Madras High Court
Ceebros Property Development vs Vanisri on 15 July, 2008
Author: M.Chockalingam
Bench: M.Chockalingam, R.Subbiah
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 15.07.2008 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE R.SUBBIAH O.S.A.NO.42 OF 2005 Ceebros Property Development Pvt. Ltd., 19/1, III Cross Road, R.A.Puram, Chennai-600 028 .. Appellant Vs. 1.Vanisri 2.Dr.A.Karunakaran .. Respondents This O.S.A. has been preferred under Order XXV Rule 11 of O.S Rules and under Clause 15 of Letters Patent against the order and decreetal order, dated 6.10.2004 made in A.No.291 of 2004 in C.S.No.859 of 2003. For Appellant : Mr.P.B.Balaji For Respondents: Mr.N.Sampath - - - - JUDGMENT
(The judgment of the Court was made by M.CHOCKALINGAM, J.) Challenge is made to a common order of the learned Single Judge made in Application Nos.290 and 291 of 2004, the first one is for stay of all further proceedings in C.S.No.859 of 2003 and the second one is for referring the matter to arbitration, in C.S.No.859 of 2003, a suit for recovery of money against two defendants found therein.
2.The Court heard the learned counsel on either side, perused the materials available and in particular the order under challenge.
3.The appellant/plaintiff filed a suit for recovery of sum of Rs.12.50 lakhs from the first defendant and Rs.6.25 lakhs from the second defendant along with interest on Rs.10 lakhs and Rs.5 lakhs respectively, alleging that the plaintiff entered into a Memorandum of Understanding with the first defendant, who is the owner of the land bearing Door No.106, Nelson Manickam Road, Aminjikarai, Chennai, along with 5 other adjoining owners for joint development of their properties; that following the said Memorandum of Understanding on 15.7.2000, a deed of Agreement for Development was actually entered into on 17.09.2001 between the parties; that following the same, different amounts were paid to the owners; that the plaintiff paid a sum of Rs.10 lakhs to the first defendant as advance and also Rs.5 lakhs to the second defendants towards brokerage charges; that the relationship between the plaintiff and the first defendant was strained; that there was exchange of notice and thus, according to the plaintiff, the defendants were liable to pay back the respective amounts of Rs.10 lakhs and Rs.5 lakhs along with interest to the plaintiff and hence the suit has been brought forth.
4.The defendants, even before filing the written statement, filed the said two applications, one for stay of proceedings in the civil suit and the other one is for referring the matter to arbitration. The first defendant, in the affidavit filed in support of the applications, while disputing the allegations made in the plaint, relying on Clause 16 of Memorandum of Understanding, has stated that whenever any dispute arose with reference to the interpretation of any clause or with reference to any other matter arising out this agreement, the same should be referred to arbitrator Mr.P.B.Ramanujam, Advocate, T.Nagar, Chennai, who should act as the sole arbitrator and hence it is a case where the matter should be referred to arbitrator for resolving the dispute between the parties.
5.The learned Single Judge posed a question whether the matter was to be referred to arbitration and on enquiry, he recorded a finding that it was a fit case for referring the matter to arbitrator and accordingly ordered the same. Hence this appeal is filed at the instance of the plaintiff.
6.Advancing arguments on behalf of the appellant, the learned counsel inter-alia would submit that it is not in controversy that there was Memorandum of Understanding entered into between the plaintiff on one side and six land owners on the other side on 15.7.2000; that subsequently, there was an agreement dated 17.09.2001; that it is true, there was arbitration clause in the Memorandum of Understanding, but the same was superseded by the subsequent agreement; that there was no reference as to the Memorandum of Understanding or the arbitration clause found in the Memorandum of Understanding in the agreement and thus, the intention of the parties at the time of agreement was quite clear that in case of default on either side what has got to be done was incorporated in the agreement. Added further the learned counsel that the plaintiff and six land owners were parties to Memorandum of Understanding and also in the agreement; that the instant suit has been brought forth for recovery of money of Rs.10 lakhs paid to the first defendant as advance and also Rs.5 lakhs paid to the second defendant as brokerage charges; that the second defendant was not the party either in the Memorandum of Understanding or in the later agreement; that so far as the suit was concerned, the suit was for recovery of money against the first and second defendants, but the other 5 owners were not parties at all.
7.The learned counsel would further add that originally, as per the Memorandum of Understanding, it is true, there was arbitration clause, where it is found that Mr.P.B.Ramanujam, Advocate was the sole arbitrator, but from the subsequent agreement, it would be quite clear that the said P.B.Ramanujam, Advocate was shown as Advocate for developer and thus, the position of the arbitrator was found to be changed and that it would indicate the intention of the parties not to go for arbitration and under these circumstances, all the factual and legal aspects were not looked into by the learned Single Judge. Added further the learned counsel that in a given case where the subject matter and the cause of action could not be split up, there is no question of referring the matter to arbitrator. In support of his contentions, the learned counsel relied on the following decisions:
a)2003 (2) CTC 431 (SUKANYA HOLDINGS PVT. LTD. VS. JAYESH H.PANDYA AND ANOTHER)
b)2005 (4) CTC 736 (DR.RAJENDRAN AND OTHER VS. RAMA CHIDAMBARAM AND OTHERS) Hence the learned counsel seeks to set aside the order of the learned Single Judge by allowing this appeal.
8.Contrary to the above contentions, the learned counsel for the respondents would submit that it is not in controversy that the parties have entered into a Memorandum of Understanding on 15.7.2000 and every clause in the memorandum of understanding would clearly indicate that there should be a formal agreement followed by Memorandum of Understanding; that accordingly, there was an agreement entered into between the parties on 17.09.2001 and under these circumstances, it would be quite clear that the principal document entered into between the parties was only the Memorandum of Understanding, dated 15.07.2000 and not the subsequent agreement, dated 17.09.2001; that the learned counsel relying on Clause 16 of Memorandum of Understanding would point out that the arbitration clause was very clear and that whenever there is dispute arose between the parties, the matter must be referred to the sole arbitrator Mr.P.B.Ramanujam, Advocate and hence it has got to be done so; that having agreed so, the plaintiff has now brought forth such a suit instead of referring the matter to arbitrator. Before filing the written statement, the defendants filed application for the relief that the matter has got to be referred to arbitrator; that the learned Single Judge has considered the factual position and also the legal position and has ordered so. The learned counsel in support of his contentions, relied on the decision of the Supreme Court reported in 2003 (3) CTC 438 (HINDUSTAN PERTOLEUM CORPN. LTD. VS. M/S.PINKCITY MIDWAY PETROLEUMS) and would submit that in a given case where there is arbitration clause in the agreement entered into between the parties and an application for referring the matter to arbitrator is made, it is mandatory on the part of the Court to refer the matter to arbitrator, if not done it may cause miscarriage of justice and under these circumstances, it is a fit case where the matter has got to be referred to arbitrator, which has been rightly done by the learned Single Judge and hence this appeal has got to be dismissed.
9.The Court has paid its anxious consideration on the submissions made and looked into the materials available.
10.It is not in controversy that it was a suit filed by the plaintiff/appellant for recovery of sum of Rs.12.50 lakhs from the first defendant, which would represent the advance amount paid and also Rs.6.25 lakhs from the second defendant, which would represent brokerage paid to him. Admittedly, the first defendant, who is the owner of a part of the property and also 5 other land owners joint together entered into a Memorandum of Understanding, dated 15.07.2000 with the plaintiff for development and various clauses are incorporated. Subsequently, there was an agreement entered into between the parties on 17.09.2001, incorporating different terms and conditions. While the matter stood thus, after memorandum of understanding and the agreement were entered into between the parties, the relationship between the plaintiff on one side and the first defendant on the other side has become strained, which resulted in exchange of notices. The plaintiff has brought the suit for recovery of the said amount from the defendants 1 and 2, as could be seen from the available materials. At this juncture, the defendants filed an application for referring the matter to the arbitrator, which has been ordered by the learned Single Judge.
11.After looking into both factual and legal positions, the Court is of the considered opinion that the order of the learned Single Judge has got to be set aside for the following reasons. Firstly, it was a suit for recovery of money filed by the plaintiff as against the first defendant, which amount would represent the advance paid and also against the second defendant, which would represent brokerage and also interest thereon. In the suit, the other 5 owners of the properties, who were also parties in the Memorandum of Understanding and also in the agreement entered into between the parties, were not shown as parties. Secondly, it is not a case where the relief is sought for in respect of anything as to the development of the property or any other dispute that is noticed. Thirdly, in the instant case, originally, it is not in controversy that there was Memorandum of Understanding entered into between the plaintiff and 6 parties, including the first defendant. A very reading of the Memorandum of Understanding would clearly indicate that a formal agreement was to be entered into between the parties subsequently. Further, there is specific clause, which would stipulate that whenever any dispute arose between the parties, the matter would be referred to the sole arbitrator Mr.P.B.Ramanujam. No doubt, there is arbitration clause, but subsequently an agreement was entered into between the parties on 17.09.2001. It is pertinent to point out that nowhere the arbitration clause, what is found in the Memorandum of Understanding, is found in the agreement. On the contrary, there is a specific clause at the end of the agreement as to what has got to be done by the parties if default is made by either of the parties. Had it been the intention of the parties that the matter must be referred to arbitration, there was no impediment in incorporating the very arbitration clause as found in the Memorandum of Understanding, in the agreement also, but not done so. On the contrary, remedy, which is open to the parties at the time of default, has been mentioned therein.
12.At this juncture, it could be well stated that the learned counsel for the respondents took the court to different parts of Memorandum of Understanding and would submit that the agreement subsequently entered into between the parties was only formal and the Memorandum of Understanding was the principal document, which contention cannot be accepted for the simple reason that the agreement, dated 17.09.2001 was actually an agreement for development entered into between the parties and the Memorandum of Understanding was actually superseded by the agreement, which has come into existence later.
13.The learned Single Judge of this Court had an occasion to consider such a situation in a case reported in 2005 (4) CTC 736 and has answered that when subsequent agreement was entered into between the parties, the first agreement would stand superseded and hence the parties cannot be allowed to act on the first agreement, while it was superseded by the second agreement. Further, in the instant case, the Court is able to see that either in the Memorandum of Understanding or in the subsequent agreement, the plaintiff on one side and 6 property owners on the other side, including the first defendant, were the parties. Now, the suit has been brought forth by the plaintiff only against the first and second defendants for recovery of money. In that suit, the other 5 owners were not parties at all. In the absence of 5 other owners, now the first defendant cannot take the arbitration clause found in the Memorandum of Understanding for service in order to refer the matter for arbitration. In the instant case, in the absence of other five owners as parties, no question of referring the matter to arbitration would arise.
14.Further, the contention put forth by the learned counsel for the appellant is that originally, Mr.P.B.Ramanujam, Advocate was appointed as sole Arbitrator as found in the Memorandum of Understanding, but a perusal of the agreement, dated 17.09.2001 would indicate that Mr.P.B.Ramanujam was acting as an Advocate for plaintiff developer and thus, the position of the arbitrator was also changed. Under these circumstances, it would talk contrary to the case of the respondent's side. Thus, it would be quite clear that it is not a fit case where the matter could be referred to arbitrator. Accordingly, the decision cited by the learned counsel for the appellant reported in 2003 (2) CTC 431 has got application to the present facts of the case and in a case where the subject matter and the cause of action could not be split up, there is no question of referring the matter to arbitrator.
15.Under these circumstances, the Court is of the considered opinion that the order of the learned Single Judge cannot be sustained and accordingly, it is set aside. The defendants are directed to file the written statement within a period of two months herefrom. Accordingly, this appeal is allowed. No costs.
(M.C., J.) (R.P.S., J.) 15.07.2008 Index : Yes Internet : Yes vvk M.CHOCKALINGAM, J.
AND R.SUBBIAH, J.
vvk O.S.A.NO.42 OF 2005 15.07.2008