Telangana High Court
Akshra Townships Private Limited vs L.Renuka on 2 January, 2024
Author: B. Vijaysen Reddy
Bench: B. Vijaysen Reddy
THE HON'BLE SRI JUSTICE B. VIJAYSEN REDDY
ARBITRATION APPLICATION No.61 of 2021
ORDER:
This application is filed under Section 11(6) of the Arbitration
and Conciliation Act, 1996 (for short 'the Act') to appoint an
arbitrator to resolve the disputes and claims between the applicant
and the respondents in terms of Clause 12 of the Development
Agreement dated 01.01.2018 and Clause 13 of the Development
Agreement dated 22.12.2018 entered into between the parties.
2. It is stated that the applicant is a company registered under
the Companies Act and engaged in real estate business, having
registered office at Warangal and branch offices in different areas.
One of its branch offices is in Siricilla. The applicant executed
several projects and completed ventures under the name and style
of "Akshara Township Private Limited".
3. It is stated that the respondent Nos.1 to 3, having come to
know about the successful projects of the applicant, approached the
applicant and made a proposal to give the land admeasuring
Ac.36.00 situated at Vemulavada for development to the applicant.
It was represented by the respondents that the owners of the said
land, Sri Govrineni Rajeshwar Rao and others and others, expressed
their interest to give their land for development and the 2
respondents No.1 to 3 had been dealing with the said owners.
The respondent No.1 is the wife of respondent No.3 and the
respondent No.3 had been dealing with the affairs of the
respondent No.1.
4. It is stated that with the above understanding,
the respondent No.2, at the first instance, with the oral consent of
the respondents No.1 and 3, entered into Preliminary Agreement
cum Memorandum of Understanding on 09.12.2017 with the
applicant in respect of the land admeasuring Ac.36.00 situated at
Vemulawada for its development i.e. conversion into house site
plots. In furtherance of the above Memorandum of Understanding
dated 09.12.2017, a separate document styled as "Preliminary
Agreement for Development of Property" dated 01.01.2018 was
executed between the respondents No.1 and 2 and the applicant to
develop the land admeasuring Ac.35.32 guntas (land available on
spot measurement) situated at Tippapur village, Vemulawada Urban
Mandal, Rajanna Siricilla District Telangana. As per the terms of the
Preliminary Agreement dated 01.01.2018, the respondents No.1
and 2 agreed to get the above mentioned property into registered
in their names and later, to execute a registered Development
Agreement with the applicant. The applicant and the respondents
No.1 to 3 have also finalized the proposed Approved Layout Plan of
the property.
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5. It is submitted that the respondents No.1 to 3 informed the
applicant that the pattedars i.e. Govrineni Rajeshwer Rao and
others executed registered Sale Deed vide Document
No.8056/2018 dated 01.11.2018 in respect of land to an extent of
Ac.12.00 guntas in Sy.No.255/9, Sy.No.273/C/అ, Sy.No.273/C/ఆ,
Sy.No.274/1/A, Sy.No.274/1/B1 and Sy.No.274/1/B2 situated at
Tippapur Village, in favour of the respondents No.2 to 5. It was
informed to the applicant that the pattedars would execute another
registered sale deed in favour of the respondents in near future.
That believing the representation of the respondents, the applicant
sent a Draft Development Deed to the respondent No.3, which was
approved, finalized and registered as Development agreement cum
Irrevocable General Power of Attorney executed by the respondents
No.2 to 5 vide document No.9323/2018 dated 22.12.2018 in
respect of Ac.12.00 guntas at Vemulawada, in favour of the
applicant.
6. It is submitted that as per the terms of the development
agreement dated 22.12.2018, if the applicant fails to complete the
work within the stipulated time, the respondents No.2 to 5 have to
complete the work and the balance amount will be paid to the
applicant by them. Further, it was mentioned in page No.7 at para
No.4 of the development agreement dated 22.12.2018 that the
respondents No.2 to 5 shall provide road access to the schedule 4
property covered therein from out of the remaining land
admeasuring Ac.23-22 guntas to enable the applicant to complete
the project. It was made clear that unless and until the respondents
No.2 to 5 carve out a road, the applicant cannot complete its
project as envisaged in development agreement dated 22.12.2018.
7. It is submitted that the applicant has been ready and willing
to perform its obligations covered under Preliminary Agreement
dated 01.01.2018 and development agreement dated 22.12.2018.
But the respondents No.1 to 5, on one pretext or the other,
have failed to perform their obligations in providing road access to
the schedule property covered under development agreement dated
22.12.2018. The applicant issued several e-mails to the respondent
No.3 to provide road access but there is no response from the
respondent No.3.
8. It is submitted that while the matter stood thus,
the applicant came to know that the original pattedars/owners have
executed different sale deeds to an extent Ac.23.22 guntas in the
following manner:
A. The Registered Sale Deed vide Document No. 2906/2019 dated : 29-03-2019 to an extent of Ac 8.00 guntas situated at Vemulawada, in which the respondents No 3 and respondent No 5 are shown as the purchasers. B. The Registered Sale Deed vide document number 7110/2019 dated : 03-08-2019 to an extent of Ac 3.33 5
guntas situated at Vemulawada, in which the respondents No 3 and Respondent No. 9 are shown as the purchasers.
C. The Registered Sale Deed vide document number 7111/2019 dated : 03-08-2019 to an extent of Ac 11.39 guntas situated at Vemulawada, in which the respondents No 3,Respondent No.6 to 8 were shown as the purchasers.
9. It is stated that thereafter, the respondents No.3, 5, 7 and 8
have executed a registered Development Agreement cum General
Power of Attorney to M/s NRR Infra i.e. respondents No.5 and 10
for development of land to an extent of Ac.19.32 guntas vide
document No.7766/2019 dated 23.08.2019, which is breach of
development agreement dated 01.01.2018 and 22-12-2018.
The execution of the development agreement in favour of the
respondents No.5 and 10 would hamper the project of development
of land i.e. conversion to house sites for total extent of Ac 35.32
guntas.
10. It is stated that the respondents No.2 to 5 have issued a
notice to the applicant on 14.12.2019 alleging non-completion of
the project and invoked clause 13 of agreement dated 22.12.2018
and sought consent for appointment of sole arbitrator.
On 05.02.2020, the applicant sent a reply to the respondents No.2
to 5 by not accepting the name suggested by the respondents No. 2
to 5 and suggested the name of another person to act as sole 6
arbitrator to resolve dispute and differences. Later, on 04.12.2020,
the applicant sent a notice to the respondents seeking consent of
named Arbitrator invoking the arbitration clause to resolve disputes
and other differences between the applicant and the respondents.
The applicant had also invoked Section 9 of Act for interim relief as
the respondents did not come forward to appoint an arbitrator.
In the circumstances, the instant application is filed for
appointment of arbitrator as per clause 12 of the development
agreement dated 01.01.2018 and clause 13 of the development
agreement dated 22.12.2018.
11. In the counter filed by the respondents No.1 to 3, inter alia,
it is stated that the agreement dated 01.01.2018 had no nexus with
the preliminary agreement dated 09.02.2017. It was denied that
the respondents No.1 to 3 introduced themselves and proposed for
development of land claiming that its owners, Govrineni Rajeshwer
Rao and others, intended to develop the same and the respondent
No.3 is dealing with the said owners. As per clause 19 of the
development agreement dated 22.12.2018, the said agreement
supersedes all other agreements and understandings between the
parties or any of them, as such, the parties to the preliminary
agreement, more particularly, the applicant was conscious of the
fact that the preliminary agreement dated 01.01.2018 was
superseded by development agreement dated 22.12.2018 and 7
consequently, the preliminary agreement would no longer be valid.
As such, invocation of arbitration clause under the superseded
preliminary agreement is invalid. The applicant did not initiate any
steps for developing the schedule property. The agreement of sale
dated 22.10.2017 entered into between the owners of the land and
the respondents No.1 and 2 could not be fructified for certain
unforeseen circumstances.
12. It is admitted that respondents No.2 to 5 have issued notices
dated 14.12.2019 invoking clause 13 of the development
agreement dated 22.12.2018 requesting the applicant to give
consent to the name suggested by them to be appointed as an
arbitrator to adjudicate the disputes between the parties and that
and that the applicant gave reply on 05.02.2020 refusing to give
consent and in turn, proposed to appoint one Md. Habeeb Ali,
Advocate, as an arbitrator. It is submitted that the present
application filed seeking appointment of arbitrator under two
different agreements, which are unconnected, is liable to be
rejected.
13. The respondent No.2 adopted the counter of respondents
No.1 and 3. In the counter filed by the respondents No.4 and 5, it is
stated that they are not parties to the agreement dated 01.01.2018
and there was no breach on the part of the respondents No.4 and 5 8
in performing the terms of the agreement dated 22.12.2018.
In the counter filed by the respondents No.6, 8 and 9, it is stated
that they are unnecessarily arraigned as respondents in the instant
application and they are not aware of the purported agreements
dated 01.01.2018 and 22.12.2018. In the counter of respondents
No.7 and 10, it is stated that they are not parties to the
agreements dated 01.01.2018 and 22.12.2018 and they are not
binding on them.
14. Mr. Alladi Ravinder, learned senior counsel appearing for the
applicant, submitted that the preliminary agreement dated
01.01.2018 and development agreement dated 22.12.2018 are
binding on the respondents. The respondents No.2 to 5 are parties
to the development agreement dated 22.12.2018 and a refundable
deposit of Rs.1.5 crores was deposited at the time of preliminary
agreement dated 01.01.2018. The preliminary agreement was
entered in favour of the applicant in respect of Ac.32.35 guntas of
land with an understanding that the respondents No.1 and 2 would
complete the sale transactions and executed development
agreements in favour of the applicant from time to time. As sale
deed was finalized for an extent of Ac.12.00 guntas,
the development agreement dated 22.12.2018 was entered into for
Ac.12.00 guntas by the respondents No.2 and 3. The respondent 9
No.3 is the husband of the respondent No.1 and had been dealing
on her behalf.
15. Mr. M. Srinivas Reddy, learned counsel appearing for the
respondents No.1 and 3, submitted that the respondent No.3 is not
a party to the agreement dated 01.01.2018 and it was entered into
only by the respondents No.1 and 2. The development agreement
dated 22.12.2018 was signed by four parties (respondents No.2 to
5) and the respondent No.2 is common to the two agreements.
However, the remaining parties are not signatories in two
agreements. As per clause 19 of the development agreement dated
22.12.2018, the agreement dated 01.01.2018 stood novated.
16. Learned counsel for the respondents No.4 and 5, while
reiterating the submissions made by the respondents No.1 and 3,
submitted that the respondents No.4 and 5 are not parties to the
agreement dated 01.01.2018. The respondents No.7 and 10 are
subsequent purchasers and developers of different extents of land.
Further, the respondents No.6, 8 and 9 are not parties to both the
agreements.
17. In reply to the arguments of the learned counsel for the
respondents, learned senior counsel for the petitioner submitted
that the agreement dated 01.01.2018 is the main agreement.
The development agreement dated 22.12.2018 is made in 10
pursuance of the agreement dated 01.01.2018. Both the
agreements are interconnected. By applying the doctrine of group
companies, both the agreements are binding on the respondents.
The respondents No.4 and 5 consented for appointment of
arbitrator and consented for initiating the arbitration proceedings.
18. Heard learned senior counsel for the petitioner and learned
counsel for the respondents. Perused the material on record.
19. Clause 12 of the preliminary agreement dated 01.01.2018
provides for arbitration in case of dispute on differences arising
between the parties. The respondents No.1 and 2 have entered into
preliminary agreement dated 01.01.2018 with the applicant in
respect of an extent of Ac.32.35 guntas of land situated in
Sy.No.251 (Ac.7.31 guntas), Sy.No.253 (Ac.8.22 guntas),
Sy.No.254 (Ac.6.28 guntas), Sy.No.255 (Ac.2.23 guntas),
Sy.No.273 (Ac.4.16 guntas) and Sy.No.274 (Ac.5.32 guntas) of
Tippapur Village, Vemulawada Urban Mandal, Rajanna Sircilla
District. As per Clause B of the said agreement, the respondents
No.1 and 2 represented that they are going to get the sale deeds
registered in their favour from the site owners of the schedule
property. It is not in dispute that in furtherance of the preliminary
agreement dated 01.01.2018, the development agreement dated
22.12.2018 was entered into for an extent of Ac.12.00 guntas, 11
which forms part of Ac.32.35 guntas covered under preliminary
agreement dated 01.01.2018. The development agreement dated
22.12.2018 also contains arbitration at Clause 13 wherein the
parties have agreed to refer the matter to a sole arbitrator in the
event of disputes or difference arisen between them.
20. The contention of the learned counsel appearing for the
respondents is that novation of the agreement dated 01.01.2018 in
terms of the clause 19 of the development agreement dated
22.12.2018 cannot be decided in the instant application filed under
Section 11(6) of the Act. Whether there is novation of earlier
agreement dated 01.02.2018 or not, is a matter to be adjudicated
by the arbitrator. In the instant application, for appointment of an
arbitrator, this Court would be only concerned with prima facie
claims of the parties and would see whether there is a valid
agreement containing arbitrator clause and if disputes have arisen
between the parties, which need to be referred to an arbitrator.
Though respondents No.6 to 10 are not parties to the agreement
dated 01.01.2018, the said point would not fall for consideration in
this application. The respondents No.6 to 10 claim interest in the
subject property through the respondents No.1 to 5 and whether
the agreement is binding on the respondents No.6 to 10 is a matter
to be looked into by the arbitrator.
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21. The judgment of the Supreme Court in YOUNG ACHIEVERS
v. IMS LEARNING RESOURCES PRIVATE LIMITED 1, relied upon
by the learned counsel for the respondents No.1 and 3, is not
applicable to the facts of the present case. In the said case, it was
held that new agreement dated 01.02.2011 was entered into, which
does not contain arbitration clause. The Supreme Court held that
the agreements dated 01.04.2007 and 01.04.2010 containing
arbitration clauses could not survive as they have been superseded
by the new agreement dated 01.02.2011. The facts of the present
case are totally different and the transaction between the parties is
relating to immovable property. The first agreement was entered
into on 01.01.2018 and followed by development agreement dated
22.12.2018 and both the agreements are interconnected and both
the agreements contain arbitration clauses. Thus, the contention of
the learned counsel for the respondents that the arbitration clauses
in both the agreements are not binding on the respondents is not
sustainable.
22. In view of the above, the arbitration application is allowed.
Sir Justice G.V. Seethapathy, Former Judge of the erstwhile High
Court of Andhra Pradesh, is appointed as arbitrator to adjudicate
the claims and disputes between the parties and to pass an award
1 (2013) 10 SCC 535 13
in accordance with law. The parties are at liberty to raise all factual
and legal grounds in support of their respective claims.
23. The learned Arbitrator is entitled to fees as per the rates
specified in the Fourth Schedule to the Act of 1996, inserted by
Act 3 of 2016 with effect from 23.10.2015, which shall be borne by
both parties in equal shares.
The miscellaneous petitions pending, if any, shall stand
closed. There shall be no order as to costs.
____________________ B. VIJAYSEN REDDY, J January 2, 2024 DSK
