Karnataka High Court
M/S Nitesh Estates Private Limited vs Vibhuthipura Verasimhasanasamsthana ... on 9 August, 2017
Author: Ashok B.Hinchigeri
Bench: Ashok B. Hinchigeri
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF AUGUST 2017
BEFORE
THE HON'BLE MR. JUSTICE ASHOK B. HINCHIGERI
C.M.P. No.123 OF 2014
BETWEEN
M/S.NITESH ESTATES PRIVATE LIMITED
A COMPANY INCORPORATED UNDER THE
COMPANIES ACT, 1956, HAVING ITS
REGISTERED OFFICE AT
NITESH TIMESQUARE, 7TH FLOOR
NO.8, M.G.ROAD, BANGALORE 560 001
REPRESENTED BY ITS GENERAL MANAGER-LEGAL
MR.K.B.SWAMY. ... PETITIONER
(BY:SRI S.S.NAGANAND, SENIOR ADVOCATE
FOR SRI VIKRAM, ADVOCATE)
AND:
VIBHUTHIPURA VEERASIMHASANASAMSTHANA MATH
VIBHUTIPURA VILLAGE, VARTHUR HOBLI
BANGALORE SOUTH TALUK 560 087
REPRESENTED BY ITS PATTADHYAKSHARU
HIS HOLINESS SHRI SHA.BRA MAHATALINGA
SHIVACHARYA SWAMIJI. ... RESPONDENT
(BY:SRI ADITYA SONDHI, SENIOR ADVOCATE
FOR SANTOSH S GOGI, ADVOCATE)
THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER
SECTIONS 11(5, 6) OF THE ARBITRATION AND CONCILIATION ACT
1996 PRAYING TO NOMINATE HON'BLE MR.JUSTICE A.M.FAROOQ,
RETIRED, JUDGE, HIGH COURT OF KARNATAKA, OR ANY OTHER
RETIRED JUDGE OF THIS HON'BLE COURT AS THE SOLE
ARBITRATOR IN TERMS OF CLAUSE 9.4 OF THE AGREEMENT DATED
21.6.2007.
THIS C.M.P. COMING ON FOR ADMISSION THIS DAY, THE
COURT MADE THE FOLLOWING:
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ORDER
This petition is filed seeking the appointment of the Arbitrator under Sections 11(5) and (6) of the Arbitration and Conciliation Act, 1996 ('the said Act' for short).
2. The parties herein have entered into the agreement, dated 21.6.2007 (Annexure-A). The petitioner is a developer and the respondent is a Religious and Charitable Trust owning the land in question. Under the said agreement, the petitioner was to get the land converted from agricultural to non-agricultural purpose and thereafter the parties were to enter into the formal joint development agreement on the terms and conditions set out in the agreement, dated 21.6.2007. Clause 9.4 of the said agreement provides for the dispute resolution through the arbitration mechanism. Complaining that the respondent failed to adhere to the terms of the said agreement, the petitioner filed C.M.P.No.16/2012 seeking the appointment of the arbitrator. It ended up in the compromise on the filing of the memo by the respondents, conceding to the request of the petitioner for joint development of the property, subject to the petitioner executing the undertaking before this Court that it shall 3 undertake the joint development strictly in terms of the agreement, dated 21.6.2007 without seeking/proposing any change or modification.
3. The petitioner sent the draft lease deed for being executed by the respondent. The respondent refused to execute the same on the ground that it contained too many deviations from the agreement, dated 21.6.2007. On the exchange of correspondence between the petitioner and the respondent not leading anywhere, it caused the issuance of legal notice, dated 6.3.2014 (Annexure-L) appointing Sri A.M.Farooq, a retired Judge of this Court as the sole arbitrator and called upon the respondent to indicate its concurrence with the said appointment.
4. The respondent, vide reply, dated 18.3.2014 (Annexure-M) took the stand that the agreement has come to an end on account of the breach committed by the respondent and consequently that the question of appointing the arbitrator in terms of the agreement, dated 21.6.2007 would not arise at all.
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5. Sri S.S.Naganand, the learned Senior Counsel appearing for Sri Vikram for the petitioner submits that the arbitration clause survives for the resolution of disputes, even when the respondent claims that the agreement is terminated. In support of his submissions, he relies upon the Hon'ble Supreme Court's decision in the case of BRANCH MANAGER, MAGMA LEASING AND FINANCE LIMITED AND ANOTHER v. POTLURI MADHAVILATA AND ANOTHER reported in (2009) 10 SCC 103. Para 14 of the said decision read out by him is extracted hereinbelow:
"14. The statement of law expounded by Viscount Simon, L.C. in Heyman as noticed above, in our view, equally applies to the situation where the contract is terminated by one party on account of the breach committed by the other particularly in a case where the clause is framed in wide and general terms. Merely because the contract has come to an end by its termination due to breach, the arbitration clause does not get perished nor is rendered inoperative; rather it survives for resolution of disputes arising "in respect of"
or "with regard to" or "under" the contract. This is in line with the earlier decision of this Court, particularly as laid down in Kishorilal Gupta."
6. He has also relied upon the Apex Court's decision in the case of ASHAPURA MINE-CHEM LIMITED v. 5 GUJARAT MINERAL DEVELOPMENT CORPORATION reported in (2015) 8 SCC 193 to support his argument that irrespective of the question as to the fact whether the MoU fructifies into a full-fledged agreement, having regard to the non-fulfillment of any of the conditions or failure of compliance with any requirement by either of the parties stipulated in the other clauses of MoU, specific agreement has been entered into by the appellant and the respondent to refer such controversies as between the parties to the sole arbitrator by consensus. When consensus was not reached between the parties for making the reference, eventually it will be open for either of the parties to invoke Section 11 of the said Act.
7. The learned Senior Counsel brings to my notice the Hon'ble Supreme Court's decision in the case of ANIL KUMAR v. B.S.NEELKANTA AND OTHERS reported in (2010) 5 SCC 407 wherein it is held that even the question as to whether the live claim made comes within the purview of arbitration clause, may also be left to the Arbitral Tribunal. The Arbitral Tribunal will decide such an issue on taking the evidence.
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8. Sri Aditya Sondhi, the learned Senior Counsel appearing for Sri Santhosh S. Gogi for the respondent submits that the insistence for the execution of the lease deed is outside the scope of the agreement, dated 21.6.2007, as set out in the terms and conditions of the said agreement. He submits that the petitioner is not entitled to maintain one more petition in the wake of disposal of the earlier petition (C.M.P.No.16/2012) by this Court, by its order, dated 15.6.2012. He submits that the petitioner has also filed an affidavit in compliance with the said order of this Court. According to him, the petitioner has foreclosed its right of seeking appointment of the arbitrator, in view of the disposal of the earlier petition for the appointment of the arbitrator. He submits that no application whatsoever is filed for recalling the order, dated 15.6.2012. He submits that, as the order passed by this Court in the earlier round of litigation is virtually a consent order, the petitioner cannot file one more petition.
9. He submits that the petitioner has committed retraction from the commitment made in the original agreement, dated 21.6.2007 and that the petitioner has put 7 an end to the said agreement by its conduct. As the very subsistence of the agreement, dated 21.6.2017 is denied, the question of appointing the arbitrator would not arise. He submits that the petitioner has not clearly disclosed the nature of its claim/dispute to be resolved by the arbitrator. He has also relied on this Court's decision in the case of DILIP BAFNA v. K.S.VASUDEVA reported in 2007(6) Kar.L.J.554 for advancing the argument that the party seeking the relief of specific performance of the agreement may have to approach the civil court.
10. In the course of rejoinder, Sri Naganand, the learned Senior Counsel appearing on behalf of the petitioner submits that there is no basis for the respondent's submission that the petitioner would invariably seek the relief of specific performance of the agreement. The petitioner may seek damages or the specific relief of the agreement or any other permissible relief. He submits that the petitioner's conduct cannot be flawed by the respondent. Without prejudice to this submission, he submits that no relief can be denied to a party on the alleged ground that his conduct is not blame-free. He submits that the petitioner is constrained to 8 file this petition because of the failure of the respondent to abide by the undertaking given by it in the earlier C.M.P. proceedings. He asserts that the petitioner is not in any way making any endeavour to enlarge its rights; it is agitating its rights strictly within the contours of the agreement, dated 21.6.2007.
11. The submissions of the learned counsel have received my thoughtful consideration. It is not in dispute that the parties have entered into the agreement, dated 21.6.2007. Clause 9.4 of the said agreement reads as follows:
"9.4 All disputes, differences and/or claims arising out of and/or connected with this Agreement shall be resolved amicably between the Parties, failing which the same shall be resolved through arbitration to be conducted only in Bangalore under the provisions of the Arbitration and Conciliation Act, 1996, as may be amended/replaced from time to time."
12. Both the parties are alleging the breaches of the clauses of the agreement, dated 21.6.2007 by the other party. If either of the parties or both the parties has/have failed to adhere to the clauses of the agreement, dated 21.6.2007 in the letter and spirit of the understanding 9 reached between them in the proceedings in C.M.P.No.16/2012, this Court cannot refuse to appoint the arbitrator. It is also not the case of the respondent that the petitioner's claims are stale or barred by limitation.
13. As held by the Apex Court in the case of VISA INTERNATIONAL LIMITED v. CONTINENTAL RESOURCES (USA) LIMITED reported in (2009) 2 SCC 55 a live issue subsisting between the parties requiring the resolution is a condition precedent for the appointment of the arbitrator. The Hon'ble Supreme Court in its decision in the case of Magma Leasing (supra) has held that a contract does not come to an end by its termination due to the breach. The arbitration clause neither gets perished nor is rendered inoperative on the ipse dixit of a party that the contract is terminated. In the case of Ashapura Mine-Chem Ltd., (supra), the Hon'ble Supreme Court has expressed the considered view that if the MoU provides for arbitration and if it does not fructify into a full-fledged agreement, as envisaged in the MoU, it is open to either of the parties to invoke Section 11 of the said Act. The arbitrator himself can decide whether 10 a live claim filed before him falls within the purview of the arbitration clause.
14. In the result I allow this petition by appointing Hon'ble Sri Justice H.Rangavittalachar, a retired Judge of this Court as the sole arbitrator. He is requested to enter upon the reference, conduct the arbitration proceedings and arbitrate the dispute.
15. Registry is directed to send a copy of this order to Hon'ble Sri Justice H.Rangavittalachar, forthwith.
Sd/-
JUDGE VGR