Telangana High Court
Mr. Vikram Takru vs M/S Sandhya Estate And Constructions ... on 29 December, 2023
THE HONOURABLE SRI JUSTICE J. SREENIVAS RAO
+ ARBITRATION APPLICATION No.188 of 2022
% Dated 29.12.2023
# Mr. Vikram Takru
S/o.Vijay Kumar Takru,
Aged: about 52 years,
Occ: Software Professional,
R/o.6027, Gleeneagles Circle,
San Jose, CA 95138, USA and others
....Applicants
VERSUS
$ M/s.Sandhya Estate and Constructions Pvt. Ltd.,
(earlier known as M/s.Sandhya Hotels Private Limited)
A Company registered under the Companies Act 1956
Having its registered office at Sy.No.86, 87, 90, 91,
Sandhya Techno-I,
Opp: sunshine Hospital Raidurg Main Road,
Hyderabad T.G. and another.
... Respondents
! Counsel for applicants : Sri Keerthi Arun Kumar
^ Counsel for Respondents :
< GIST:
> HEAD NOTE:
? CITATIONS:
1. 2020 (12) SCC 767
2. Curative Petition © No.44 of 2023 (2023INSC1066)
3. 2023 (7) SCC 1
4. (2011) 14 SCC 66
2
JSR, J
AA.No.188 of 2022
THE HONOURABLEJUSTICE SRI J. SREENIVASRAO
ARB.APPL.No.188 OF 2022
ORDER:
The applicants filed this application under Section 11(6) of
the Arbitration and Conciliation Act, 1996, (for short 'the Act') to
appoint a sole arbitrator to adjudicate the disputes and
differences between the Applicants and the Respondent in
respect of Letter of intent dated19.01.2018.
2. Factual matrix:
2.1. The applicants submit that they are software
professionals and, with an intention to establish a company with
Software development facilities in the Hi-tech City at Hyderabad,
have approached respondent No.1 for purchase of Unit No.504
on Fifth floor with a super built up area of 25,898.81 Sq. feet
(Built up area of 19,424.60sft.&Common area of 6,474.21sft.)
along with twenty five car parking slots in Cellar 3 of the
proposed building namely "SANDYA TECHNO-I" office building
complex, along with undivided share of land equivalent to 310.78
Sq yards i.e., 259.851 Sq.meters out of 15,355Sq.Yards
('Scheduled Property' for brevity) for a total sale consideration of
Rs.15,79,82,741/-.
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2.2. The applicants further submit that respondent No.1 is
a private limited company and it is represented by respondent
No.2, who is the Managing Director. Respondent No.2
represented that respondent No.1 is the absolute owner and
possessor of the property admeasuring 15,355 Sq.yards (Ac.3-
06gts) from out of total land admeasuring Ac.4-02.2 guntas in
Sy.No.86, 87, 91/2(part) and 92 situated at Rayadurga,
Panmaktha, Serilingampally, R.R. District and have obtained
permission for construction of office-cum-commercial multi-
storied complexes. The applicants intended to purchase the said
schedule property for a total sale consideration of
Rs.15,79,82,741/-.
2.3. Applicants further stated that initially a Letter of
intent was executed on 19.01.2018 and subsequently an
agreement of sale dated 16.04.2018 was executed. As per the
terms and conditions of the agreement of sale, the respondents
are under the obligation to hand over fully developed office unit,
as mentioned in the specifications in the agreement of sale to the
applicants. Respondents have agreed to hand over the same to
the applicants by 31.07.2018. Similarly, the applicants were
under obligation to make payments of the sale consideration in
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stage-wise/phased manner as described in Clause No.2 of
agreement of sale. In case of delay in making payment of sale
consideration by the applicants, interest @18% per annum was
to be levied which is mentioned in Clause No.2(c), upto a period
of three months from the due date.
2.4. Applicants further stated that as on May, 2018, they
have paid an amount of Rs.11,24,14,402/- under various heads.
Respondents have failed to comply with the terms and conditions
of the agreement of sale and failed to handover the possession of
the premises,i.e., fully developed office to the applicants, and they
are jointly liable to pay liquidated damages of an amount of
Rs.12,85,22,844/- to the applicants in terms of the agreement
of sale. Though the applicants have made several requests and
demands for handing over the possession of the scheduled
property, the respondents have failed to complete the
construction and abandoned the project. Applicants have
addressed a letter dated 16.09.2018 brining to the notice of the
respondents about all the shortfalls which they have noticed in
the building and made a demand for completion of the said
works. Though respondents received the said letter, they have
not carried out the said works and the applicants have
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constrained to issue legal notice dated15.11.2018 to the
respondents calling upon them to execute sale deed and make
payment of liquidated damages as agreed under the
agreement of sale. As the respondents failed to honour the
terms and conditions of the agreement, applicants were
constrained to file a Consumer Complaint before the
Telangana State Consumer Disputes Redressal Commission,
Hyderbad vide C.C.(Sr) No.375 of 2019 on 08.02.2019 and the
said complaint was returned on 04.04.2019 on the ground of
pecuniary jurisdiction.
2.5. The applicants further stated that on 13.11.2019
they got issued another legal notice duly called upon the
respondents to complete the pending works and to hand over the
possession of the property by executing registered sale deed by
taking balance sale consideration, for which there was no
response from the respondents. In spite of repeated requests,
notice etc., of the applicants, the respondents have neither
issued any reply nor followed the terms and conditions of the
agreement. As the respondents have committed breach of the
terms of agreement of sale, the applicants have got issued notice
dated 16.08.2022 through their counsel invoking the arbitration clause
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of Letter of intent to the respondents to give consent for appointment of
sole arbitrator for adjudication of the differences and disputes between
them. In the said notice, the applicants mentioned three high court
retired judges. The said notice was returned with an endorsement that
"No such addressee in this plot" and the other was returned as
"Unclaimed returned to sender". Hence, the applicants filed the present
application.
3. Respondent Nos.1 and 2 filed preliminary counter-affidavit
contending that the application filed by the applicants for
seeking appointment of sole arbitrator to adjudicate the
purported disputes between the parties arising under Letter of
intent dated 19.01.2018 is not maintainable under law, as it is
no longer res integra and the Letter of intent is not an
enforceable document. The Letter of intent merely expresses an
intention to enter into a contract. There was no binding legal
relationship between the applicants and the respondents. In the
absence of a valid enforceable agreement. The applicants are not
entitled to seek the relief sought in this application and the same
is not maintainable and liable to be dismissed.
3.1. It is further stated that the agreement of sale dated
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Nil, April 2018 is not a registered document and requisite stamp
duty is not paid. Therefore, unless and until such deficit stamp
duty is paid through proper impounding procedure as per the
provisions of the Indian Stamp Act, 1899 (herein after called
brevity, 'the Act'), the said document cannot be taken into
consideration. It is stated that applicant No.11 viz., Mr. Sohan
Ghanathe has cancelled the agreement of sale with the
respondents vide cancellation of agreement of sale dated
16.01.2023. Therefore, applicant No.11 is unequivocally given
up all the claims in relation to the subject matter of the
application. By virtue of the cancellation of agreement of sale by
one of the purchasers, impinges on the validity of the agreement
of sale and renders it unenforceable.
4. Heard Sri Keerthi Arun Kumar, learned counsel for the
applicants, and Smt. A. Satyasiri, learned counsel for the
respondents.
5. Learned counsel for the applicants submits that the
applicants intend to purchase the scheduled property for the
total sale consideration of Rs.15,79,82,741/-.Accordingly, a
Letter of intent was executed between the parties on 19.01.2018
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and subsequently an agreement of sale was executed on Nil-04-
2018. As per the terms and conditions of the agreement of sale,
the respondents have to complete the construction of building
along with all fixtures and fittings and handover fully developed
office to the applicants by 31.07.2018. As per the terms and
conditions of the agreement of sale, the applicants have paid an
amount of Rs.11,24,14,402/-more than the amount as agreed,
however the respondents have failed to complete the work and to
handover the premises within the stipulated time. As per the
terms and conditions of the agreement of sale, the respondents
have to pay penalty of total amount of Rs.12,85,22,844/- as on
15.08.2022.
5.1. He further contended that the applicants have addressed a
letter to respondents on 16.09.2018 pointing out all the facts and
demanded the respondents for completion of the works. In spite
of the same, respondents have not taken any steps to complete
the works and not paid liquidating damages to the applicants in
terms of agreement of sale. At that stage the applicants have got
issued legal notice on 16.08.2022 invoking the arbitration clause
No.9 of the Letter of intent dated 19.01.2018 informing them to
give their consent for appointment of sole arbitrator by choosing
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any one arbitrator out of three arbitrators to dissolve the
disputes between them and the notice in respect of respondent
No.1 was returned with a postal endorsement that no such
address and the notice in respect of respondent No.2 returned
with an endorsement that unclaimed.
5.2 He vechemently contended that the objections raised by
respondents that whether the letter of intent dated 19-01-2018
and consequential agreement of sale dated Nil.04.2018are
properly stamped as per the provisions of the Act,or not and
required to pay any deficit stamp duty, the said issues can be
gone into by the arbitral tribunal and the arbitral tribunal is
having power to sent the said document to the Registrar for
impounding the document by paying deficit stamp duty and the
same is curable defect. He also contended that arbitration
agreement need not be in any particular form and basing on the
Letter of intent dated 19.01.2018, the applicants are entitled to
seek appointment of arbitrator through the said document. In
support of his contention, he relied upon the judgment of the
Hon'ble Apex Court in Mahanagar Telephone Nigam Limited
JSR, J
vs. Canara Bank and others 1.
6. Per contra, Smt. Satyasiri, learned counsel appearing on
behalf of respondents vehemently contended that the
applicants filed this arbitration application basing on the
Letter of intent dated 19.01.2018 and the said document
cannot be treated as agreement between the parties. Hence
the arbitration application filed by the applicants for seeking
appointment of sole arbitrator invoking the provisions of the
Act is not maintainable. She further contends that the
agreement of sale dated Nil.04.2018 is required stamp duty and
registration and the said document cannot be taken into
consideration unless and until the applicants pay deficit stamp
duty by impounding the document under the provisions of the
Act.
6.1. She further contended that applicant No.11-Mr.Sohan
Ganathe cancelled the agreement of sale with the respondents
vide cancellation of agreement of sale dated 16.01.2023 and has
given up unequivocally all the claims in relation to arbitration
application and he has taken an amount of Rs.17,00,000/- from
respondent No.1. Hence, the arbitration application filed by the
1 2020 (12) SCC 767
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applicants is not maintainable.
7. Having considered the rival submissions made by
respective parties and upon perusal of the material available on
record, the following points arise for consideration.
(i) Whether the applicants are entitled to seek
appointment of sole arbitrator basing upon the
Letter of intent dated 19.01.2018 invoking the
provisions of Section 11(6) of the Act?
(ii) When the said agreement of sale dated
Nil.04.2018 is cancelled by one of the applicant,
the other applicants can seek any relief basing
upon the said agreement of sale?
(iii) To what relief.
8. It is an undisputed fact that the applicants and respondents have
entered into a Letter of intent on 19.01.2018, followed by an Agreement
of Sale dated Nil.04.2018, for the purchase of a property for a total
consideration of Rs.15,79,82,741/-. Pursuant to the same, applicants
made certain payments. The grievance of the applicants is that the
respondents failed to fulfill the terms and conditions outlined in the
Letter of intent and Agreement of Sale and for non-compliance of the
terms and conditions, they got issued legal notices on 15.11.2018 and
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13.11.2019 to the respondents claiming penalties and demanding for
completion of works and also handover the possession of the property
by executing a registered sale deed. In spite of the same, respondents
took no action. Records further discloses that on 16.08.2022, the
applicants issued a notice invoking Section 21 of the Act seeking
appointment of a sole arbitrator basing on the arbitration clause No.9 in
the Letter of intent dated 19.01.2018. The notices were returned
indicating that the given addresses were nonexistent and one notice
returned with postal endorsement 'unclaimed'.
9. The main objection of the respondents is that Letter of intent is
only expresses an intention to enter into agreement and basing on the
said document, the applicants are not entitled to seek appointment of
arbitrator, as the document is not enforceable document.
10. It is very much relevant to place on record that arbitration
agreement need not to be in particular format. Provision of Section
7(4)(d) of Arbitration and Conciliation Amended Act 2015 reads as
follows:
d) An exchange of letters, telex, telegrams or other means of
telecommunication [including communication through
electronic means] which provide a record of the agreement; or
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11. In Mahanagar Telephone Nigam Limited Vs. Canara Bank,(3
supra) the Hon'ble Apex Court specifically held that the arbitration
agreement as per the provisions of amended act, communication
through arbitration agreement can be derived from exchange of letter,
telex, telegram or other means of communication including through
electronic means.
12. It is an undisputed fact that the applicants have entered
agreement of sale with respondents to purchase the scheduled property
and paid certain amounts and disputes arose between the parties. As
per the terms and conditions of the Letter of intent as well as agreement
of sale, if any dispute arises between the parties, they have to dissolve
the said dispute through arbitration. Pursuant to the Letter of intent,
the parties have entered into agreement of sale dated Nil.04.2018,
wherein Clause 2(f)(b) says as follows:
"The terms agreed to into letter of intent dated signed by the
vendor and purchaser will continue to remain in effect to that
extent that is not contrary to this agreement of sale to show the
intent of the parties".
13. In view of the same, terms and conditions mentioned in the Letter
of intent and consequential agreement of sale are binding upon the
parties and the application filed by the applicants invoking arbitration
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clause for seeking appointment of arbitrator is maintainable under
section 11(6) of the Act. It is relevant to extract the arbitration clause as
follows:
"9. If there is any dispute arising out of these head of terms, including
with respect to the validity or enforceability of the same, the party shall
refer the same to arbitration under the Arbitration And Conciliation
Act,1996.The arbitral panel shall comprise of a sole arbitrator to be
mutual agreed between the parties. The venue of arbitration shall be
Hyderabad and the language shall be English".
14. Insofar as the other objection raised by the respondents is
concerned, applicant No.11 cancelled the agreement of sale by receiving
an amount of Rs.17 lakhs from the respondents and executed
cancellation of agreement of sale dated 16.01.2023 and by virtue of the
same, the applicants are not entitled to seek the appointment of
arbitrator. The cancellation agreement is applicable to applicant No.11
only and the same is not binding upon other applicants.
15. In respect of the other objection raised by respondent Nos.1 and 2
that agreement of sale dated Nil April, 2018 is not properly stamped as
per the provisions of the Stamps Act and the applicants cannot seek
appointment of arbitrator until the deficit stamp duty is paid is
concerned, the said objection can be investigated/verified by the arbitral
tribunal and arbitrator is having power to send the said document to the
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Registrar for impounding the same by paying deficit stamp duty.
16. It is very much relevant to place on record that Seven-Bench
Judges of the Hon'ble Apex Court In M/s Bhaskar Raju and Brothers
and Anr v. M/s Dharmaratnakara Rai Bahadur Arcot Narainswamy
Mudaliar Chattram & Other Charities and Ors 2, overruling the earlier
judgments of N. N. Gobal mercantile (p) ltd. V. Indo Unique Flame
ltd. 3 and SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., 4
holding that Non-stamping or inadequate stamping is a curable defect
and an objection as to stamping does not fall for determination under
Section 8 or 11 of the Arbitration Act. The concerned court must
examine whether the arbitration agreement is exist between the parties
or not and all other objections and disputes including stamping of
agreement falls within the ambit of arbitral tribunal only.
17. In view of the foregoing reasons as well as the law laid down by
Hon'ble Apex Court, Sri Justice Challa Kodandaram, Plot No.68, Road
No.71, Phase-III, Jubilee Hills, Hyderabad-33, is appointed as
Arbitrator, who will adjudicate the dispute between the parties arising
out of the Letter of intent dated 19.01.2018 followed by the agreement of
sale dated Nil.Apirl, 2018.
Curative Petition (C) No. 44 of 2023 (2023INSC1066)
3 2023 (7) SCC 1
4 (2011) 14 SCC 66
JSR, J
18. The learned Arbitrator shall fix his own remuneration upon
deliberation and consultation with the parties. He shall also estimate
the cost and expenses for the secretarial assistance and other incidental
expenditure of the arbitration proceedings. The parties will bear the
expenses of the arbitration proceedings in equal share.
19. Accordingly, the Arbitration Application is allowed. No costs.
As a sequel thereto, miscellaneous applications, if any, pending in
this Arbitration Application, shall stand closed.
______________________
J. SREENIVAS RAO, J
Date: 29.12.2023
L.R. Copy to be marked - Yes.
mar
