Bombay High Court
Kiran Gunvantray Parekh And 2 Ors vs Arihant Associates And 2 Ors on 20 November, 2019
Author: G. S. Patel
Bench: G.S. Patel
904-CARBPL1051-19.DOC
Arun
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
ARBITRATION PETITION (L) NO. 1051 OF 2019
Kiran Gunvantray Parekh & Ors ...Petitioners
Versus
Arihant Associates & Ors ...Respondents
WITH
ARBITRATION APPLICATION (L) NO. 345 OF 2019
Mr Devrat Singh, with Mr Arthav Sanghvi, i/b Praxis Legal, for the
Petitioners.
Ms Tamsin Moris, i/b Shewta Shinde, for the Respondents.
CORAM: G.S. PATEL, J.
DATED: 20th November 2019 PC:-
1. There is an arbitration application under Section 11 and an arbitration petition under Section 9 of the Arbitration and Conciliation Act, 1996. The arbitration petition is still on a lodging number. If it has been dismissed for default, it is restored. All fling defects are to be cured within one week. In default both Section 9 petition and the Section 11 application will stand dismissed and this order will stand recalled and the arbitral mandate will terminate. I fnd there is a need to say this because Advocates and parties are Page 1 of 9 20th November 2019 ::: Uploaded on - 21/11/2019 ::: Downloaded on - 22/11/2019 00:16:11 ::: 904-CARBPL1051-19.DOC being utterly remiss in curing these fling defects and are taking this court for granted.
2. A few facts may be necessary. The 1st and 2nd applicants are husband and wife. The 3rd applicant is their HUF. The 1st respondent is a partnership frm doing business in real estate development. Respondents Nos. 2 and 3 are its partners.
3. The pleadings recite that sometime in August 2014 the respondent sought fnancial assistance from the 1st applicant to fund various development projects. Their discussions culminated in the execution of a frst Memorandum of Understanding ("MoU") dated 10th September 2014. The 1st applicant was assured of a fxed return in the form of interest. He was to advance to Rs. 2 crores to the respondent against the assignment of a fat in favour of the applicants in the respondents project called Anand Tower at Tilak Nagar, Chembur. This was partial security. The amount advanced under the frst MoU was to be returned with interest at 40% per annum within one year. The 1st applicant disbursed a total amount of Rs.1,32,48,000/- between September and October 2014.
4. He could not disburse the entire amount required under the MoU. He asked the respondents to repay the amount with pro rata interest. The respondents refused and said that they had not been put in funds for the entire amount. They also said that they were no position to make pre-payment as requested.
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5. Further discussions followed and these culminated in a second MoU dated 6th November 2014 superseding the frst. A copy of this second MoU is at Exhibit "A". The amount of Rs. 1,32,48,000/- paid under the frst MoU was acknowledged and the applicants agreed to disburse a further amount of Rs. 66 lakhs making a total of Rs. 1,98,48,000/-. The repayment of this was secured by creating a charge over two fats C-1502 and C-1504 in the Anand Tower project at Chembur. Again this carried interest at 40% per annum (and I am only noting the contractual provision, not returning a fnding on it). The amount was to be returned with this interest by 30th September 2015. There was also a provision for further interest.
6. The respondents were unable to adhere to their commitments under the second MoU. The applicants say that they exercised their right and demanded a transfer of the secured fats to their name. This did not happen. The respondents sought an enlargement of time by a year to make repayment. Again the respondent defaulted. They made part payment of only Rs. 15 lakhs in August 2016.
7. According to the applicants, since there was no payment in full and even interest payment had not been made the applicant agreed to accept the respondents ofer of two additional fats 1403 in "C" wing of Anand Tower and 1302 in "C" wing of Anand Tower for a stated lump-sum price of Rs.1,39,18,000/-. Agreements of sale were apparently executed. There were again defaults.
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8. It is in these circumstances and because of the continued default that the present claims comes to be made.
9. The arbitration agreement is Clause 3 of the second MoU, reproduced at page 19 of the arbitration application.
"In case of any dispute arising from this MOU, the verdict of Shri Pankaj Nagindas Shah, the broker, shall be the fnal on h is agreeing for voluntary assumption of responsibility, arising from his age-old relationship with above said The Developer through this MOU as arbitrator between the Developer of frst part & The Financiers & or Investors of Second Part. However, this shall not exclude the option at the hands of The Financiers &or Investors of Second Part approach any courts/tribunals of India for recovering their aggregate amount of Rs. 2,77,76,000/- (Rupees Two Crores Seventy Seven Lakhs Seventy Six Thousand only) including principal aforesaid loaned amounts together with aforesaid other assumption of liabilities of Rs. 66,00,000/- of The Developer of First Part, consequent interest &/or proft as has been decided under this MoU."
10. The learned Advocate for the respondents is correct in saying that at a minimum this is a very strangely worded clause. Indeed it is. The second portion of it seems to completely derogate from the frst part. She also points out that Clause 5 and 6 at page 20 would prima facie indicate that the parties had abandoned the notion of arbitration.
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11. I do not think it is possible to accept this. The execution of the two MoUs is not disputed. What the meaning of these clauses is and whether any question arises of arbitral competence or jurisdiction must necessarily be left to the arbitral tribunal for a decision under Section 16 of the Arbitration and Conciliation Act. There can be no doubt that the frst portion of Clause 3 does in fact contemplate arbitration. It may not be worded in the usual fashion but that it contemplates an arbitration and in fact names an arbitrator cannot be denied. That arbitrator cannot possibly function since he is intimately connected to one of the two parties and he would stand disqualifed under Section 12(1) read with Section 12(2) and 11(8) as also schedule VII of the Arbitration and Conciliation Act.
12. The parties thus, and in these circumstances, leave the choice of the arbitrator to the Court. On behalf of the petitioners/applicants it is also stated that the Section 9 application will be presented and urged as Section 17 application before the learned sole arbitrator.
13. Having regard to the position of the parties, I will request Mr Atul Daga, learned Advocate of this Court to serve as the learned Sole Arbitrator.
(a) Appointment of Arbitrator: By consent, Atul Daga, is hereby nominated to act as a Sole Arbitrator to decide the disputes and diferences between the parties.
(b) Communication to Arbitrator of this order:Page 5 of 9
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(i) A copy of this order will be communicated to the learned Sole Arbitrator by the Advocates for the Applicant within one week from today of the order being uploaded.
(ii) In addition, within one week of this order being uploaded, the Registry will forward an ordinary copy of this order to the learned Sole Arbitrator at the following postal and e-
mail addresses:
Arbitrator/s Mr Atul Daga Address 2nd foor, Jeroo Building, MG Road, Fort Mumbai 400 001.
Mobile +91 98190 44756
Email [email protected]
(c) Disclosure: The learned Sole Arbitrator is requested to
forward his statement of disclosure under Section 11(8) read with Section 12(1) of the Arbitration Act to the Prothonotary and Senior Master of this Court, referencing this arbitration application, as soon as possible, and in any case sufciently in advance of his entering upon the reference to his arbitration. That statement will be retained by the Prothonotary & Senior Master on the fle of this application. Copies will be given to both sides.Page 6 of 9
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(d) Appearance before the Arbitrator: Parties will appear before the learned Sole Arbitrator on such date and at such place as he nominates to obtain appropriate directions in regard to fxing a schedule for completing pleadings, etc.
(e) Contact/communication information of the parties:
Contact and communication particulars are to be provided by both sides to the learned Sole Arbitrator within one week of this order being uploaded. The information is to include a valid and functional email address.
(f ) Section 16 application: The respondent is at liberty to raise all questions of jurisdiction within the meaning of section 16 of the Arbitration Act. All contentions are left open.
(g) Interim Application/s:
(i) Liberty to both sides parties to make an
interim application or interim applications including (but not limited to) interim applications under Section 17 of the Arbitration & Conciliation Act, 1996 before the learned Sole Arbitrator. Any such application will be decided in such manner and within such time as the learned Sole Arbitrator deems ft.Page 7 of 9
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(ii) The present Petition under Section 9 of the Arbitration Act will be treated, heard, and disposed of as an application under Section 17 of the Act. All afdavits fled in the Section 9 petition will be treated as afdavits fled in the Section 17 application. Liberty to apply to the learned Sole Arbitrator for leave to fle further afdavits.
(iii) The learned Sole Arbitrator is requested to dispose of all interim applications at the earliest.
(iv) All contentions are left open.
(h) Fees: The arbitral tribunal's fees shall be governed by
the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018.
(i) Sharing of costs and fees: Parties agree that all arbitral costs and the fees of the arbitrator will be borne by the two sides in equal shares in the frst instance.
(j) Consent to an extension if thought necessary. Parties immediately consent to a further extension of up to six months to complete the arbitration should the learned Sole Arbitrator fnd it necessary.
(k) Venue and seat of arbitration: Parties agree that the venue and seat of the arbitration will be in Mumbai.
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(l) Contentions left open. All contentions are left open throughout.
14. The petition and the application are disposed of in these terms. There will be no order as to costs.
15. The reply afdavit is taken on record.
(G. S. PATEL, J) Page 9 of 9 20th November 2019 ::: Uploaded on - 21/11/2019 ::: Downloaded on - 22/11/2019 00:16:11 :::