Madhya Pradesh High Court
Ganga Infratech Through Its Partner ... vs M/S Johari Land And Finance Through Its ... on 10 February, 2025
Author: Subodh Abhyankar
Bench: Subodh Abhyankar
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1
M.P. No.1033- 2023
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE SUBODH ABHYANKAR
ON THE 10th OF FEBRUARY, 2025
MISC. PETITION No. 1033 of 2023
GANGA INFRATECH THROUGH ITS PARTNER MR. PALASH
RAJANI AND OTHERS
Versus
M/S JOHARI LAND AND FINANCE THROUGH ITS PARTNER
RAJENDRA SONI AND OTHERS
Appearance:
Shri Vijay Kumar Asudani- Advocate for the petitioner.
Shri Vivek Phadke- Advocate for the respondent No.1.
Shri Amol Shrivastava- Advocate for the respondent Nos.2 to 58.
WITH
ARBITRATION CASE No. 56 of 2023
GANGA INFRATECH THROUGH ITS PARTNER PALASH RAJANI
Versus
M/S JOHARI LAND AND FINANCE THROUGH ITS PARTNER MR.
RAJENDRA SONI
Appearance:
Shri Vijay Kumar Asudani- Advocate for the applicant.
Shri Vivek Phadke- Advocate for the non-applicant.
ORDER
Heard.
2] This order shall also govern the disposal of A.C. No.56 of 2023,
considering the fact that M.P. No.1033 of 2023 has arisen out of an order
passed on an application filed under Section 8 of the Act of 1996, i.e., for
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M.P. No.1033- 2023
referring the parties to the arbitrator, whereas A.C. No.56 of 2023 has
been filed for appointment of arbitrator. For the sake of convenience, the
facts as narrated in M.P. No.1033/2023 are being taken into
consideration.
3] This petition has been filed by the petitioners/defendants under
Article 227 of the Constitution of India, against the order dated
02.02.2023, passed by the First Additional District Judge, Dewas, in Case
No.RCSA-200/2022, whereby, an application filed by the petitioner
under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as „the Act of 1996‟) for referring the parties to the arbitration,
has been rejected by the Civil Court, on account of allegations of serious
fraud pleaded by the plaintiff/respondent No.1. It was also held that since
in the Civil Suit, apart from the plaintiff and defendant No.1 there are
other defendants also, who are not the parties to the agreement dated
16.07.2020, they cannot be asked to enter into the arbitration
proceedings.
4] In brief, the facts of the case are that initially, a registered
development agreement was executed between the petitioner
No.1/defendant, who is a registered partnership firm, with the respondent
M/s. Johri Land and Finance/the plaintiff, which is also a registered
partnership firm through its partners. The agreement (Annexure P/1)
dated 16.07.2020 was executed by late Shri Naresh Soni on behalf of the
partnership firm M/s Johri Land and Finance for development of land
situated at Senior Patwari Halka No.18, District Dewas. As per the
agreement, a sum of Rs.1 Crore was paid to the respondent No.1 as non-
refundable security deposit, with a further stipulation that after the
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development of the land, the profits shall be shared by the parties in the
ratio of 80:20, i.e., 80% by the developer-petitioner-defendant No.1 and
20% by the land owners/the respondent No.1/plaintiff. After the aforesaid
agreement was entered into between the parties on 25.01.2021, the layout
plan was sanctioned by the Town and Country Planning Department, and
thereafter, on 21.01.2022, an amendment deed of development agreement
was also executed, in which it was also provided that the earlier
agreement shall be considered as the original agreement. In the
meantime, permission of development of colony by Dewas Municipal
Corporation was also granted, as also on 13.12.2021, the permission by
the RERA. Whereas, the colony was developed by the petitioner on
31.05.2022, and admittedly, till 16.09.2022, around sixty plots of the
colony were already sold. The aforesaid sale deeds were also signed by
partner of respondent No.1 Shri Rajendra Soni.
5] In a turn of events, Shri Naresh Soni, one of the partners of the
respondent No.1 firm, committed suicide on 05.08.2022, regarding
which, a merg was registered and according to the respondents, the
deceased Naresh Soni had also left a suicide note which is also filed on
record as Annexure-R/1, in which he had also made serious allegations
against the relatives of the partners of the petitioner firm, and
subsequently, a publication was also made by the respondent No.1
cancelling the Power of Attorney executed in favour of the partner of the
petitioner firm.
6] Subsequent to that, a civil suit No.RCSA-200/2022 was also filed
by the respondent No.1, in which not only the present petitioners were
arrayed as the defendants, but the fifty-five plot purchasers were also
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made defendants. In the said civil suit, after the petitioners were served,
they filed an application under Section 8 of the Act of 1996 by referring
to para 16 of the original agreement dated 16.07.2020, contending that
since there exists an arbitration agreement between the parties, the Civil
Court has no jurisdiction and the parties must be directed to refer the
dispute to the arbitrator, as provided in the agreement.
7] A reply to the aforesaid application was also filed by the
plaintiff/respondent no.1, in which it was contended that the agreement
dated 16.07.2020 was executed by playing fraud on the plaintiffs, as the
ratio which was to be in favour of the plaintiffs as 80:20, has been
reversed as 20:80, i.e., the defendant No.1/petitioner would get 80% of
the profit, whereas, the plaintiff would get only 20% of the profit, despite
the fact that they are the owners of the land. Secondly, it was contended
that in the initial draft agreement, there was no arbitration clause and in
fact, the arbitration clause was also crossed in the initial draft, and
thirdly, there are as many as fifty-five additional defendants in the plaint,
who are not the parties to the arbitration agreement, hence they cannot be
compelled to go for the arbitration. The application was rejected by the
learned Judge of the Civil Court vide its impugned order dated
02.02.2023, accepting the grounds raised by the plaintiff/respondent no.1,
and additionally, it was also held that since there are other parties also,
who have not signed the arbitration agreement, they cannot be asked to
participate in the arbitration proceedings. Reference was also made to the
suicide note left by Late Shri Naresh Soni, one of the partners of the
plaintiff firm.
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8] Shri Vijay Kumar Asudani, learned counsel for the petitioner has
submitted that the impugned order has been passed without proper
assessing the legal provisions, as admittedly, the agreement dated
16.07.2020 was a registered agreement, whereas, the draft agreement
dated 16.07.2020, relied upon by the respondent(s) is only a photocopy of
the agreement, and is not even signed by any of the parties concerned. It
is also submitted that so far as the arraignment of the other defendant
Nos.3 to 57 in the plaint is concerned, the aforesaid defendants have
executed the sale deed pursuant to the development agreement, which has
been signed by both the contesting parties, and even the sale deeds have
been signed by both the parties.
9] Counsel has submitted that since the sale deeds have been executed
pursuant to the development agreement, which is also referred to in the
sale deed, the said purchasers are also governed by the agreement, which
is the main agreement giving rise to the subsequent sale deeds. In support
of his submissions, Shri Asudani has also relied upon a decision rendered
by the Supreme Court in the case of Ameet Lalchand Shah & Ors. Vs.
Rishabh Enterprises & Anr., reported as (2018) 15 SCC 678, paras 28,
29, 34, 35 and 36 wherein, the Supreme Court has also defined the term
„party' as provided under Section 2(h) the Act of 1996.
10] So far as the question of alleged fraud committed by the petitioner
is concerned, it is submitted that the respondent No.1 has entered into the
agreement with open eyes and all the conditions were before them at the
time when the agreement was executed and registered, and thus, it cannot
be said that any of the conditions of the agreement were subsequently
changed, especially when the draft agreement relied upon by the
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respondent is only a photocopy, not signed by any of the parties, and has
no value in the eyes of law. In this regard, counsel has also relied upon a
decision rendered by the Supreme Court in the case of N.N. Global
Mercantile Private Limited Vs. Indo Unique Flame Limited and Ors.
reported as (2021) 4 SCC 379, para 50, and it is submitted that the
aforesaid ground raised by the respondent can be adjudicated upon by the
Arbitrator itself.
11] Shri Asudani has also submitted that otherwise also, the reason for
the ratio of 80:20 in favour of the petitioner is also assigned in the
agreement itself, and has drawn the attention of this Court to para 5 of the
agreement, in which it is stated that the respondent No.1 was getting Rs.1
Crore as non-refundable deposit, and there was a nala adjoining to the
said land, and no construction was permissible within 9 meters of the
same, and other reasons were also assigned justifying the aforesaid ratio.
12] Counsel has also drawn the attention of this Court to the draft
agreement, on which the respondent has relied upon, wherein, only the
ratio has been changed in favour of the respondent, although all the
reasons assigned therein, which are otherwise in favour of the petitioner,
have remained the same. Thus, it is submitted that the aforesaid draft
agreement is apparently, a dubious document on a bare reading the
aforesaid clause itself.
13] On the other hand, Shri Vivek Phadke, learned counsel for the
respondent, has drawn the attention of this Court to Clause 5, regarding
the ratio, which was in favour of the respondent in the draft agreement.
Counsel has submitted that there was no reason for the respondent No.1
to agree to the proportion of 20% of the proceeds only despite providing
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the land for the said project, and otherwise also, normally the ratio for
such deals is 60:40, in favour of the land holders/owners. It is also
submitted that as per the pleadings of the plaint filed in the civil suit, it
has been averred by the respondent No.1 that the aforesaid draft
agreement was recovered from the drawer of the deceased Naresh Soni
who committed suicide due to fraud played on him.
14] In rebuttal, Shri Asudani, learned counsel for the petitioner has
drawn the attention of this Court to the statement of Gyanendra Dubey,
who is the service provider, and had executed the agreement, in which he
has also stated that as per the map, Soni family (respondent no.1) was to
get 20% of the proceeds, whereas, Palash Rajani was to get 80% of the
proceeds. Counsel has also drawn the attention of this Court to the
roznamcha, wherein, only one letter has been recovered from the drawer
of the deceased Naresh Soni, and during the investigation, Police has also
found that the aforesaid suicide note on which the respondent has relied
upon, was not in the handwriting of the deceased Naresh Soni.
15] Shri Amol Shrivastava, learned counsel for the respondent Nos.2 to
58, who are the plot holders has submitted that the matter may be referred
to the arbitration, as the respondents have no objection.
16] Heard counsel for the parties and perused the record.
17] From the record, this Court finds that the dispute between the
petitioner/defendant and respondent No.1/plaintiff has arisen out of a
registered development agreement dated 16.07.2020, the execution of
which is not denied by the plaintiff. However, their contention is that
during the process of registration, the ratio in para 5 has been reversed,
and according to the plaintiff, in the draft agreement, which was prepared
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for the perusal of the parties, the ratio was in favour of the plaintiff as
80:20, and the arbitration clause was also deleted, but to the utter surprise
of the plaintiff, not only the aforesaid ratio was reversed in favour of the
defendant, but the arbitration clause has also not been deleted, as agreed
between the parties. This Court is of the considered opinion that the
contention of the respondent No.1 cannot be accepted, as it is found that
the documents on which the plaintiff is relying upon, is merely a
photocopy of an agreement, it is neither registered, nor it is signed by any
of the parties concerned. In such circumstances, it is difficult to override
the evidentiary value of a registered document as compared to an
unregistered and unsigned document which has no evidentiary value at
all.
18] Even otherwise, on perusal of para 5 of the agreement, this Court
finds that the reasons have been assigned for keeping the ratio of
profit/proceeds in the proportion of 80:20 in favour of the builder, as the
same is on account of various restrictions/constraints faced by the
builder, and it is difficult to assume that on the same
constraints/restrictions which would be faced by the builder, the ratio
would be 80:20 in favour of the land owner.
19] So far as the suicide note left by deceased Naresh Soni is
concerned, the petitioner has also placed on record the handwriting
expert‟s report submitted by the Police, in which it is mentioned that the
aforesaid suicide note is not written by the deceased. Thus, this Court is
of the considered opinion that the finding recording by the learned Judge
of the Trial Court that because a person has committed suicide and an
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FIR has been lodged, it is a case falling under serious fraud, cannot be
sustained in the eyes of law.
20] So far as the contention of the respondent No.1 regarding the fraud
is concerned, reference may be had to the decision rendered by the
Supreme Court in the case of Ameet Lalchand Shah (Supra), the
relevant paras of the same, read as under:-
"34. Under the Act, an arbitration agreement means an agreement which
is enforceable in law and the jurisdiction of the arbitrator is on the basis
of an arbitration clause contained in the arbitration agreement. However,
in a case where the parties alleged that the arbitration agreement is
vitiated on account of fraud, the Court may refuse to refer the parties to
arbitration. In Ayyasamy case [A. Ayyasamy v. A. Paramasivam, (2016)
10 SCC 386 : (2017) 1 SCC (Civ) 79] , this Court held that mere
allegation of fraud is not a ground to nullify the effect of arbitration
agreement between the parties and arbitration clause need not be avoided
and parties can be relegated to arbitration where merely simple
allegations of fraud touched upon internal affairs of parties is levelled.
A.K. Sikri, J. observed that it is only in those cases where the Court finds
that there are serious allegations of fraud which make a virtual case of
criminal offence and where there are complicated allegations of fraud
then it becomes necessary that such complex issues can be decided only
by the civil court on the appreciation of evidence that needs to be
produced. In para 25 of Ayyasamy case [A. Ayyasamy v. A.
Paramasivam, (2016) 10 SCC 386 : (2017) 1 SCC (Civ) 79] , Sikri, J.
held as under : (SCC p. 407)
"25. ... Therefore, the inquiry of the Court, while dealing
with an application under Section 8 of the Act, should be on the
aforesaid aspect viz. whether the nature of dispute is such that it
cannot be referred to arbitration, even if there is an arbitration
agreement between the parties. When the case of fraud is set up
by one of the parties and on that basis that party wants to
wriggle out of that arbitration agreement, a strict and meticulous
inquiry into the allegations of fraud is needed and only when the
Court is satisfied that the allegations are of serious and
complicated nature that it would be more appropriate for the
Court to deal with the subject-matter rather than relegating the
parties to arbitration, then alone such an application under
Section 8 should be rejected."
35. While concurring with Sikri, J., D.Y. Chandrachud, J. pointed out
that the duty of the Court is to impart "sense of business efficacy" to the
commercial transactions pointing out that mere allegations of fraud were
not sufficient to decline to refer the parties to arbitration. In para 48
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of Ayyasamy case [A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386 :
(2017) 1 SCC (Civ) 79] , D.Y. Chandrachud, J. held as under : (SCC p.
417)
"48. The basic principle which must guide judicial decision-
making is that arbitration is essentially a voluntary assumption of an
obligation by contracting parties to resolve their disputes through a
private tribunal. The intent of the parties is expressed in the terms of
their agreement. Where commercial entities and persons of business
enter into such dealings, they do so with a knowledge of the efficacy
of the arbitral process. The commercial understanding is reflected in
the terms of the agreement between the parties. The duty of the court
is to impart to that commercial understanding a sense of business
efficacy."
(emphasis supplied)
36. When we apply the aforesaid principles to the facts of the present
case, as discussed earlier, both parties have consciously proceeded with
the commercial transactions to commission the Photovoltaic Solar Plant at
Dongri, Raksa, District Jhansi, U.P. The first respondent has proceeded to
procure the materials, entered into agreement with Juwi India for
engineering, installation and commissioning and the Sale and Purchase
Agreement with Astonfield, were all the conscious steps taken in the
commercial understanding to commission the Solar Plant at Dongri,
Raksa, District Jhansi, U.P. Even though Juwi India and Astonfield are not
parties to the main agreement -- Equipment Lease Agreement (14-3-
2012), all the agreements/contracts contain clauses referring to the main
agreement. It is the duty of the court to impart the commercial
understanding with a "sense of business efficacy" and not by the mere
averments made in the plaint. The High Court was not right in refusing to
refer the parties on the ground of the allegations of fraud levelled in the
plaint.
(Emphasis Supplied)
21] Thus, tested on the anvil of the aforesaid dictum of the Supreme
Court, it is found that in the case in hand, although the respondent No.1
has tried to set up a case of fraud to wriggle out the arbitration
agreement, but under the prevailing circumstances as aforesaid, where
after execution of the agreement the respondent No.1 has also helped the
petitioner to obtain all the legal permissions from the government
authorities to commence the development work, and was also a
consenting party in the execution of the sale deeds of the plots to the
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various purchasers, this Court has no hesitation to hold that the
arbitration agreement would survive and the plea of fraud can also be
addressed by the arbitrator in the arbitration proceedings.
22] So far as the arbitrability of the dispute in respect of the purchasers
of the plots, who are respondent Nos.2 to 58 is concerned, it is found that
the learned Judge of the Trial Court, while rejecting the application filed
under Section 8 of the Act of 1996 filed by the petitioner, has also
observed that since the respondent Nos.2 to 58 are not the parties to the
agreement between the petitioner and the respondent No.1, and also that
they have not filed any such application for referring the matter to the
arbitrator, on this ground also the petitioners‟ application cannot be
allowed. The learned Judge has distinguished the decision rendered by
the Supreme Court in the case of Chloro Controls India Private Limited
Vs. Severn Trent Water Purification Inc. and Others, reported as (2013)
1 SCC 641, on the ground that the aforesaid decision is in respect of
foreign arbitration.
23] So far as the definition of „party' is concerned, although the same is
provided under Section 2(h) of the Act of 1996, that a „party' means a
party to the arbitration agreement, but it has been the subject matter of
interpretation in various judgments of the Supreme Court. Reference in
this regard may be had to a recent decision rendered by the Supreme
Court in the case of COX & Kings Ltd. Vs. SAP India Private Limited,
reported as (2024) 4 SCC 1, relevant paras of the same, read as under :-
"146. Sections 8, 35, and 45 use the phrase "parties or any person
claiming through or under". The word "or" is used in Sections 8 and 45 as a
disjunctive particle to express an alternative or give a choice between
"parties" or "any person claiming through or under". Consequently, either
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the party to an arbitration agreement or any person claiming through or
under the party can make an application to the judicial authority to refer the
dispute to arbitration. It is in the interest of respecting the intention of the
parties and promoting commercial efficacy, that the above provisions allow
either the party or any person "claiming through or under him" to refer the
disputes to arbitration.
147. On the other hand, Sections 35 and 73 use the phrase "parties and
persons claiming under them". The use of the word "and" in Sections 35
and 73 conveys the idea that "parties" is to be added or taken together with
the subsequent phrase "any person claiming through or under". The above
provisions provide that an arbitration award binds not only the parties but
also all such persons who derive their capacity from the party to the
arbitration agreement. Again, the foundational basis for this provision is
commercial efficacy as it ensures that an arbitral award leads to finality,
such that both the parties and all persons claiming through or under them do
not reagitate the claims. Moreover, the use of the word "and" in Sections 35
and 73 leads to an unmistakable conclusion that under the Arbitration Act,
the concept of a "party" is distinct and different from the concept of
"persons claiming through or under" a party to the arbitration agreement."
(Emphasis Supplied)
24] Thus, going by the aforesaid decision of the Supreme Court, in the
considered opinion of this Court, even if the respondent Nos.2 to 58 have
not filed any application for referring the matter to the arbitrator, it
cannot be a ground to reject the application filed by the
petitioner/defendant no.1 to refer the matter to the arbitrator, and further
considering the fact that when the sale deeds of the defendant Nos.2 to 58
have also been signed by the petitioner and the respondent No.1, in which
it is clearly mentioned that they have been executed pursuant to the
development agreement dated 16.07.2020. Thus, apparently, the rights of
the said purchasers of plots have also emanated from the development
agreement itself, hence the same is also binding on them, and merely
because they are not the signatories of the development agreement, it
cannot be said that the arbitration clause is not binding on them. On the
other hand, Shri Amol Shrivastava, learned counsel for the defendants
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Nos.2 to 58, has also submitted that he has no objection if the matter may
be referred to the arbitration.
25] In view of the same, this Court is of the considered opinion that the
impugned order dated 02.02.2023 cannot be sustained in the eyes of law,
and the same is hereby set aside, and the application filed by the
petitioner under Section 8 of the Act of 1996, is hereby allowed, and the
parties are directed to refer the matter to the arbitration.
26] With the aforesaid M.P. No.1033 of 2023 stands allowed and
disposed of.
A.C. No.56 of 2023.
27] So far as A.C. No.56 of 2023 is concerned, which has also been
filed by the petitioner/applicant Ganga Infratech, under Section 11 (6) of
the Act of 1996, for appointment of Arbitrator, on account of the
aforesaid dispute between the parties, for the reasons assigned
hereinabove, this Court has no difficulty to come to a conclusion that the
matter requires to be referred to the arbitrator, as it is apparent that a
dispute has arisen between the parties viz., the Ganga Infratech and M/s
Johri Land and Finance, relating to the agreement dated 16.07.2020,
which also provides for an arbitration clause No.16, and although the
arbitration clause itself has been disputed by the non-
applicant/respondent No.1 herein, however, needless to say, the learned
Arbitrator can also rule on the applicability/existence of the arbitration
clause.
28] It is also found that the purchasers of the plots who are the
defendants Nos.2 to 58 in the Civil Suit, have not been arrayed as the
non-applicants in this arbitration case (A.C.No.56/2023), and although
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their interest entwined with that of the petitioner/applicant, but even
otherwise, if all or any of them want to participate in the arbitration
proceedings, they/he/she may do so by appearing before the arbitrator
and filing their response to the arbitration application, if necessary.
29] Accordingly, the application stands allowed and this Court proposes
to appoint Hon‟ble Shri Justice A.M. Naik (Former High Court Judge) to
be the Arbitrator for resolving the dispute.
30] Let the declaration in terms of Section 11(8) and 12(1) of the
amended Arbitration Act in the prescribed form as contained in the 6th
Schedule of the Act be obtained from the proposed Arbitrator by the
Principal Registrar of this Court before the next date of hearing.
31] Let the Arbitration Case No.56 of 2023 be listed on 27.02.2025.
(SUBODH ABHYANKAR)
JUDGE
Bahar
