Telangana High Court
Firasat Hussain And 3 Others vs Mirza Taimur Baig Najam And 9 Others on 25 November, 2022
Author: A. Abhishek Reddy
Bench: A. Abhishek Reddy
THE HON'BLE SRI JUSTICE A. ABHISHEK REDDY
ARBITRATION APPLICATION No.104 OF 2021
ORDER:
This application is filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (for short 'the Act'), seeking appointment of a sole Arbitrator to adjudicate the claims and disputes between the applicants and the respondents.
The case of the applicants, in brief, is that having believed the respondents' team integrity, competency and financial soundness and the assurance of the respondents that they will carry out the construction work to complete the proposed HQH Residential Complex, they have entered into a Registered Development Agreement-cum-General Power of Attorney bearing document No.2255 of 2018 dated 29.05.2018 with the respondents herein for development of the property possessed by the applicants bearing municipal Door Nos.6-2-1 & 1/1 (part) and 6-2-1/A6 collectively admeasuring 951 Sq. Yards out of 1111 Sq. Yards situated at Lakdi-ka-pul, Hyderabad. The said property along with its existing structure is valued more than Eight Crores. The grievance of the applicants is that even after lapse of 12 months period, no work was done by the respondents in the subject premises except formally laying six columns footing out of 42 columns footing by spending eight lakhs for the project worth 2 seven crores. Even the said work was carried out by the respondents in an un-professional, un-skilled manner without a qualified full time site engineer. Further, it was came to the notice of the applicants that the respondents are not having any financial soundness to take up the construction work and they have taken up the project only to procure money from the intending buyers. Further, the respondents have obtained 30% floor area permission and started constructing 70% more area. Further, the proposed plan of the respondents is without setbacks and against the norms and rules of the GHMC Act and in such a situation, the applicants, being the owners of the property, will be held responsible for the deviations committed by the respondents. Further, in the month of July, 2019, the GHMC authorities have issued show cause notice dated 06.08.2019 under Sections 452 (1) and 461 (1) of the GHMC Act for the unauthorized construction being carried out at the schedule property. On 07.08.2019, the GHMC authorities have visited the site and stopped the unauthorized construction. Thereafter, the portion of illegal construction was demolished by the GHMC authorities. Further, the applicants got issued a legal notice for cancellation of Development Agreement-cum-General Power of Attorney, to which, the respondents got issued a reply notice after lapse of prescribed time limit of 15 days. Thereafter, the applicants have initiated arbitration proceedings vide OP No.86 3 of 2019 on the file of III Additional Chief Judge's Court wherein interim orders were granted and the same are still in subsistence. Further, having regard to clause 34(d) of the Development Agreement, the applicants have issued a notice to the respondents on 30.10.2019 requesting for appointment of an arbitrator, to which the respondents have issued reply notice dated 07.11.2019 proposing the name of Mohd Osman Ali as the arbitrator, but the said proposed arbitrator is an interested party to the transaction and he is also involved in crime No.729 of 2019 of Saifabad PS. Therefore, the applicants are constrained to file the present Arbitration Application.
The respondents have filed a counter mainly stating that the respondents have spent substantial amount towards development of the property and have paid Rs.1,85,00,000/- to the applicants while entering into the Development agreement. Further, the respondents have engaged qualified Engineers for the purpose of supervision of the construction and have also obtained necessary approvals from the GHMC and started construction strictly as per the sanctioned plan. When the construction was in progress and the respondents have laid slabs, the petitioners have set up false defense and started filing cases and not allowing the respondents to complete the work. It is further stated that in order to extract more money, unnecessary complaints are being filed by the 4 applicants. The alleged show cause notice was also issued by the GHMC authorities only at the instigation of the applicants. Further, the applicants have filed OS No.98/2019 seeking cancellation of Development Agreement. It is alleged that on one side, the applicants are invoking arbitration proceedings and on the other they approached the Civil Court and therefore the present Arbitration Application is not maintainable. The amount paid by the respondents of Rs.1,45,00,000/- to the applicants and Quader Hussain while entering into the agreement shows the financial soundness of the respondents. That absolutely there is no need to appoint the arbitrator and therefore the present Arbitration Application is liable to be dismissed.
Heard Sri Manu, learned Counsel for the applicants, and Sri MAK Mukheed, learned Counsel for the respondents. Perused the record.
For the purpose of deciding the present application, this Court has only to see whether there is an arbitrable dispute between the parties and whether the agreement entered between the parties has an arbitration clause to refer the matter to an arbitrator.
Admittedly, the Development Agreement-cum-General Power of Attorney, dated 29.05.2018, entered by the parties contains an Arbitration Clause i.e. Clause 34 (d), which reads as under: 5
"34 (d) In case of any disputes arising between the parties except the delay in completion, the matter will be referred to Arbitrator one chosen by each party and in case of any difference in opinion between such Arbitrators, they shall nominate common umpire and their award shall be final and binding on both parties and relevant provisions of the Arbitration Act, shall apply."
In IBI Consultancy (India) (P) Ltd. v. DSC Ltd.1, the Hon'ble Supreme Court while dealing with the Arbitration Application filed under Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, for appointment of an arbitrator to adjudicate the disputes that have arisen between the parties therein in connection with the contracts in question, has held, at para 8, as under:
8. The first and the foremost thing is the existence of an arbitration agreement between the parties to the petition under Section 11 of the Act and the existence of dispute(s) to be referred to arbitrator is condition precedent for appointing an arbitrator under Section 11 of the Act. It is also a well-settled law that while deciding the question of appointment of arbitrator, the court has not to touch the merits of the case as it may cause prejudice to the case of the parties. The scope under Section 11(6) read with Section 11(9) is very limited to the extent of appointment of arbitrator. This Court has to see whether there exists an arbitration agreement between the parties and if the answer is in the affirmative then whether the petitioner has made out a case for the appointment of arbitrator.
1 (2018) 17 SCC 95 6 Further, in Duro Felguera, S.A. v. Gangavaram Port Ltd.,2 the Hon'ble Supreme Court, at para 59, has held as under:
"The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co.Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117]. This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected."
In view of the law laid down by the Hon'ble Supreme Court in IBI Consultancy (India) (P) Ltd. and Duro Felguera, S.A. (referred supra) and also the fact that the respondents, when issued a legal notice invoking arbitration clause, have agreed for appointment of Sri Mohd Osman Ali as an Arbitrator, whose candidature was not acceptable to the petitioners, this Court deems it fit to allow the Arbitration Application and refer the matter for arbitration to be conducted by a sole arbitrator.
In the result, the present Arbitration Application is allowed appointing Ms. G. Sridevi, retired Judge of this High Court, as the sole Arbitrator to arbitrate on the disputes between the applicants 2 (2017) 9 SCC 729 7 and the respondents and the said arbitrator shall enter on reference and proceed with, as enjoined by the Act.
The learned Arbitrator shall fix her remuneration as per the statutory provisions. She shall also fix the costs and expenses of the secretarial assistance for the arbitration proceedings upon deliberation and consultation with the parties. All the costs and expenses of the arbitration proceedings shall be borne by both the parties in equal share. The learned Arbitrator is requested to complete arbitration proceedings, and pass an award at the earliest, preferably within six months from the date of commencement of the arbitral proceedings. It is made clear that this order does not preclude the respondent from raising all legally tenable objections as may be permissible under the law.
Miscellaneous Applications, if any, pending in the Arbitration Application shall stand closed.
____________________ A. ABHISHEK REDDY, J Date : 25-11-2022 sur