Rajasthan High Court - Jaipur
M/S Windsor Infrastructure Ltd vs M/S H S B Agro Industries Ltd on 30 January, 2014
Author: Ajay Rastogi
Bench: Ajay Rastogi
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN
AT BENCH JAIPUR
SB Arbitration Application No.61/2009
M/s Windsor Infrastructure Lt. Vs.
M/s HSB Agro Indusries Pvt. Ltd.
Order reserved on : 21.01.2014
Order pronounced on : 30.01.2014
Hon'ble Mr. Justice Ajay Rastogi
Mr. UN Bhandari, Sr. Adv. along with
Dr. PC Jain, for petitioner.
Mr. Manish Sharma, for respondent.
Instant arbitration petition has been filed u/S.11(6) of the Arbitration And Conciliation Act, 1996 (Act, 1996) for appointment of sole Arbitrator in view of Clause-23 of the Agreement Of Collaboration dt.9.5.2007 executed between the parties.
Brief facts culled out are that the petitioner M/s. Windsor Infrastructure Ltd. is a public ltd. incorporated under the provisions of Companies Act, 1956 and as alleged is engaged in the real estate business and is also carrying on the business as promoters and developers in the real estate. The respondent company is a private company and is the owner of the plot measuring 623.82 Sq. Meter bearing No. C-24B, Bhagwan Das Road, C-Scheme, Jaipur-302001. For the purpose of construction and development of the said piece of plot, the parties entered into an Agreement of Collaboration on certain terms and conditions agreed between the parties being executed on 9.5.2007 and simultaneously possession of the subject plot was handed over to the petitioner (developer) for demolition of old structure and further development at the aforesaid site vide letter dt.9.5.2007 (Ann.1A).
As per agreed terms of the agreement of collaboration, the owner/owners was under obligation to get the subject plot free from all encumbrances, charges, liens, liabilities, claims etc. till the duration and implementation of the agreement and keep indemnify the Developers against any part of claim, action or demand for want of title of the owner/owners and as per Clause-20 of the Agreement, the respondent Owner on signing of the Agreement shall obtain the diversion/ permission of the aforesaid plot within 15 days so as to enable the Developer to apply for change of land use and if the diversion or the conversion of land use for commercial is not permitted, the agreement of collaboration shall be treated as canceled and security deposit of Rs.2.00 crore shall be refunded immediately within a period of seven days by the Owner to the Developer from the date of such intimation to owner in writing, otherwise 24% interest shall be charged till receipt of payment.
It reveals from the record that the permission for diversion was granted to respondent owner/owners on 10.1.2008 and when the file was processed for change of land use for commercial, it was rejected by the Jaipur Municipal Corporation on 27.6.2008 and the parties entered into cancellation agreement dt.23.3.2009 Ann.R1 and both the parties reached to a mutual compromise and agreed that the owner/owners would refund Rs.1 crore 50 lacs after deducting Rs.50.00 lacs as compensation against the demolition of the existing structure over the property and developer will hand over the possession of the subject property.
In terms of cancellation agreement, it is not in dispute that Rs.1.50 crore was refunded by the owner (respondent) of the subject property and Agreement of Collaboration scribed on non judicial stamp paper No. C-129696 both the parties put a joint note on their original Agreement of collaboration on 23.3.2009 that this agreement of collaboration stands canceled from 23.3.2009 and their signatures were duly attested and notarized and this fact is not disputed by the petitioner but still neither the agreement of collaboration on which there was specific note regarding cancellation endorsed by the parties which was on non judicial stamp paper No. C-129696 was filed/available nor the cancellation agreement dt.23.3.2009 was placed on record, however, after the amount of Rs.1.50 crore was remitted to the petitioner after due adjustment of Rs.50.00 lacs towards the compensation against demolition of existing building structure on the subject property of the owner, the possession of plot was also handed over to the owner in terms of cancellation agreement and thereafter, a legal notice was served by the petitioner through their Advocate & Solicitor dt.3.8.2009 invoking Clause of Arbitration for recovery of outstanding amount of Rs.50.00 lacs and simultaneously vide letter dt.25.8.2009 appointed Dr. MC Gupta, CEO of the petitioner company to act as Arbitrator and letter was also sent to the respondent on 9.9.2009 regarding appointment of their arbitrator in terms of Arbitration Clause-23 of the Agreement of Collaboration dt.9.5.2007. Reply in reference thereto, was sent to the petitioner on 18.9.2009 and it was informed that the agreement of collaboration dt.9.5.2007 by mutual consent has been canceled vide cancellation deed dt.23.3.2009 signed by Dr. MC Gupta, the then executive officer of the petitioner company, no question further arises for appointment of arbitrator and since no action was taken by the respondent after the intimation regarding appointment of arbitrator was sent, he approached this Court by filing instant arbitration petition seeking appointment of arbitrator invoking Clause 11(6) of the Act 1996.
The narration of facts which are referred to are not in dispute, however, case of the petitioner and what is being urged before the Court is that the cancellation agreement which was executed between the parties on 23.3.2009 was under coercion, duress as there was no other option available other than to settle on the terms as agreed by the respondent owner of the subject property and the petitioner entered into memorandum of understanding (MOU) with M/S. Seaweed Marbles Pvt. Ltd. and received money which the petitioner paid to the respondent and M/s. Seaweed Marbles Pvt. Ltd. was pressing hard for refund of the amount as such no option was left than to sign the cancellation agreement under duress and the respondent took advantage of its superior position and upper hand who had received a good amount of money in the name of agreement of collaboration dt.9.5.2007 and in the facts and circumstances cancellation agreement dt.23.3.2009 could not be pressed as a defence by the respondent and there appears no reason as to why the respondent refunded only Rs.1.5 crore as against Rs.2.00 crore received as advance and that has been enjoyed upon by the respondent for almost two years.
It will be pertinent to note that in the original petition, the petitioner has made a passing reference in Para 19 of the application regarding cancellation agreement being forced to sign by using coercion and undue influence but failed to place on record along with application the cancellation agreement dt.23.3.2009 and so also original agreement of collaboration on which there was note appended regarding its cancellation agreed by the parties dt.23.3.2009 duly attested and notarized, however, the petitioner has placed on record the zeros copy of the same stamp paper No.C-129696 on which agreement was initially scribed and after reply came to be filed by the respondent, in rejoinder, the petitioner has tried to justify to show the circumstances under which the cancellation agreement perforce was signed and along with it, a memorandum of understanding on its own letter head scribed for the purpose of establishing its claim dt.10.3.2007 regarding duress as alleged but no other supporting material was brought on record.
Counsel for petitioner placed reliance on the decision of Coordinate Bench of this Court dt.8.12.2011 in SB Civil Arbitration Application-40/2009 M/s. Electro steel Castings Ltd. Vs. Rajasthan Urban Infrastructure Development Project and certain judgments of Supreme Court including (2011) 3 Supreme Court Cases 507 Indian Oil Corporation Limited Vs. SPS Engineering Limited and other judgments relied upon.
Counsel for petitioner further contended that cancellation agreement was signed under duress as there was no other option left then to sign it since a sum of Rs.2.00 crore was lying as security deposit with respondent and after their application for change of land use for commercial being rejected by the Corporation dt.27.6.2008, for the obvious reason the money was to be refunded by owner of the plot and being under financial crunch, it was to be refunded in terms of MOU dt.10.3.07 signed and without loss of time notice was sent to invoke Clause-23 of the Agreement of Collaboration for appointment of arbitrator which the respondent failed to avail and that has compelled the petitioner to approach this Court invoking Sec.11(6) for appointment of sole arbitrator for resolving arbitral dispute arises from the collaboration agreement.
The application is opposed by the respondent and apart from merits, preliminary objection has been raised that the arbitration petition filed u/S.11(6) of the Act invoking Clause-23 of the Agreement of Collaboration dt.9.5.2007 is not maintainable since agreement of collaboration dt.9.5.2007 has been canceled vide cancellation agreement dt.23.3.2009 and after the said cancellation agreement being mutually agreed and settled the dispute in full and final by the parties and whereupon respondent has repaid Rs.1.5 crore after deducting Rs.50.00 lacs towards compensation for demolition of existing structure on the subject property and the fact of cancellation deed dt.23.3.2009 has been suppressed by the petitioner and in view thereof, the present application is not maintainable.
Counsel further placed on record the valuation report dt.9.5.2007 of the construction existing over the said plot in question which appears to be demolished for raising new construction obviously after the change of land use being permitted by the competent authority.
Counsel for respondent submits that after deducting compensation of Rs.50.00 lacs for demolition of structure over the subject plot, Rs.1.50 crore vide four separate cheques was handed over to the petitioner and which were encashed on 21.5.2009. After encashment of aforesaid cheques, the present petition has been filed without disclosing the cancellation deed being executed on 23.3.2009 and suppressing this material fact instant application has been filed invoking jurisdiction of this Court u/S.11(6) of the Act 1996.
Counsel for respondent further submits that in view of Sec.62 of the Contract Act, if the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. In the instant case after the parties have agreed to enter into cancellation agreement dt.23.3.2009 and after the money was transferred to the petitioner & possession was handed over to the respondent of the subject plot, the original agreement was not required to be performed and the very basis on which the present application has been filed invoking Clause-23 of the Agreement for appointment of arbitrator in the facts & circumstances has no substance and in support of his submission placed reliance on the latter judgment of Supreme Court in 2011 (12) SCC 349 Union of India (UOI) and Ors. Vs. Master Construction Co.
Counsel for respondent further contended that unless case is prima facie established before the Court that cancellation agreement was due to fraud, coercion or duress, influence, merely using these stock phrase could not be sufficient and the party who alleges has to at least prima facie establish the same by placing material on record which in the instant case is completely missing and as regard MOU placed by the petitioner on record along with its rejoinder is concerned, it is nothing but a document created at later stage on its own letter head to show that the money was borrowed but nothing in support thereof has been placed on record and the application in these facts & circumstances deserves to be dismissed.
I have considered the submissions made by the respective parties and with their assistance also perused material on record.
This fact remain indisputed that the agreement of collaboration was executed on 9.5.2007 but after the developer (petitioner) was not able to get the permission for change of land use of the plot to commercial from the competent authority as per clause-20 of agreement of collaboration the parties entered into cancellation agreement which was agreed, signed and executed by the parties on 23.3.2009 and accordingly the respondent refunded Rs.1.50 crore after deducting Rs.50.00 lacs from Rs.2.00 crore received from the Developer as compensation against the demolition of the existing structure on the subject property and after receiving the money, the developer in terms of cancellation agreement handed over possession to the respondent owner. It was stipulated in the cancellation agreement dt.223.3.2009 that there will be no further liability on both the parties to the agreement and no right, interest and title shall remain in the property with reference to the agreement dt.9.5.2097 and no party may have any right, interest or title pursuant to the agreement dt.9.5.2007 and if it be so, it will be void-ab-initio and this was jointly signed & attested by the parties on the original agreement of collaboration scribed on non judicial stamp of which first page is of Rs.100/- bearing No. C-129696 and endorsement was made regarding its cancellation and regarding superior position and upper hand of the respondent that cancellation agreement dt.23.3.2009 was executed under duress or coercion, apart from allegation in the rejoinder, so called document placed on record in the form of memorandum of understanding scribed on letter head of the petitioner dt.10.5.2007 to justify that money was borrowed from M/s. Seaweed Marbles Pvt. Ltd. who too was pressing hard for refund of the amount in the opinion of this Court was an after thought to justify coercion/duress as prayed.
The extract of condition of cancellation agreement reads ad infra-
Now after the handing over of the property to the Developer and demolition of the existing structure by the Developer the terms and conditions of the agreement dt.9.5.2007 related to approval of change of land use could not be fulfilled and need for settlement arose between the parties due to which the construction on the property could not start.
That both the parties reached a mutual compromise and agreed that the Owner/Owners would refund Rs.1 crore 50 lacs after deducting Rs.50.00 lacs from Rs.2.00 crore received from the Developer as compensation against the demolition of the existing structure of the property.
And the Developer accepts the above Rs.1 crore 50 lacs from the Owner/Owners after deduction of Rs.50 lacs as compensation against the demolition of existing building structure on the property, out of Rs.2.00 crores given as interest free refundable security deposit to the Owner/Owners and handover the possession of the property to the Owner/Owners.
It is mutually agreed between the Owner/Owners and the Developer that the agreement dt.9.5.2007 will be treated as canceled subject to the clearance of aforesaid cheques for the total amount of Rs.1 Crore 50 lacs. After the cancellation of the agreement there will be no further liability on both the parties to the agreement and no right, interest and title shall remain in the property with reference to the agreement dt.9.5.2007 and no party may have any right, interest and title in pursuance to the agreement dt.9.5.2007 and if it is so it will be void-ab-initio.
The clauses of cancellation agreement clearly indicates that parties to the agreement has agreed and with mutual consent executed the cancellation agreement.
As regard judgments on which counsel placed reliance to justify that it was a case of coercion and undue influence suffice to say that mere allegation may not be sufficient but it has to be prima facie proved on the basis of documentary evidence on record and this what Apex Court in given facts and circumstances of the case considered and it has to be looked into facts of each case. However, Hon'ble Supreme Court in the later judgment reported in 2011 (2) WLC (SC) Civil 276 Union of India Vs. Master Construction (supra) has made reference of several judgments relied upon by the petitioner in para 19 which reads ad infra-
19. In Boghara Polyfab Private Limited (2009) 1 SCC 267, this Court surveyed a large number of earlier decisions of this Court, namely, The Union of India v. Kishorilal Gupta and Bros. AIR (1959) SC 1362, The Naihati Jute Mills Ltd. v. Khyaliram Jagannath AIR (1968) SC 522, Damodar Valley Corporation v. K.K. Kar (1974) 1 SCC 141; Bharat Heavy Electricals Limited, Ranipur v. Amar Nath Bhan Prakash (1982) 1 SCC 625, Union of India and Anr. v. L.K. Ahuja and Co. (1988) 3 SCC 76, State of Maharashtra v. Nav Bharat Builders 1994 Supp (3) SCC 83; P.K. Ramaiah & Company v. Chairman & Managing Director, National Thermal Power Corporation 1994 Supp (3) SCC 126, Nathani Steels Ltd. v. Associated Constructions : 1995 Supp (3) SCC 324, Indian Drugs and Pharmaceuticals Ltd. v. Indo Swiss Synthetics Gem Mfg. Co. Ltd. and Ors. (1996) 1 SCC 54, United India Insurance v. Ajmer Singh Cotton and General Mills and Ors. (1999) 6 SCC 400, Jayesh Engineering Works v. New India Assurance Co. Ltd. (2000) 10 SCC 178, SBP and Co. v. Patel Engineering Ltd. and Anr. (2005) 8 SCC 618, National Insurance Co. Ltd. v. Nipha Exports (P) Ltd. (2006) 8 SCC 156 and National Insurance Company Limited v. Sehtia Shoes (2008) 5 SCC 400.
However, the Supreme Court finally observed in para 24 which reads ad infra-
In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no-claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be necessity to refer the dispute for arbitration at all. It cannot be overlooked that the cost of arbitration is quite huge - most of the time, it runs in six and seven figures. It may not be proper to burden a party, who contends that the dispute is not arbitrable on account of discharge of contract, with huge cost of arbitration merely because plea of fraud, coercion, duress or undue influence has been taken by the claimant. A bald plea of fraud, coercion, duress or undue influence is not enough and the party who sets up such plea must prima facie establish the same by placing material before the Chief Justice/his designate. If the Chief Justice/his designate finds some merit in the allegation of fraud, coercion, duress or undue influence, he may decide the same or leave it to be decided by the Arbitral Tribunal. On the other hand, if such plea is found to be an after-thought, make-believe or lacking in credibility, the matter must be set at rest then and there.
In the instant case, as regard factual matrix is concerned, the parties initially entered into agreement of collaboration dt.29.5.2007 and it was the duty of the developer under the conditions to obtain certificate of change of land use for commercial by the competent authority which came to be rejected by the Corporation dt.27.6.208 and accordingly the parties agreed to enter into cancellation agreement executed on 23.3.2009 and as per mutual agreement, refund of sum of Rs.1.5 crore to the petitioner was carried out and remaining Rs.50.00 lacs was adjusted against demolition of existing building structure on the subject property and even after cancellation deed being executed between the parties, possession of the subject plot was also handed over to the respondent owner and thereafter notice was sent for appointment of arbitrator but no reference made regarding cancellation agreement executed between the parties or executed under duress and this Court can take judicial notice for intentionally withholding the cancellation agreement which the parties executed and agreed upon on 23.3.2009 and a joint note regarding cancellation of their agreement of collaboration, copy of which has been placed on record as Ann.R2 and in the considered opinion of this Court after the cancellation agreement being executed between the parties, the original agreement executed on 9.5.2007 was not required to be performed by either party and all further action was void-ab-initio. In these facts & circumstances the petitioner was not justified invoking Clause-23 of the agreement of collaboration which stands canceled vide mutual cancellation agreement dt.23.3.2009 and as regards allegation of coercion and undue influence is concerned, this is nothing but a mere allegation and no supporting document is made available on the basis of which this Court can record prima facie satisfaction of there being any undue influence or coercion remains for signing agreement of cancellation executed on 23.3.2009.
Thus, it clearly emerges that after the cancellation agreement dt.23.3.2009 being signed and executed, in furtherance voluntarily possession of the subject property being handed over to the owner after acceptance of amount refunded, indisputably the agreement of collaboration dt.9.5.2007 was not to be performed and Clause-23 could not be invoked by the petitioner for appointment of arbitrator u/S.11 (6) of the Act.
Consequently, in my considered view, the petition is wholly devoid of merit and accordingly dismissed.
[Ajay Rastogi], J.
dsr/-
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