Bombay High Court
Adeshwar And Co vs Shreenath Builders on 3 May, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-OS:7703
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (L) NO.20343
OF 2023
WITH
INTERIM APPLICATION (L) NO.10866 OF 2024
IN
COMMERCIAL ARBITRATION APPLICATION (L)
NO.20278 OF 2023
Adeshwar and Co .. Applicant
Versus
Shreenath Builders .. Respondent
...
Mr.Pradeep Sancheti, Senior Advocate a/w Sonal, Ankit R
Tripathi, Pallavi Bali i/b Harshit O Mehta for Petitioner.
Ms.Aparna Revkar i/b M P Vashi & Associates for respondent.
CORAM: BHARATI DANGRE, J.
DATED : 3rd MAY, 2024 P.C:-
1 Adeshwar and Company, a registered partnership firm has filed two proceedings; Commercial Arbitration Application (L) No.20278 of 2023, under Section 11 of the Arbitration and Conciliation Act, 1996 for referring the disputes and differences arising under the Deed of Conveyance dated 12/03/2007, for arbitration and the second proceedings in form Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 ::: 2/11 43 CARBP-L-20343-2023.doc of Commercial Arbitration Petition (L) No.20343 of 2023 seeking interim measures, pending the commencement and conclusion of the arbitral proceedings, making of the arbitral award, for directing the respondent to deposit the balance sale consideration with the Prothonotary and Senior Master and seeking an injunction restraining the respondent and its partners from creating any third party rights in the property, that is the subject matter of Deed of Conveyance.
2 I have heard learned senior counsel, Mr. Pradeep Sancheti for the petitioner/applicant along with Advocate Sonal and Mr. Ankit Tripathi. The respondent is represented by Ms. Aparna Revkar.
3 The Petitioner, as well as the respondent are engaged in the development of real estate properties and the petitioner vide Sale Deed dated 18/06/1990, duly registered with the Sub-
Registrar of Assurances, Jodhpur purchased the right, title and interest in the property popularly known as "Olympic Cinema Jodhpur", along with all appurtenant building/s and structure/s standing thereon on the plot of land admeasuring approximately 7,204 Sq. mtrs, or equivalent thereabout, being situated at Olympic Road, Jodhpur. The Petitioner constructed a residential cum commercial building referred to as a BLOCK-A and sold the same to various persons, though it continued to remain in possession of remaining portion of the property equivalent to 62,900 Sq feet.
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Subsequently, the Petitioner through its Partner sold this property along with tube well etc as a part of composite sale of the business undertaking, on a slump sale basis to the respondent through a Deed of Conveyance dated 12/12/2007, in relation to slump sale of its business undertaking, along with the property known as Olympic Cinema with structure standing thereupon, for a sale consideration of Rs. 47 crores only.
A copy of the Deed of Conveyance is placed on record at Exhibit- A to the Section 9 Petition.
This slump sale consideration was agreed to be paid in 4 tranches and according to the petitioner it received a total of Rs. 37.12 crores out of the entire sale consideration from the respondent, however, the cheque for third tranche, in the sum of Rs.9.88 crores was dishonored on account of insufficient funds, when it was presented for clearing. Upon informing, the respondent assured to pay the balance consideration along with 12 % interest and also issued the cheque for the subsequent tranche of 2.25 crores, which was however asked to be kept on hold, by stating that the funds were being arranged.
4 In the wake of the aforesaid, a sum of Rs.7.45 crores, along with interest at the rate of 12% per annum is yet to be realized and despite several meetings for payment of the balance consideration and the petitioner being accommodative and sensitive to the financial difficulties of the respondent, no active steps were taken. Moreso, the respondent admitted the Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 ::: 4/11 43 CARBP-L-20343-2023.doc outstanding liability towards the petitioner, in its books of account for the financial year 2011-2012 and it also send confirmation of accounts dated 1/04/2011 to the petitioner, acknowledging the balance consideration.
This is evident from Exhibit B and Exhibit annexed to the arbitration petition.
5 During the meeting held between the partners of the petitioner and that of the respondent on 22/01/2023, the respondent however refused to adhere to its commitment of payment of the balance sale consideration and this constrained the petitioner to address a notice dated 4/02/2022, requesting the respondent to pay the amount and resolve the dispute amicably. Thereafter, the representative of the respondent contacted with representative of the petitioner and once again the meeting was held on 6/03/2023, which remained inconclusive and no concrete steps were taken for resolving the issue.
Once again on 13/03/2023, a legal notice was addressed to the respondent seeking payment of the balance sale consideration, wherein it was reiterated that the ownership of the property has been transferred to the respondent, though the balance sale consideration was pending and hence the petitioner held a charge over the property. It was also stated that the outstanding amount of balance sale consideration is to be paid as per the Conveyance Deed, and the claim raised was within the period of limitation.
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Ultimately on 6/03/2023, the petitioner was
compelled to serve a notice expressing its intention to initiate arbitration proceedings as envisaged under Clause 12 of the Conveyance Deed and even the name of the Arbitrator was suggested.
6 The respondent replied to the said notice and alleged that the claim of the petitioner for balance consideration is time barred.
Apart, it also took a stand that in the Deed of Retirement dated 2/12/2013, of M/s Shreenath Builders, the respondent Mr. Mukesh Mehta, Mr.Sandeep Mehta, Mr.Rishabh Chand Daga, and Mr. Sanjay Surana, stood retired against payment of Rs. 18 crores, which constituted conclusive settlement of partnership accounts relating to the development of the property.
7 The petitioner responded, to the above on 17/04/2023, adopting a specific stand on merits of the issue raised and by placing on record the Deed of Retirement dated 2/12/2013 executed between the continuing partners and retiring partners of M/s Shreenath Builders and alleged that the respondent is maliciously attempting to mix two transactions to evade the payment of balance consideration. It was clarified that the payment of 18 crores was made to the retiring partners of the respondent firm under the Retirement Deed in relation to their contributions at the time of their induction and retirement from Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 ::: 6/11 43 CARBP-L-20343-2023.doc the firm. Its claim, that the respondent owe a sum Rs.7,45,00,000/- along with interest at 12% until the realization was reiterated, by asserting that the amount had remained unpaid, pursuant to the Conveyance Deed executed between the parties.
8 It is not in dispute that the Conveyance Deed comprise of an arbitration clause in form of clause no.12, which reads thus:
"12. In the event of any dispute/s or difference/s arising out of or in connection with or in relation to this Deed of Conveyance, the aggrieved party will notify the other party in writing, about the disputes or differences with such Party setting out in such notice about the dispute or difference which exists, giving details of the same and notify the other Party that it is desired the same be settled by negotiation between the Parties within 30 (thirty) days from receipt of such notice. If such dispute/s or difference/s is/are not settled by negotiation/s between the parties hereto, as above said, the aggrieved party shall notify the other party that such dispute/s or difference/s shall be settled by Arbitration under the provisions of Arbitration and Conciliation Act, 1996 as amended till date. The reference about such disputes/difference shall be to two arbitrators, one to be appointed by the Vendor and the other to be appointed by the Purchaser and the two arbitrators so appointed shall be mutual consent appoint an Umpire and on the failure on the part of the Arbitral Tribunal, the dispute/differences shall be subject matter before the appropriate competent Court in Mumbai only. The venue of the arbitration shall be at Mumbai. The Jurisdiction of Courts also shall be in Mumbai only."
9 The learned counsel Ms. Revkar, for the respondent has raised an objection about the claim being time barred, as it is sought to be canvassed that the Deed of Conveyance was Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 ::: 7/11 43 CARBP-L-20343-2023.doc executed on 12/12/2007 and the arbitration is invoked on 13/03/2023, for demanding the balance amount of consideration, which obviously is ex facie hopelessly barred by limitation and there is no scope in appointing an Arbitrator, in relation to a patently fraudulent and time barred claim.
Dealing with the said objection, Mr. Sancheti, would submit that the argument of the claim being time barred is advanced without taking into consideration the period of limitation prescribed under article 62 of the Limitation Act, 1963, which prescribe limitation for 12 years "to enforce payment of money secured by a mortgagee, or otherwise charged upon immovable property" and the period of 12 years shall run from the date "when money becomes due".
10 The perusal of the Conveyance Deed would disclose that the purchaser/respondent was under an obligation to make the payment/s of the sale consideration amount to the Vendor as per schedule provided in clause 3.
The Conveyance Deed further record as under:
"(b) The Vendor has already handed over quiet, vacant and peaceful possession of the entire portion of the said Larger Property to the Purchaser as Owners and as a part of indivisible, integrated, composite business undertaking;
(c) The Vendor has simultaneously upon execution hereof delivered to the Purchaser all the Original Title Deeds, Documents, evidences, writings and papers exclusively relating to the said Larger Property and the business undertaking and hereafter the same shall remain permanently in the custody and possession of the Purchaser Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 ::: 8/11 43 CARBP-L-20343-2023.doc only;
(d) The Vendor in addition to these presents shall execute and deliver to the Purchaser and/or their nominee or nominees any such Conveyance/ Assignment Document/s, Writings or assurances as may be required by the Purchaser for effectuating a complete and proper transfer of the said Larger Property to the name/s of the Purchaser or their nominee or nominees and in the latter event the Purchaser shall join in the execution of such document or documents as confirming parties;"
The Conveyance Deed thus made the purchaser entitle to use, occupy, possess and enjoy the larger property as owner thereof, alongwith all the right, title, interest benefits claim/s and demand/s whatsoever, at law or otherwise of the Vendor to the larger property conveyed to the purchaser upon simultaneous with the execution of the Deed.
11 In the wake of the aforesaid arrangement, when the amount of balance consideration is not received by Adeshwar and Company, the partnership firm, it intend to secure the payment of money, by retaining charge on the immovable property and for this purpose the prescribed limitation is 12 years, which would start from the date when the money becomes due.
Towards the last tranche of payment, the cheque issued was of 20/03/2008 and the talks continued between the parties and rather the petitioner despite being aware of the outstanding amount, continued to wait but was assured by the confirmation of accounts addressed to it by the respondent, Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 ::: 9/11 43 CARBP-L-20343-2023.doc acknowledging the balance consideration and this communication is dated 1/04/2013.
Since, the respondent categorically admitted that the money was due and payable and reflected so in its books of account, and since the liability was not denied,, the period of 12 years shall be required to be computed from the date when the money became due and payable and the arbitration having been invoked in the year 2023, the claims staked by the claimant cannot in my opinion be construed as an ex facie time barred or a hopelessly time barred claim, taking into account a period of limitation from bringing the action to be of 12 years.
12 Since, the Deed of Conveyance categorically set out that the venue of arbitration shall be Mumbai and the jurisdiction of Court shall also be in Mumbai, in the light of the position of law emanating from the decision of the Apex Court in case of BGS SGS Soma JV Vs. NHPC Limited (2020) 4 SCC 234, the venue fixed would amount to the seat of Arbitration as no contrary intention is indicated in the Deed and particularly when it is noticed that it is the Mumbai Courts have been conferred jurisdiction in regards to the arbitration proceedings.
13 The respondent has vehemently opposed the reference of the disputes to arbitration, on the ground that the claim is hopelessly barred but without prejudice to the said contention, when I expressed that the dispute must go for arbitration in the wake of clause no.12 in the Deed of Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 ::: 10/11 43 CARBP-L-20343-2023.doc Conveyance, she express her consensus with learned senior counsel Mr. Sancheti, in submitting that instead of a tribunal, the dispute shall be resolved through a sole Arbitrator.
In the wake of the above, once I have expressed that the objection of the respondent that the dispute to be referred to the arbitration is not time barred, it is made over for arbitration, by appointing Mr. Naushad Engineer, as a sole Arbitrator, whose nomination has consensus of both the sides.
14 In the wake of the above, Advocate Naushad Engineer, is appointed as Sole Arbitrator to adjudicate the disputes and differences that have arisen between the parties.
The details of the Arbitrator are as below:
Name :- Adv. Naushad Engineer.
Address :- 1- D/E, Lentin Chambers, Dalal street, Fort,
Mumbai-23.
Mob No :-9821047087
Email id :- [email protected]
The Arbitrator shall, within a period of 15 days before entering the arbitration reference forward a statement of disclosure as contemplated u/s Section 12 of the Arbitration and Conciliation Act, 1996, to the Prothonotary and Senior Master of this Court to be placed on record.
The Arbitrator, shall after entering the reference fix the date of first hearing and issue further directions as are Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 ::: 11/11 43 CARBP-L-20343-2023.doc necessary.
The Sole Arbitrator shall be entitled for the fees as per Bombay High Court (Fee Payable to Arbitrators) Rules, 2018 and the arbitral costs and fees of the Arbitrator shall be borne by the parties in equal portion and shall be subject to the final Award that may be passed by the Tribunal.
All rights and contentions of the parties are kept open.
The Advocate for the Applicant shall intimate the Arbitrator about his appointment within a period of one week from the date of uploading of this Order;
In addition, the Office of the Prothonotary and Senior Master of this Court shall also intimate the Arbitrator about his appointment, within a period of one week from the date of uploading of this order.
15 Section 9 petition, shall be taken before the Arbitrator in form of Section 17 application.
(SMT. BHARATI DANGRE, J.) Ashish ::: Uploaded on - 10/05/2024 ::: Downloaded on - 16/05/2024 09:31:44 :::