petitioner, having failed to
persuade the learned Single Judge, in the second Section 11 petition (i.e.
Arb. Petition No. 515/2018), that he could press additional claims, is now
wanting via this route to reopen proceedings, which were terminated with its
consent.
35 The entire gamut of facts and circumstances show that the petitioner
was not prosecuting its petitions in this Court with good faith and certainly
not with due diligence.
36 Therefore, having regard to the conduct of the petitioner, I am not
inclined, at this juncture, to exclude the period of 141 days, which spans
between 23.07.2018 and 10.12.2018 for the purpose of calculation of period
of limitation. For the very same reason, I am also not inclined to condone
the delay of 13 days in filing the instant petition.
37 Resultantly, I.A. No.1586/2019 and I.A. No.1588/2019 are dismissed.
38 Since the aforementioned I.A.s have been rejected; the main petition
filed under Section 34 of the 1996 Act and the accompanying application
for stay i.e. I.A. No.1585/2019 would axiomatically be rendered
infructuous.
38.1 Consequently, both, the main petition and the application for stay, are
closed.
RAJIV SHAKDHER, J
FEBRUARY 01, 2019
A
