Telangana High Court
M/S. Cresco Housing Projects vs G. Vibby on 22 April, 2024
Author: K. Lakshman
Bench: K. Lakshman
1
HON'BLE SRI JUSTICE K. LAKSHMAN
ARBITRATION APPLICATION NOs.155 OF 2023 AND 15 OF 2024
COMMON ORDER:
Both the applications arise from a common set of facts between
the same parties. Therefore, both the Applications are heard together
and disposed of by way of this common order:-
2. Heard Sri B.Rajeshwar Reddy, learned counsel for the
Applicants in A.A.No.155 of 2023 and respondents 1 and 2 in
A.A.No.15 of 2023, Sri K.Sathakarni, learned counsel for the
Applicant in A.A.No.15 of 2024 and respondent Nos.1 and 4 in
A.A.No.155 of 2023, M/s Unnam Law Firm, learned counsel
appearing for respondent No.2 and Sri Mohd. Moin Ahmed Quadri,
leaned counsel appearing for respondent No.3 in A.A.No.155 of 2023.
3. Mr. G.Vibby and Mr. G.Chakradhar, sons of late G.K.Raju,
represented by their GPA holder Mr. N. Ravinder Reddy, have filed
Arbitration Application vide A.A.No.155 of 2023 against M/s. Cresco
Housing Projects, Mr. Shyam Sunder Baheti, Mr. Dommata Narsimha
Rao and Mr. S. Anil Kumar, seeking appointment of Arbitrator to
adjudicate the disputes between the parties in relation to cancellation
of Development Agreement - cum - General Power of Attorney
(DAGPA), dated 06.02.2017. Likewise, M/s Cresco Housing Projects
represented by its Promoter and working partner Mr. S.Anil Kumar,
has filed A.A.No.15 of 2024 against Mr. G. Vibby and Mr. G.
Chakradhar, seeking appointment of Arbitrator to adjudicate its claims
including but not limited to indemnification, specific performance of
the respondent's/Mr. G. Vibby and Mr. G. Chakradhar duties and
obligations as per the clauses of the DAGPA dated 06.02.2017,
rectification deed and to resolve the said disputes.
4. The said G.K.Raju and G.Vibby, have entered into a
registered DAGPA bearing Doc.No.272 of 2017, dated 06.02.2017
with M/s Cresco Housing Projects and partnership firm represented by
its partners Mr. Shyamsunder Baheti, Mr. D.Narsimha Rao and Mr.
S.Anil Kumar, with regard to development of land admeasuring
Ac.21.31guntas comprising of Ac.09.09guntas in Sy.Nos.317/A,
317/AA/1, 317/AA/2, 317/AA/3, 317/E; Ac.05.17guntas in
Sy.Nos.324/A/2 and 324/E; Ac.6.05guntas in Sy.Nos.324/AA/2A,
324/AA/3A, 324/AA/2, 324/AA/3 and Ac.2.00guntas in
Sy.No.324/E/3 situated in Singapur Village, Shankarpally Mandal,
Ranga Reddy District (for short, 'the subject property'). They have
also entered into supplementary agreements for Phase-1 and Phase-2
on the same day of the said property. Mr. G.Chakradhar had executed
a rectification deed bearing document No.4510 of 2022 dated
27.08.2022 in favour of M/s Cresco Housing Projects represented by
the aforesaid three partners.
(For the sake of convenience, the parties hereinafter are referred
to as arrayed in A.A.No.155 of 2023).
5. As per said DAGPA, 1st respondent/ M/s Cresco Housing
Projects, has to obtain necessary permits and shall complete the
projects within 24 months from the date of obtaining the said permits.
Three months grace period was also agreed therein.
6. According to 1st respondent, it could not complete the said
projects due to pendency of litigation in several suits including
O.S.No.107 of 2015, O.S.No.385 of 2022 and other issues. But
according to the Applicants, the said issues will not come in the way
of respondent in obtaining necessary permits and completing project.
Even then, respondent failed to complete the project in terms of the
said DAGPA and supplementary agreements all dated 06.02.2017 and
therefore, vide legal notice dated 01.07.2023, the Applicants have
cancelled and revoked the said DAGPA and the supplementary
agreements all dated 06.02.2017.
7. According to the Applicants, their father Mr.G.K.Raju, died
on 09.02.2018. In view of the said disputes, they have executed two
unregistered irrevocable GPAs dated 27.07.2020 and also SPAs dated
26.08.2022 in favour of Sri N.Ravinder Reddy. According to the
Applicants, clause No.14.5 of DAGPA, dated 16.02.2017 deals with
governing law and dispute resolution mechanism besides arbitration
clause. Therefore, they have issued legal notice dated 01.07.2023
cancelling the aforesaid DAGPA, supplementary agreements and
proposed the name of Sri Justice L.Narasimha Reddy, Former Chief
Justice of Patna High Court as sole Arbitrator of the disputes.
Respondents have issued replies denying the same.
8. Thus, according to the Applicants, there are disputes between
the Applicants and respondent No.1, with regard to development of
the aforesaid property pursuant to the said DAGPA and
supplementary agreements dated 06.02.2017 which are arbitrable in
nature. But according to the respondent No.1, the Applicants cannot
cancel the registered DAGPA dated 06.02.2017 by way of issuance of
legal notice dated 01.07.2023, it is impermissible. There is no
provision in the said DAGPA to cancel the same. It is a registered
DAGPA and it has to be cancelled by way of another registered
document. Arbitrator cannot go beyond the terms of the said DAGPA
and consider the aspect of cancellation. The irrevocable GPAs dated
27.07.2020 and SPAs dated 26.08.2022 are non-est in terms of
Sections 24, 201 and 202 of the Indian Contract Act,1872. Therefore,
A.A.No.155 of 2023 filed by the Applicants represented by their GPA
holder Sri N.Ravinder Reddy is liable to be dismissed and A.A.No.15
of 2024 filed by M/s Cresco Housing Projects Limited is liable to be
allowed.
9. There is no dispute that Mr. G.K.Raju and his son Mr.
G.Vibby, have executed the aforesaid DAGPA in favour of 1st
respondent with regard to development of aforesaid property. Sri
G.K.Raju, died on 09.02.2018. The said registered DAGPA is in
existence. Therefore, according to the Applicants, since the
respondents failed to comply with the said projects in terms of said
DAGPA within the timelines, they have cancelled the same by way of
issuing legal notice dated 01.07.2023.
10. In the light of the aforesaid submissions, Sections 24, 201
and 202 of the Indian Contract Act are relevant and the same are
extracted below:-
Section 24 of Indian Contract Act, 1872
24.Agreements void, if considerations and objects unlawful in part.--
If any part of a single consideration for one or more objects, or any one
or any part of any one of several considerations for a single object, is
unlawful, the agreement is void.
Section 201 of Indian Contract Act, 1872
201. Termination of agency.--An agency is terminated by the
principal revoking his authority; or by the agent renouncing the
business of the agency; or by the business of the agency being
completed; or by either the principal or agent dying or becoming of
unsound mind; or by the principal being adjudicated an insolvent under
the provisions of any Act for the time being in force for the relief of
insolvent debtors.
Section 202 of Indian Contract Act, 1872
202. Termination of agency, where agent has an interest in subject-
matter.--Where the agent has himself an interest in the property which
forms the subject-matter of the agency, the agency cannot, in the
absence of an express contract, be terminated to the prejudice of such
interest.
11. The said provisions inter alia provides that where the agent
has himself an interest in the property which forms the subject matter
of agency the agency cannot in the absence of an express contract, be
terminated to prejudice such interest.
12. In S. Saktivel (Dead) By Lrs vs M.Venugopal Pillai 1, the
Apex Court held that the terms of registered document can be altered,
rescinded or varied only by subsequent registered document and not
otherwise.
13. In Seth Loon Karan Sethiya vs Ivan E. John 2, the Apex
Court held:
"5. There is hardly any doubt that the power given by the appellant in
favour of the Bank is a power coupled with interest. That is clear both
from the tenor of the document as well as from its terms. Section 202
of the Contract Act provides that where the agent has himself an
interest in the property which forms the subject-matter of the
agency, the agency cannot, in the absence of an express contract,
be terminated to the prejudice of such interest. It is settled law
that where the agency is created for valuable consideration and
authority is given to effectuate a security or to secure interest of
the agent, the authority cannot be revoked."
14. In Thota Ganga Laxmi vs. Government of Andhra
Pradesh 3 the Apex Court held as follows:
"4. In our opinion, there was no need for the appellants to approach the
civil court as the said cancellation deed dated 4-8-2005 as well as
registration of the same was wholly void and non est and can be
ignored altogether. For illustration, if A transfers a piece of land to B
(2000) 7 SCC 104
AIR 1969 SC 73
(2010) 15 SCC 207
by a registered sale deed, then, if it is not disputed that A had the title
to the land, that title passes to B on the registration of the sale deed
(retrospectively from the date of the execution of the same) and B then
becomes the owner of the land. If A wants to subsequently get that
sale deed cancelled, he has to file a civil suit for cancellation or else
he can request B to sell the land back to A but by no stretch of
imagination, can a cancellation deed be executed or registered.
This is unheard of in law."
15. In Dashamma vs State of Telangana 4, the Division Bench
of this Court while discussing unilateral cancellation held that
registration and unilateral cancellation of documents such as
Development Agreement-cum-General of Power of Attorney under
the Registration Act is not permissible in law. The same view was
taken by another Division Bench of this Court in Gaddam Laxmaiah
vs. The Commissioner of and Inspector General, Registration and
Stamps 5.
16. In Bommisetti Vasundhara vs. Pachipulusu
Subramanyam 6, the Madras High Court held that Section 202 of the
Contract Act provides that where the agent has himself an interest in
the property which forms the subject matter of the agency, the agency
cannot, in the absence of an express contract, be terminated to the
2019 SCC Online TS 2474
MANU/TL/0983/2022
MANU/TN/0603/1992
detriment of such interest. In the instant case, the agency is created for
valuable consideration and authority is given to effectuate a security
or to secure interest of the agent.
17. In P.Venkata Ravi Kishore vs. JMR Developers
Pvt.Ltd. 7, Division Bench of this Court held that the Registration Act
and the Rules made thereunder, as held by the Constitutional Courts,
prohibits unilateral cancellation of any document by one party without
the consent of other party. Once an agreement is registered under the
Indian Registration Act, such agreement cannot be cancelled
unilaterally by one party to the detriment of other party even when it
deals with agency and when no clause is incorporated in the registered
document authorizing principal to unilaterally cancel the agency
affecting the interest of the agent.
18. In the light of the law laid down in the aforesaid judgments,
coming to the facts on hand, as discussed supra, Mr. G.K.Raju and his
son G.Vibby, the Applicant No.1 have executed registered DAGPA
bearing Doc.No.272 of 2017 dated 06.02.2017, in favour of 1st
respondent and it should be cancelled only by way of registered
document with the consent of the 1st respondent, otherwise, they have
2022 (5) ALT 382
to file a civil suit. They cannot cancel by way of issuance of legal
notice dated 01.07.2023. Therefore, they cannot execute the aforesaid
irrevocable GPA both dated 24.06.2020 in favour of Sri N.Ravinder
Reddy, with regard to the very same property. In fact, as rightly
contended by learned counsel for the respondent, there is no provision
in the registered DAGPA to cancel the same on the grounds stated by
respondent No.1 in the legal notice dated 01.07.2023 including for
delay in completing the project. Applicants are entitled for rents.
19. The Applicants seeking to appoint arbitrator to adjudicate
the disputes between the Applicant and respondents in relation to
cancellation of the DAGPA executed between the parties on
06.02.2017. In the light of the same, clause No.14.5 of the said
DAGPA is relevant and the same is extracted below:-
Clause 14.5 of the DAGPA is extracted below:
"This Agreement shall be governed and construed in accordance with
the laws of India (jurisdiction of the relevant court in the City of
Hyderabad, Telangana) and shall benefit and be binding upon the
parties hereto and their respective successors and assigns. In the event
of a dispute arising out of or pertaining to this Agreement, or under
this agreement or in the interpretation of any of the terms and
conditions of this Agreement the same shall be referred to arbitration.
The arbitration shall be conducted by an arbitral tribunal consisting of
a sole-arbitrator mutually appointed by both Parties in accordance with
the Arbitration and Conciliation Act. 1996. The language of the
arbitration shall be English. The venue of arbitration shall be
Hyderabad, Telangana. Each of the Parties submits 10 the exclusive
jurisdiction of Courts at Hyderabad, Telangana over any matter
pertaining to seeking interim relief or enforcement of the arbitration
award or any other matter that cannot be referred to arbitration under
applicable law."
Cancellation is not part of the same. Therefore, Arbitrator cannot travel
beyond the scope of the aforesaid arbitral clause in the agreement.
20. In Union of India vs. Bharat Enterprise 8, the Apex Court held
that the Arbitrator cannot travel outside contractual provision and pass an
award. The same principle was laid down by the Apex Court in Steel
Authority of India Limited vs. J.C.Budharaja 9.
21. Emaar india Ltd. Vs. Tarun Aggarwal Projects 10, the Apex
Court held that the Court at the reference stage itself can go into non-
arbitrability of the disputes.
22. In Victory Iron Works Ltd. Vs. Jitendra Lohia 11, the Apex
Court held that the claim cannot be beyond the agreement.
23. In PSA Sical Terminals Pvt.Ltd. vs. the Board of
Trustees of V.O.Chidambranar Port Trust, Tuticorin 12, the Apex
2023/INSC/277
AIR 1999 SC 3275
2022 SCC OnLine SC 1328
2023/INSC/230
Court held that the jurisdiction of the Arbitrator being confined to the
four corners of the agreement, he can only pass such an order which
may be the subject matter of reference. The Arbitral Tribunal is not a
Court of law. Its orders are not judicial orders. Its functions are not
judicial functions. It cannot exercise its powers ex debito justitiae. The
jurisdiction of the arbitrator being confined to the four corners of the
agreement. He can only pass such an order which may be the subject
matter of reference.
24. In the light of the same, as discussed supra, Clause No.14.5
of the DAGPA, dated 06.02.2017 deals with the arbitration clause and
dispute resolution mechanism. The arbitrator has to confine to the
same.
25. Learned counsel for the Applicant has placed reliance on
the following judgments:-
1. M/s Asian Avenues Pvt.Ltd vs. Sri Syed Shoukat Hussain 13
2. Sushma Shivkumar Daga vs. Madhurkumar Ramkrishnaji
Bajaj 14
3. Epsilon Eduventures Private Limited vs. Nikhil Goel 15
2021/INSC/265
2023 AIR (SC) 2185
2023 LiveLaw (SC) 984
4. M/s Sree Durga Estates vs. J.A.S.Padmaja 16
The facts of the said cases are altogether different to the facts of the present
case since the DAGPA in the case on hand is a registered document,
whereas the same was cancelled by way of issuance of legal notice, dated
01.07.2023 which is impermissible in law.
26. As discussed supra, the Applicants in A.A.No.155 of 2023 i.e.
owners of the subject property represented by Sri N.Ravinder Reddy, GPA
holder sought appointment of Arbitrator and whereas, 1st respondent also
sought appointment of an Arbitrator to adjudicate the disputes between the
owners and itself.
27. Thus, admittedly there are disputes between the Applicants and
respondents with regard to the aforesaid DAGPA, dated 06.02.2017 and the
same are arbitrable to be adjudicated by an Arbitrator.
28. During the course of arguments, it is brought to the notice of this
Court about filing of the suit by the developer against Sri M.Ravinder
Reddy, and obtaining an order and also filing of an Application under
Section 9 of the Act, vide COP Nos.6 and 7 of 2021 and also COMCA
Nos.19 and 20 of 2022. The aforesaid facts would reveal that there are
2022 SCC OnLine Del 1308
COMCA No.34 of 2022, dated 10.02.2023 of High Court of Telangana, at
Hyderabad.
disputes between the Applicants and respondents which are arbitrable in
nature.
29. During the course of arguments, it is brought to the notice of this
Court that M/s Cresco Housing Projects has entered into MOU dated
05.09.2019 with PVR Developers India Private Limited. According to the
Applicants, the 1st respondent has no power to execute the said MOU. It is
an arbitrable issue and this Court cannot go into the same. At the reference
stage, being referral Court, under Section 11(6) of the Act, this Court has to
see as to the existence of agreement and arbitration clause as held by the
Apex Court in Vidya Drolia v. Durga Trading Corporation 17,
30. It is also brought to the notice of this Court that there are
disputes between the partners of M/s Cresco Housing Projects.
According to Sri K.Sathakarni, learned counsel for 1st respondent, the
same are with regard to rendition of accounts and they are nothing to
do with the present applications. The said fact is confirmed by M/s
Unnam Law Firm, learned counsel appearing for respondent No.2 and
Sri Mohd. Moin Ahmed Quadri, learned counsel appearing for
respondent No.3 in A.A.No.155 of 2023.
(2021) 2 SCC 1.
31. As discussed supra, during the subsistence of the said registered
DAGPA bearing Doc.No.272 of 2017, dated 06.02.2017, Applicants cannot
cancel the same by way of issuance of legal notice dated 01.07.2023 and
execute the aforesaid two irrevocable GPAs dated 27.07.2020 and SPAs
dated 26.08.2022 in favour of Mr. N.Ravinder Reddy, the same are non-est
in the eye of law. On the strength of the same, Mr. N.Ravinder Reddy,
cannot represent the owners and file arbitration application vide
A.A.No.155 of 2023.
32. In the light of the above discussion, A.A.No.155 of 2023 filed by the
Applicants represented by their GPA Holder Mr. Ravinder Reddy, is liable to be
dismissed and accordingly, dismissed. Whereas, A.A.No.15 of 2024 filed by M/s
Cresco Housing Projects against the respondents Mr.G.Vibby and
Mr.G.Chakradhar is liable to be allowed and accordingly allowed. Accordingly,
Sri Justice M. Seetharama Murti, Former Judge of High Court of
Andhra Pradesh at Amaravati. is appointed as sole Arbitrator to
adjudicate the disputes between the parties. The parties are at liberty to take
all the defences before the learned sole Arbitrator.
Consequently, miscellaneous petitions, pending if any, shall stand
closed.
_________________
K. LAKSHMAN, J
Date:22.04.2024
vvr
