Delhi High Court
Sanjeev Verma vs Amita Arora on 24 November, 2020
$~4
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on : 24th November, 2020
+ ARB.P. 589/2020
SANJEEV VERMA ..... Petitioner
Through Ms. Aditi Mohan and Ms.
Abhipriya, Advs.
versus
AMITA ARORA ..... Respondent
Through Mr. Anshul Tyagi, Mr. Vaibhav
Suri and Mr. Prithvi Sidhu,
Advs.
CORAM:
HON' BLE MR. J USTICE C. HARI SHANKAR
JUDGMENT
% 24.11.2020
(Video-Conferencing)
C. HARI SHANKAR, J .
I.A.10437/2020
1. Allowed, subject to all just exceptions.
2. The application stands disposed of.
ARB.P. 589/2020
1. This petition, under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act"),
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seeks the appointment of an arbitrator.
2. A reading of the petition reveals that the existence of an
arbitrable dispute between the parties is not seriously contested, and
that the necessity of filing this petition has arisen only because the
parties have not been able to agree on the identity of the sole
arbitrator, to arbitrate on the disputes between them.
3. For the sake of the record, the paragraphs, in the petition, which
set out the controversy and dispute between the parties, may be
reproduced thus, strictly without prejudice to the right of the
respondent to dispute the same:
"(i) The Petitioner is a well reputed builder in New Delhi
and is presently residing at F-4/2, Vasant Vihar, New Delhi-
110057.
(ii) That in the year of 2015, the Respondent approached
the Petitioner or the purpose of re-developing/constructing the
building (i.e. Basement, Stilt, Ground, First Floor, Second
Floor and Third Floor) on Plot No. 9-A, North West Avenue,
Punjabi Bagh, New Delhi-110026 owned by the Respondent
(hereinafter referred to as the "said property") Accordingly,
a Property Development Agreement dated 27.08.2015
(hereinafter referred to as "the Property Development
Agreement") was executed between the Petitioner and the
Respondent whereby inter-alia, the Petitioner was required to
redevelop, construct and complete the building entirely at its
own cost and expense and further pay an additional
consideration of Rs. 4,55,00,000/- (Rupees Four Crores Fifty-
Five Lacs only) as 'non-refundable amount' as per the
schedule set out in Clause 2 therein. It is pertinent to note
here, that the entire possession of the building was vested with
the Petitioner by the Respondent for the redevelopment
purpose. That as on 11.12.2015, a sum of Rs. 3,55,00,000/-
(Rupees Three Crores Fifty-Five Lacs only) out of
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Rs.4,55,00,000/- (Rupees Four Crores Fifty-Five Lacs only)
stood paid to the Respondent by the Petitioner, as the non-
refundable amount under the Property Development
Agreement.
(iii) That in consideration of the Petitioner incurring each
and every expense for the purpose of completion of the entire
project coupled with the payment of Rs. 4,55,00,000/-
(Rupees Four Crores Fifty-Five Lacs only) as nonrefundable
amount, the Petitioner beanie entitled under the Agreement to
the entire Second Floor of the Property along with 20%
proportionate undivided share in the land underneath and 20%
area in the stilt for the parking (hereinafter referred to as "the
Builder's Allocation") upon completion of the project.
(iv) That it was further unequivocally agreed between the
parties that upon completion of the structure of the building
(i.e. casting of slabs of Basement, Stilt, Ground, first, Second,
third and the entire brick work of all the floors) in the manner
and mode set out in the Property Development Agreement,
and upon further paying the balance consideration of
Rs.1,00,00,000/(Rupees One Crore only), the Respondent
would be required to execute the Sale Deed/Conveyance Deed
of 50% of the demarcated area of the Builder's Allocation, as
per the choice of the Petitioner in his favour.
(v) That it was further agreed that the Respondent would
have no right to protest or object to the execution of the
aforementioned Sale Deed. It may be pertinent to mention at
this juncture, that in the event of default or delay in executing
the sale deed by the Respondent, it was agreed that a penalty
of Rs.5,00,000/-(Rupees Five Lacs only) per month would be
payable to the Petitioner and the Petitioner would be entitled
to further stop all construction if the Sale Deed was not
executed.
(vi) That in so far as the execution of the remaining 50%
Sale Deed of the Builder's Allocation in favour of the
Petitioner is concerned, it was agreed that the Petitioner
would become entitled to the same upon the completion of the
project and upon handover of the physical possession of the
Respondent's allocated share i.e. the Owner's share in the said
property, after full development of the project.
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(vii) That soon after demolishing the building and obtaining
the sanctions from the municipal authorities to commence the
construction work of the project, the Petitioner came to know
that not only was the said property under a prior attachment
from the Central Bank, which fact was deliberately and
willfully concealed from the Petitioner at the time of
executing the Property Development Agreement but also there
were pending dues to be paid to the Excise Department by the
Respondent.
(viii) That the Respondent had willfully and fraudulently
misrepresented to the Petitioner at the time of signing the
Property Development Agreement that the said Property was
free of all encumbrances, legal impediments, etc. The
Respondent had willfully suppressed the pending litigation
from the Petitioner where the Respondent had undertaken to
not sell, alienate or create any third party interest in the said
property in any manner, before the Hon'ble High Court of
Delhi.
(ix) That shortly thereafter, the Petitioner approached the
Respondent being fearful of losing the capital already
invested in the project on account of the gross violation of the
warranties and representations made by the Respondent to the
Petitioner and the disrepute caused to the project because of
the attachment by the bank and the pending litigations
surrounding the property.
(x) In the aforementioned background, in October 2016, it
was offered by the Respondent and agreed by the Petitioner
that in the event, the Builder's Allocation i.e. the Second
Floor remained unsold by the Petitioner during the pendency
of the construction of the building and additionally, the
Respondent offered an advance/earnest money of Rs.
2,00,00,000/- (Rupees Two Crores only) to the Petitioner,
then the Respondent would buy back the Builder's allocation
from the Petitioner for a total sale consideration of
Rs.28,00,00,000 (Rs. Twenty-Eight Crores only). That on
18.10.2016 the Petitioner and the Respondent formally
executed a Buy Back Agreement to encapsulate the aforesaid
understanding (hereinafter referred to as "the Buy Back
Agreement").
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(xi) That it is a matter of record that the Respondent was
unable to honour the commitments to buy-back the Builder's
allocation i.e. the second Floor as per the terms of the Buy
Back Agreement on account of the Respondent's financial
inability to do so and failed to offer the advance/earnest
amount of Rs. 2,00,00,000/- (Rupees Two Crores only) to the
Petitioner, despite providing repeated assurances regarding
the security of the Petitioner's investment in the project.
(xii) That it is pertinent to point out at the juncture, that
sometime in October/November 2018 itself, the Petitioner had
already completed the structure of the building as per the
agreed standard of construction within the agreed period
(including the period extended from time to time by mutual
consent between the parties) without any delay being
attributable to the Petitioner thereby, becoming fully entitled
to obtain the Sale Deed in respect of 50% of the Builder's
Allocation in the Petitioner's favour. Subsequently, the same
was also accepted by the Respondent and the Respondent had
agreed to execute the sale deed in favour of the Petitioner.
However, under some pretext or the other the Respondent
kept avoiding the execution of the Sale Deed, in favour of the
Petitioner.
(xiii) That after several rounds of discussion and negotiation
sometime in November 2019, the Respondent again
approached the Petitioner requesting the handover of the
possession of the Basement, Second Floor and Third Floor for
the purpose of letting out the same to a tenant and also
requested for a no objection certificate (NOC) from the
Petitioner to this effect. The Petitioner agreed to give its NOC
with respect to the handover of possession of the Basement,
Second Floor and Third Floor for executing a Lease deed with
the Tenant purely, in order to mitigate its losses in the said
property.
(xiv) That with a view to facilitate the handover of the
possession of the Basement and Third Floor from the
Petitioner and further to obtain the possession of the
Petitioner's builder's allocation i.e. the Second Floor, the
Respondent requested the Petitioner to execute an Addendum
to the Property Development Agreement pursuant to which,
the Petitioner could handover the possession of the Basement,
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Second Floor and the Third Floor for the limited purpose of
carrying out fit outs to the prospective Tenant.
(xv) It was further assured to the Petitioner by the
Respondent that the prospective tenant had agreed to pay a
sum of Rs. 13,00,000/- (Rupees Thirteen Lacs only) per
month as rent towards the Petitioner's Builder's Allocation i.e.
the Second Floor and that the advance rent and security
deposit as and when received from the Tenant would be
handed over to the Petitioner. That it may be noted at this
juncture, that the Respondent again avoided getting the Sale
deed qua 50% of the Builder's Allocation executed in favour
of the Petitioner and assured the Petitioner of its commitment
to buy-back the second floor for a sum of Rs. 28,00,00,000/-
(Rupees Twenty Eight Crores only).
(xvi) Moreover, the Respondent expressed her desire to avail
a loan against rent discounting of the Basement, Second Floor
and the Third Floor of the Property from the Bank/Financial
Institution in order to secure the amount towards the
consideration of the Second Floor to be paid to the Petitioner.
It is a matter of record that the Respondent have been in a
financially precarious situation since the inception of the
Project in the year 2015 and have time and again breached
and wriggled out its obligations and have till date failed to
execute the Sale Deed in respect of 50% of the front portion
of the Second Floor in favour of the Petitioner.
(xvii) That the Petitioner, again with a view to mitigate his
losses in the project and upon the Respondent's insistence
agreed to execute the Addendum dated 15.11.2019 to the
Property Development Agreement (hereinafter referred to as
the "Addendum") and the Agreement dated 15.11.2019
(hereinafter referred to as the "Refreshed Buy Back")
despite having become entitled to the entire second floor and
the execution of the Sale Deed qua 50% of the Builder's
Allocation upon completion of the structure of the Building in
December 2018 itself.
(xviii) That as per the specific terms of the Addendum and
subsequently vide letter dated 11.11.2019, the Respondent
had undertaken that the security deposit and the rent received
from the Tenant towards the Petitioner allocation would be
paid to the Petitioner. Further, in order to give effect to the
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aforementioned understanding the Respondent also took a No
objection letter from the Petitioner prior to executing the
Lease Agreement with the Tenant on 15.11.2019. It is a
matter of record that not only have the Respondent failed to
give the Petitioner any monies received from the prospective
tenant towards the Petitioner's allocation nor have the
Respondent disclosed the terms of the LOI or Lease
Agreement executed with the Tenant till date, in complete
contravention of the terms of the Addendum.
(xix) That further the Respondent reiterated its commitment
to buy back the builder's allocation from the Petitioner for an
agreed sale consideration of Rs. 28,00,00,000/- (Rupees
Twenty Eight Crores only) in the Refreshed Buy-Back
Agreement and it was agreed that a sum of Rs.
5,00,00,000/(Rupees Five Crores only) shall be paid on/before
01.01.2020 by the Respondent and, in the event of any delay
or default the Petitioner would become entitled to the
following: -
a) To stop development work of the said property
and in such an event, would not be liable for any
losses, if suffered by the Tenant and;
b) To retain the possession of the entire Ground
Floor and First Floor, without carrying any liability, till
such time the Sale Deed is executed by the Respondent
towards the Second Floor allocation along with a
penalty for the delay in payment @ Rs. 5,00,000/-
(Rupees Five Lacs only) per month.
(xx) That further it was represented by the Respondent that
the Respondent was availing a loan against rent discounting of
the Basement, Second Floor and the Third Floor i.e. the leased
premises, the possession of which was with the Petitioner and
accordingly, requested the Petitioner to give his NOC to
mortgage to the Bank/Financial Institution for the purpose of
availing the rent discounting loan facility towards the
aforementioned floors. It was further represented by the
Respondent that out of such loan amount being sought from
the Bank, a sum of Rs. 15,00,00,000/- (Rupees Fifteen Crores
only) would directly be paid by the Bank to the Petitioner
against the adjustment towards the sale consideration of the
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buy-back amount of Rs. 28,00,00,000/- (Rupees Twenty Eight
Crores only).
(xxi) That it was explicitly agreed that no other mortgage
could be done by the Respondent except the Basement,
Second Floor and the Third Floor i.e. the leased premises.
Further, it was stated that the aforesaid NOC was subject to
the fulfillment of the Respondent obligation regarding the
payments of Rs. 5,00,00,000/- (Rupees Five Crores only) by
the Bank/Financial Institution and further the Bank/Financial
Institution binding itself to pay a sum of Rs. 10,00,00,000/-
(Rupees Ten Crores only) within 6 months from
commencement of the rent.
(xxii) That to utter shock of the Petitioner, the Sanction
Letter from Aditya Birla Finance Ltd. (hereinafter referred to
as "ABFL") dated 20.01.2020 sent to the Petitioner on
29.01.2020 had no mention of any binding regarding the
commitment to pay a sum of Rs, 10,00,00,000/- (Rupees Ten
Crore: only) within 6 months from commencement of rent to
the Petitioner, as envisaged in the terms of the Addendum and
the Refreshed Buy-Back Agreement executed on 15.11.2019.
Moreover, the Respondent surreptitiously offered to mortgage
the Ground Floor in favour of ABFL, without having any
authority to do so and in complete breach of the terms of the
Agreements.
(xxiii) Moreover, the Refreshed Buy-Back Agreement had
lapsed on 08.0l.2020 itself (after giving 1-week grace period
w.e.f. 01.01.2020 by the Petitioner) coupled with the fact that
the Respondent had failed to pay Rs. 5,00,00,000/(Rupees
Five Crores only) to the Petitioner. Therefore, as per the terms
of the Agreements executed on 15.11.2019 the Respondent
again became liable to execute the 50% sale Deed of the
Second Floor forthwith in favour of the Petitioner. That even
though the Petitioner was entitled to stop work in the past as
per the several Agreements, the Petitioner has always kept the
interest of the Tenant as the paramount objective and has
always continued to perform his obligations under the
Agreements despite getting the sale deed executed in his
favour till date.
(xxiv) That several rounds of correspondence were exchanged
between the Petitioner and the Respondent on 12.02.2020,
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18.02.2020, 24.02.2020 and 02.03.2020, wherein the
Petitioner has time and again reiterated his willingness and
readiness to honour the agreed terms.
(xxv) That furthermore, vide letter dated 06.03.2020, the
remaining balance consideration of Rs. l,00,00,000/- (Rupees
One Crore only) was also offered by the Petitioner to the
Respondent by Demand Draft drawn on Standard Chartered
Bank however, it is pertinent to note that till date the
Respondent has failed to either reject or accept the same.
Obligation offered enough.
(xxvi) It is reiterated that the Petitioner is and has always
been ready and willing to perform his obligations and has
repeatedly informed the Respondent through his emails dated
12.02.2020, 18.02.2020, 24.02.2020, 02.03.2020,06.03.2020
and 16.03.2020 and also in person. It has been stated time and
again, that the Petitioner is suffering huge losses on his
investments since 2015 on account of the Respondent's
continuous breaches and failure to perform its obligation on a
day to day basis however, the Respondent has failed to rectify
such breaches till date.
(xxvii) That the Respondent has repeatedly and
unambiguously accepted its failure to perform its obligations
under the several Agreements executed between the parties
from time to time however, has till date failed to honour the
same. In view of the above, several disputes including but not
limited to the failure to execute the 50% Sale Deed of the
front portion of the Petitioner builder's allocation in the said
property, loss of rentals and profit caused on account of the
Respondent's default, loss of opportunity cost, penalty
,compensation towards loss on account of misrepresentation
by the Respondent, loss of goodwill and reputation, etc. have
arisen between the parties in connection with or/and in
relation to the Property development Agreement, Buy back
Agreement, Addendum to the Property Development
Agreement and the Refreshed Buy Back Agreement.
(xxviii) That in the above-mentioned circumstances, the
Petitioner was constrained to issue Notice Invoking
Arbitration dated 09.07.2020 thereby proposing the name of
Hon'ble Mr. Justice Pradeep Nandrajog (Former Chief Justice
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of Bombay and Rajasthan High Court and Judge of Delhi
High Court) as the Sole Arbitrator.
(xxix) That on 05.08.2020 the Petitioner received a
perfunctory reply to the Notice Invoking Arbitration wherein,
the Respondent conveyed its refusal to the appointment of the
proposed name by the Petitioner and proposed the name of
Hon'ble Mr. Justice V.N. Khare, Former Chief Justice of India
as the Sole Arbitrator.
(xxx) That it is pertinent to mention that thereafter, the
Petitioner and Respondent held a meeting wherein, the parties
attempted to resolve their disputes. However, on 28.08.2020,
the Respondent served a Termination-cum Demand letter of
the Property Development Agreement upon the Petitioner
raising superfluous and unsubstantiated claims and
threatening to illegally terminate the Property Development
Agreement, without having any right or authority to do so
under the said Agreement."
(Emphasis as in Original)
4. Mr. Anshul Tyagi, learned counsel for the respondent, needless
to say, disputes all the aforesaid allegations of the petitioner and
submits that there were various other agreements and understandings
between the petitioner and the respondent, regarding which the
petition is not forthright. He submits that there is no liability of the
respondent qua the petitioner.
5. Clearly, arbitrable disputes have arisen between the parties and,
to be fair, neither of the learned Counsel disputed this position.
6. The petitioner invoked arbitration by his notice dated 9th July,
2020, and the respondent replied vide response dated 5th August, 2020,
denying all allegations against her. Each of the parties suggested the
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name of a learned sole arbitrator, to arbitrate on the disputes between
them, but neither party was agreeable to the name suggested by the
other.
7. As such, there is an impasse, regarding the sole arbitrator who
would arbitrate on the disputes between the parties, which has resulted
in the petitioner moving this Court under Section 11(6) of the 1996
Arbitration Act.
8. The Arbitration Clause, in the Property Development
Agreement, reads as under:
"49. That in the event of any question or dispute arising
under in connection with incidental to and or interpretation or
scope of this agreement or relating hereto, the same shall be
referred to any arbitrator mutually acceptable to both the
parties and the decision of the arbitrator shall be final and
conclusive. The provisions of the Arbitration and Conciliation
Act, 1996 and the statutory modifications, amendment and or
reenactment thereof from time to time shall apply to such
arbitration. The parties shall bear and pay their own costs,
charges and expenses of the proceedings for the arbitrator.
The Place of the arbitration shall be at New Delhi."
9. As the existence of the arbitration clause, its application, and
the existence of arbitrable disputes between the parties, is not
contested by the respondent, and the difference is only with respect to
the identity of the Sole Arbitrator to arbitrate on the disputes, this
Court appoints Justice Nisar Ahmad Kakru, a former Chief Justice of
the High Court of Andhra Pradesh, as the Sole Arbitrator to arbitrate
on the aforesaid disputes between the parties. The learned Sole
Arbitrator may be contacted at 078894 89805, and his address is, X-19
Top floor, Houz Khas, New Delhi -110016.
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10. Needless to say, the above recital is only by way of an overview
of the case set up by the petitioner, and does not amount to an
expression of opinion by this Court on the merits of the allegations of
the petitioner against the respondent. The respondent, would,
therefore, be at liberty to contest the said allegations and all questions
in this regard would remain open for debate by the parties before the
learned Sole Arbitrator.
11. The learned Sole Arbitrator would arbitrate on the disputes in
accordance with the 1996 Arbitration Act, and the fees of the learned
Sole Arbitrator would also abide by the Fourth Schedule to the 1996
Arbitration Act.
12. The parties are directed to contact the learned Sole Arbitrator
within 48 hours of being emailed a copy of this order by the Registry,
in order to obtain the concurrence of the learned Sole Arbitrator and to
fix a schedule of arbitration.
13. The learned Sole Arbitrator would also file the requisite
disclosure, under Section 12(2) of the 1996 Act, within a week from
entering on the reference.
14. With the aforesaid observations, this petition stands disposed of.
C.HARI SHANKAR, J.
NOVEMBER 24, 2020
r.baraia
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