Telangana High Court
M/S. Navayuga Engineering Company ... vs Mahira Ventures Pvt Ltd on 2 May, 2025
Author: K. Lakshman
Bench: K. Lakshman
HONOURABLE SRI JUSTICE K. LAKSHMAN
ARBITRATION APPLICATON No.270 OF 2024
ORDER:
Heard Sri Vimal Varma Vasi Reddy, learned counsel for the
Applicant, and Sri E. Venkata Siddhartha, learned counsel for the
Respondents.
2. The present Arbitration Application is filed under Section 11
(5) and (6) of the Arbitration and Conciliation Act, 1996 (hereinafter
'the Act, 1996') for appointment of a sole arbitrator to adjudicate the
disputes between the Applicant and Respondents.
FACTS:-
3. M/s Navayuga Legala Estates Private Limited (NLEPL), a
group company of Navayuga Group, is the Applicant herein. It was in
possession of land admeasuring Ac.25.10 guntas in Sy.No.82(p),
83(p) and 84(p) (opposite new municipal office, old Mumbai
Highway, Serilingampally Village, Mandal and Municipality, Ranga
Reddy District (hereinafter referred to as 'subject property').
4. 2nd respondent intended to enter into a Joint Development
Agreement for development of the subject property as a freehold land
after its de-notification from SEZ in all respects. 2nd respondent
requested the Applicant to act as a facilitator to facilitate the de-
notification of the subject land from SEZ under the applicable laws
thereby to ensure handing over of the said land to NLEPL without any
encumbrances.
5. On 02.04.2018, the Applicant and 2nd respondent entered into
an agreement for development of subject property. They have also
entered into an amended agreement dated 27.06.2018 making certain
modifications to the principal agreement 02.04.2018. The respondents
agreed to hand over Rs.30 Crores worth of saleable area in the project
on completion of Phase-I as a facilitation fee to the Applicant at
construction costs agreed between the parties.
6. On 09.11.2018, 1st respondent entered into agreement
wherein it had confirmed the de-notification of the said land from the
SEZ from all respects and also confirmed delivery of possession of the
same without any encumbrances, charges and thus discharged the
Applicant's obligation as a facilitator. As per the terms of the
agreement, dated 09.11.2018, 2nd respondent agreed to facilitate Rs.30
Crores worth of saleable area exclusively in the residential project and
50% in the Phase-I and balance 50% in the Phase -II in the shape of
residential units. Respondents further agreed to handover the
residential units within the period as agreed.
7. Despite fulfilling its obligation under the agreement, the
respondents remained evasive about their obligation in compensating
the Applicant. The Applicant's all attempts remained futile. The
Applicant vide notice dated 04.05.2024 requested the respondents to
determine the area ascertainable at the cost as specified in Annexure-I
of the Amendment Agreement dated 27.06.2018 within Fifteen (15)
day from the receipt of notice.
8. Vide reply dated 21.05.2024, the respondents admitted that
the Applicant is entitled for Rs 30 Crores and denied liability for any
built up sale area. The Applicant vide letter dated 09.07.2024
requested the respondents to determine the ascertainable area. Despite
receiving and acknowledging the said notice, there was no response
from the respondents. Therefore, invoking the arbitration clause in the
said agreement, the Applicant had issued notice dated 23.07.2024
nominating Sri Justice Challa Kodanda Ram, Former Judge of this
Court, as arbitrator to resolve the disputes.
9. Vide letter dated 23.07.2024, 2nd respondent expressed its
willingness to resolve the disputes through mutual discussions
between the parties. Thus, 2nd respondent requested the Applicant to
inform the details of the persons participating in the
negotiations/meeting representing the Applicant. Thereafter, the
Applicant has filed present application seeking appointment of an
arbitrator to adjudicate the disputes between the Applicant and
respondents.
10. 1st respondent filed counter contending that there is an
arbitral dispute that arose under the said agreements. The present
application filed by the Applicant is pre-mature as Phase-1 of the
project has not been completed and so the facilitation fee is non-
payable. The said agreements provided an option to pay Rs.30 Crores
instead of saleable area, which was not accurately reflected by the
Applicant. The Applicant has not provided necessary certificates of
compliance as per the agreements and that the invocation of
arbitration was pre-mature.
11. Sri E.Venkata Siddhartha, learned counsel for the
respondent No.1 placed reliance on the principle ad down by the Apex
Court in Indian Oil Corporation Limited (supra) to contend that the
this Court also having power to decide with regard to existence of
arbitrable disputes.
12. 2nd respondent adopted the said counter.
13. Perusal of the record would reveal that the Applicant and 2nd
respondent and NLEPL have entered into an agreement dated
02.04.2018 for development of the subject property on the specific
terms and conditions mentioned therein. They have also entered into
amendment agreement dated 27.06.2018 on the specific terms and
conditions mentioned therein. Thereafter, the Applicant and 1st
respondent have entered into an agreement dated 09.11.2018 for
development of the said property. In the said agreement, it is stated
that the NLEPL has acquired valid and legal title and is in possession
of the subject property. 1st respondent is an associate of 2nd
respondent. 1st respondent is in the business of purchasing, selling and
developing land including construction of high-rise buildings.
Therefore, 1st respondent/ Developer and NLEPL, land owners,
intended to enter into an agreement for development of subject
property. The Applicant agreed to act as facilitator for de-notifying the
entire schedule property from SEZ in all respects and to hand over the
freehold land to NLEPL without any encumbrance etc. As per the
terms of the Agreement dated 09.11.2018, respondents agreed to
facilitate Rs. 30 Crores worth of saleable area exclusively in the
residential project and 50% in the phase-I and balance 50% in Phase-
II in the shape of residential units. Respondents further agreed to
handover the residential units within the period as agreed.
14. It is further agreed that in lieu of the aforesaid agreement,
date of handing over of the Units shall commence from the date of
completion of Phase-1 to the extent of 50% and balance of 50% shall
be handed over on the completion of Phase-II of the residential
development of the Project on the schedule property or else 1st
respondent shall have to pay facilitation fee of Rs.30 Crores instead of
said agreement specified under the present agreement. 1st respondent -
developer shall discharge all its obligations as regards the facilitation
fees towards NECL under the first agreement on mutual terms thereto.
15. Clause No.6 (g) of the said agreement dated 09.11.2018
deals with 'Resolving Dispute and Jurisdiction' and the same is
extracted below:-
6(g): Resolving Dispute and Jurisdiction:-
Any dispute, controversy or claim arising out of or relating to this
Agreement of related agreement or other document or the validity,
interpretation, breach or termination thereof (a "Dispute"), including claims
seeking redress or asserting rights shall be setting amicably at the first
instance of such referred dispute/s within 10 days from the date of shall be
in consonance with the Arbitration and Conciliation act, 1996 (or any
statutory notice of dispute and if not resolved thereafter it shall be referred
to sole arbitrator, which Hyderabad, Telangana. The decision of the arbitral
tribunal shall be final and binding on modification or re-enactment for the
time being in force). The Seat of arbitration shall be the parties. Pending
final resolution of any dispute, the Parties shall continue to perfor their
respective obligations hereunder.
This Agreement shall be subject to the exclusive territorial jurisdiction
of Courts situated at Hyderabad, Telangana State, INDIA.
All notice/s deemed to be served to the address of Party/ies herein a
referred in this Agreement.
16. It is the specific contention of the Applicant herein that it
has fulfilled its obligations under the said agreement and respondents
failed to compensate as agreed. It has issued notices dated 04.05.2024,
09.07.2024 and 23.07.2024. Even then, there was no resolution of
disputes. Therefore, according to the Applicant, there are disputes
between the Applicant and respondents with regard to the execution of
the said agreement and the same are arbitrable in nature. Invoking the
aforesaid clause, Applicant has issued notice dated 23.07.2024
nominating Sri Justice Challa Kodanda Ram, the Former Judge of this
Court, as an arbitrator to adjudicate disputes between the Applicant
and respondents. The Applicant vide reply notice dated 09.07.2024
requested the respondents to determine the ascertainable area, execute
a deed of conveyance within 15 days. The Applicant has also
requested to arrange meeting to resolve the disputes.
17. Vide reply dated 24.07.2024, 2nd respondent expressed its
willingness to resolve the disputes through mutual discussions
between the parties. Therefore, 2nd respondent requested the Applicant
to inform the details of the participants in the discussion/meeting
representing the Applicant so that 2nd respondent can accordingly plan
for participation in the said meeting. Thereafter, there was no
correspondence. However, the Applicant had issued notice dated
23.07.2024 nominating Sri Justice Challa Kodanda Ram, the Former
Judge of this Court, as an arbitrator to resolve the disputes. Despite
receiving and acknowledging the same, there was no response from
the respondents.
18. The aforesaid facts would reveal that respondents are
opposing this application contending that the present application is not
maintainable since there is no arbitrable dispute. This Court in
exercise of its power under Section 11 of the Act, could refuse
reference to arbitration in cases which are ex-facie frivolous, non-
arbitrable, so as to ensure expeditious and efficient disposal at the
referral stage.
19. In the light of the aforesaid discussion, it is relevant to note
that in NTPC Vs. M/s SPML Infra Limited 1, the Apex Court held
that the High Court under Section 11(6) confines to the examination
of the existence of an arbitration agreement. The Apex Court further
held as follows:-
25. Eye of the Needle: The above-referred precedents crystallise the
position of law that the pre-referral jurisdiction of the courts under Section
11(6) of the Act is very narrow and inheres two inquiries. The primary
inquiry is about the existence and the validity of an arbitration agreement,
which also includes an inquiry as to the parties to the agreement and the
applicant's privity to the said agreement. These are matters which require a
thorough examination by the referral court. The secondary inquiry that may
arise at the reference stage itself is with respect to the non- arbitrability of
the dispute.
20. The Apex Court also considered the principle laid down by
it in Indian Oil Corporation Limited vs. NCC Limited 2 and in
Vidya Drolia v. Durga Trading Corpn. 3 confirming that prima
facie, review is essential and only clear non-arbitrable disputes should
be declined.
21. In the light of the principle laid down in the aforesaid
judgments, coming to the facts of the present case, as discussed supra,
the Applicant and respondents have entered into an agreement dated
(2023) 2 SCC 539
(2023) 2 SCC 539
(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549
09.11.2018 on the specific terms and conditions mentioned therein. It
is the specific contention of the Applicant that it has completed its
obligations under the said agreements and the respondents failed to
comply with the same. Therefore, there are disputes between the
Applicant and respondents which are arbitrble in nature.
22. As discussed supra, vide letter dated 24.07.2024, 2nd
respondent expressed its willingness to resolve the disputes through
mutual discussions. Thereafter there was no response from the
respondents.
23. In the light of the aforesaid discussion, respondents cannot
contend that the present application is pre-mature as Phase-I of the
project has not been completed, making facilitation fee non-payable.
The said aspect, this Court cannot consider. It is for the Arbitrator to
consider the said aspect.
24. As discussed supra, this Court, being the referral Court, has
to confine itself to see the existence of arbitration agreement, if the
issue is arbitrable in nature and arbitration clause. In the present case,
there is an agreement and arbitration clause. This Court is also of the
considered view that there are disputes between the Applicant and
respondents with regard to the agreement dated 27.11.2018 the same
are arbitrable in nature to be adjudicated by the arbitrator.
25. In the present case, there are disputes between the Applicant
and respondents with regard to the execution of agreement, dated
09.11.2018 and the same are arbitrable in nature.
26. Accordingly, This Arbitration Application is allowed.
Sri Justice Goda Raghuram, Former Judge of the erstwhile High
Court of Andhra Pradesh, 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.
As a sequel, miscellaneous applications, if any, pending in the
Arbitration Application shall stand closed.
________________________
JUSTICE K. LAKSHMAN
Date:02-05-2025
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