Delhi District Court
Raksha Vigyan Karamchari vs Proto Developers & Technologies ... on 16 January, 2021
In the Court of Shri Sanjiv Jain,
District Judge (Commercial Court)03, Patiala House Courts
New Delhi
Arbitration Number. 145/2020
Raksha Vigyan Karamchari
Sahkari Awas Samiti Limited,
Pratap Vihar, NH24, Ghaziabad,
Uttar Pradesh.
Also at: 23/A, 1st Floor, Sector62,
Noida, Uttar Pradesh.
... Appellant
versus
1. Proto Developers & Technologies Limited,
Lower Ground Floor, S453, GK II, New Delhi110048
2. Corporation Bank,
Branch Sector62, Noida, Uttar Pradesh
3. Additional Commissioner (Housing) Cum Additional Registrar,
Corporative Societies
104, Mahatma Gandhi Marg, Lucknow, UP.
4. Uttar Pradesh Awas Vikas Parishad
Vasundhara, Ghaziabad, Uttar Pradesh.
... Respondents
Date of institution : 05.03.2020
Date of reserving judgment : 23.12.2020
Date of decision : 16.01.2021
Arb No. 145/20 Page No.1 of 12
JUDGME NT
1. This appeal under Section 37 of the Arbitration & Conciliation Act, 1996 (hereinafter called the 'Act') has been directed against the order dated 03.01.2020 passed by the Arbitrator in the Claim Petition no. 5 of 2020, whereby, the operation of the order dated 11.12.2019 passed by the respondent no. 3 has been stayed and the respondent no. 1 / appellant has been restrained to conduct the allotment process on 05.01.2020 or thereafter till the disposal of the claim petition. Respondent no. 2 i.e. Corporation Bank was also directed that the amount pertaining to respondent no. 1 be kept in freeze condition since the date of the passing of the order till the disposal of the claim petition.
2. Briefly the facts as stated in the appeal are that the Appellant is a group housing society, which was formed and registered in 1991 under the Uttar Pradesh Corporative Act, 1965 for constructing affordable flats for its members at Village Chhajarsi, Ghaziabad, Uttar Pradesh. After getting approval from UP Housing Development Board, it entered into a collaboration / development agreement with Rose Enterprises on 23.06.2006 for construction of flats. S. L. Maloo was the Managing Partner of the above company. Later, the business of Rose Enterprises was taken over by Proto Developers & Technologies Limited i.e. respondent no. 1. It was agreed upon that the respondent no. 1 would construct the flats / township and obtain requisite sanction / approval of the building Arb No. 145/20 Page No.2 of 12 plans from the concerned authorities and in lieu of that, it would have right to sell 25 flats in the society. The appellant entered another development collaboration agreement with Proto Developers & Technologies Limited on 21.01.2010. When the respondent no. 1 failed to perform its part after the lapse of 4 years, the appellant entered into a collaboration agreement with Antriksh Real Tech Pvt Ltd on 09.02.2010, in which respondent no. 1 was the confirming party. The said agreement was in addition to the agreements dated 23.06.2006 & 21.01.2010. It was agreed upon that in case of conflict between the agreements, the terms of the previous agreement shall be modified. S. L. Maloo became the President of the Managing Committee of the society. He connived with the Vice President and the Secretary and began to sell the flats without the knowledge and consent of the society members. When the members came to know of their unlawful activities, they filed the complaints to the Housing Commissioner. He vide order dated 27.10.2016 directed the Managing Committee to take action against the President and also restrained the President and Secretary from representing the society till their removal from their posts. Managing Committee called a meeting on 05.03.2017 and removed S. L. Maloo & others from their posts. They filed several civil suits and arbitration claims against the appellant through the respondent no. 1, which, unilaterally appointed the Arbitrators without giving notice to the appellant and got interim orders. Respondent no. 1 also appointed a panel of three Arbitrators namely Sh. Vivek Gaur, Sh. Hem Singh and Sh. Narender Gautam without sending notice of reference to the Arb No. 145/20 Page No.3 of 12 appellant and others respondents, initiated the arbitration proceedings titled M/s Proto Developers & Technologies Ltd Vs. M/s Raksha Vigyan Karmachari Sahkari Awas Samit Limited on 20.02.2017 and obtained ex parte order against the appellant and the other respondents on 08.03.2017. When the counsel for the appellant apprised the panel on 10.05.2017 that the appointment of the panel was illegal and other respondents were not the parties to the collaboration agreement dated 09.02.2010, none for the respondent no. 1 appeared and the proceedings of the arbitration were terminated for non prosecution. Respondent no. 1 then appointed Sh. Pankaj Garg as a Sole Arbitrator on the very next day of the termination of the proceedings without giving prior notice to the appellant and other respondents and filed statement of claims on 12.05.2017 and got issued the notice for 04.06.2017. One of the parties to the agreement dated 09.02.2010, Antariksh Real Tech Pvt Ltd challenged the appointment of Sh. Pankaj Garg as the Sole Arbitrator before the High Court vide petition no. 435/2017. The High Court referred the matter to Delhi International Arbitration Centre (DIAC) with direction to appoint a Sole Arbitrator vide order dated 16.03.2018. The respondent no. 1 did not pay the arbitration fee to DIAC for about one and half years, which made DIAC not issue notice to the parties. The respondent no. 1 then on 03.01.2020 unilaterally appointed the Arbitrator Sh. Pradeep Kumar Kaushik and filed the statement of claims along with the application for stay of the allotment process to be conducted in terms of the order dated 11.12.2019 of the respondent no. 3. The Arbitrator without giving Arb No. 145/20 Page No.4 of 12 notice to the respondents passed the impugned order dated 03.01.2020.
3. It is alleged that the Arbitrator entered into the reference without appreciating the contents of the arbitration clause in the agreement nor tried to ascertain whether the appellant and other respondents were served with the notice of reference for the appointment of the Arbitrator or whether the provisions of Section 21 of the Act have been complied with or not. It is stated that the appellant immediately filed an application bearing IA No. 01/2020 under Section 13 of the Act on 03.02.2020 and challenged the appointment of the Arbitrator. It also filed an application bearing IA no. 02/2020 for vacating the ex parte order dated 03.01.2020 bringing to the knowledge of the Arbitrator that there was no agreement between the appellant and the respondent no. 1 giving authority to the respondent no. 1 to unilaterally appoint the Arbitrator. It placed the three agreements dated 23.06.2006, 21.01.2010 & 27.08.2016 before the Arbitrator. However, the Arbitrator dismissed the application vide order dated 19.02.2020 holding that the respondent no. 1 has invested huge amount in the project and the appellant could not be allowed to use the funds lying in the bank.
4. It is alleged that the Arbitrator did not make any observation how the respondent no. 1 could appoint the Sole Arbitrator unilaterally without giving notice to the appellant and the other Arb No. 145/20 Page No.5 of 12 respondents. He failed to assign any reason how the respondent nos. 2 to 4 could be the party to the arbitration proceedings. It is alleged that the Arbitrator has referred a collaboration agreement dated 05.09.2016 in his order stating that Para 6 of the agreement gave right to the respondent no. 1 to appoint the Sole Arbitrator unilaterally. It is alleged that no such agreement was entered into between the appellant and the respondent no. 1 and the appointment of the Sole Arbitrator was unlawful and against the provisions of the Act. It is stated that the order of the Arbitrator is unreasonable, perse illegal and liable to be set aside.
5. On getting notice of the appeal, respondent no. 1 filed its reply alleging that the plaintiff has concealed the material facts and supplement to the collaboration agreement duly executed by the appellant and the respondent no. 1 modifying the arbitration clause in suppression of all previous arbitration clauses thereby empowering either party i.e. appellant or the respondent no. 1 to appoint a sole arbitrator. It was agreed therein that once such appointment is made by either party, the other party shall be bound to join the arbitration proceedings without questioning the appointment. It is stated that after invoking the arbitration clause, it appointed the Sole Arbitrator for adjudication of disputes and made reference and thus, the appointment of the Arbitrator cannot be faulted. It is stated that the impugned order was passed by the Arbitrator after considering the entire facts & circumstances and there no legal requirement for the Arbitrator to issue notice to the Arb No. 145/20 Page No.6 of 12 other party before entering into the reference of arbitration. Only thing, which the Arbitrator was to satisfy at the time of entering into reference that there existed a valid and legal arbitration between the parties.
6. It is alleged that the respondent no. 1 vide agreement to sell dated 23.06.2006 had purchased the land admeasuring 61.5 Bighas at Village Chhajarsi after making payment of entire sale consideration to the appellant and taken possession of the land. Thereafter, the collaboration agreements dated 21.01.2010 and 27.08.2016 were executed for construction and development of flats. It was agreed upon that ownership of the flats shall rest with the respondent no. 1 and the appellant shall be responsible to transfer the sale consideration of the said flats to the respondent no. 1. It is alleged that as on date, the buyers have to pay the huge amount to the respondent no. 1 but the appellant wants to allot the flats to its members to the deprivation of the respondent no. 1 without settling the accounts. It is stated that it was agreed upon vide agreement dated 23.06.2016 that 237 members would resign and new members of the respondent no. 1 would be inducted subject to the condition that respondent no. 1 would compensate such members. It is stated that the respondent no. 1 honored its contractual obligations, compensated the society and paid about Rs. 25.0 crores but the appellant and its members failed to pay the amount towards 237 flats. On the contrary, they are claiming ownership and possession of the flats. It is stated that on 05.09.2016 a supplement agreement to Arb No. 145/20 Page No.7 of 12 collaboration agreement was entered, wherein it was stated that the ownership of the flats developed / constructed shall rest with the respondent no. 1 and the appellant would remit the monies collected by it towards the sale consideration of the flats. It is stated that the total balance to be recovered till date is approximately Rs. 203.0 crores but the respondent no. 3 passed the order dated 11.12.2019 allotting the remaining built up and / or under construction flats fatal to the interest of the respondent no. 1. It is stated that the Arbitrator has rightly passed the impugned order dated 03.01.2019, which does not call for interference.
7. I have heard Ld. Counsel Sh. Ravi Ranjan for the appellant and Sh. Manu Parashar, Ld. Counsel for the respondent no. 1 and gone through the records of the case.
8. A perusal of record shows that on 23.06.2006, the appellant had entered into an agreement with Rose Enterprises through its partner S. L. Maloo for development of the land measuring 61.5 Bighas at Village Chhajarsi, Ghaziabad and construction of flats etc for its members. It was agreed upon that the existing 237 members of the society would retire and they would be compensated by the new members to be brought in by Rose Enterprises. Rose Enterprises would pay Rs. 25.0 lakhs in advance and the balance of Rs. 10,44,50,000/ in ten months. It was also agreed upon that the society would accept 25 new members of the company and induct S. L. Maloo in the managing committee and that the company could Arb No. 145/20 Page No.8 of 12 receive monies from the proposed members and deposit with the society for payment to the existing members. It was agreed that all disputes arising out of this agreement would be settled mutually or else as per the provisions of Arbitration Act. Rose Enterprises was taken over by Proto Developers & Technologies Limited i.e. respondent no. 1. The society then entered into the collaboration agreement on 21.01.2010 with Proto Developers & Technologies. It contained an arbitration clause that in case of dispute, matter shall be referred to Arbitration of two persons, one to be appointed by the developer and other to be appointed by the owners and the decision of the Arbitrators will be final and conclusive. The society entered into another collaboration agreement dated 27.08.2016, which has reference of agreement to sell dated 23.06.2006 and development / collaboration agreement dated 21.01.2010 and indenture of collaboration agreement dated 09.02.2010 with the appellant, respondent no. 1 and Antariksh Realtech Pvt Ltd, which contained clause no. 10 relating to resolution of disputes through arbitration of two persons, one to be appointed by the developer and other by the owners.
9. During construction, disputes arose between the parties and references were made to the Arbitrators / Arbitral Tribunal. The Arbitrator in the order dated 19.02.2020 has made reference of the supplement to the development collaboration agreement dated 05.09.2016 containing clause 6 about the constitution of the Arbitral Tribunal, which is reproduced as under:
Arb No. 145/20 Page No.9 of 126. The provision in earlier bipartite agreement for appointment of two Arbitratorsone each by Raksha and Protostands modified to the extent that even a sole Arbitrator appointed by either party first can function as such and once appointed the other party shall be bound to join the arbitration proceeding without questioning such appointment.
10. It is to note that the reference of the supplement to development collaboration agreement dated 05.09.2016 came for the first time in the order dated 19.02.2020. No reference of the said supplement came in the earlier orders of the Arbitrators / Arbitral Tribunal, even in the order of the High Court dated 16.03.2018, whereby, the parties were directed to appear before DIAC on 06.04.2018 qua the appointment of Sole Arbitrator for adjudication of disputes in relation to the collaboration agreement. The appellant has categorically denied having entered into the supplement dated 05.09.2016 by filing an affidavit. The affidavit of the respondent is however contrary to the affidavit filed by the appellant.
11. In the instant case, as evident from the record, the respondent no. 1 did not approach DIAC for the appointment of the Arbitrator in compliance of the order of the Hon'ble High Court but unilaterally, appointed the Sole Arbitrator Sh. Pradeep Kumar Kaushik after making a reference on 03.01.2020 without giving notice to the appellant & other respondents and filed the statement of claims and the application for stay of the order dated 11.12.2019 of the respondent no. 3, who passed an ex parte ad interim order on the same day i.e. on 03.01.2020.
Arb No. 145/20 Page No.10 of 1212. Section 21 of the Arbitration & Conciliation Act, 1996 provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
13. In the instant case, no request was received by the appellant prior to referring of disputes to the Arbitrator by the respondent no.
1. After the impugned order dated 03.01.2020, the appellant came to know of the reference. Immediately, on 03.02.2020, it tried to approach the Arbitrator but could not contact him. Thereafter, the appellant filed an application under Section 13 of the Arbitration Act vide IA No. 01/2020 on 03.02.2020 challenging the appointment of the Arbitrator and another IA No. 02/2020 dated 14.02.2020 for vacating the order dated 03.01.2020. The Arbitrator vide order dated 19.02.2020, after hearing the counsels for the appellant and the respondent no. 1 dismissed both the applications.
14. The appellant has challenged the impugned order dated 03.01.2020 in this Court, vide appeal, on 05.03.2020 meaning thereby that the appellant was well aware of both the orders dated 03.01.2020 & 19.02.2020 passed by the Arbitrator.
15. During arguments, question of limitation was raised by the counsel for the respondent no. 1. The appellant referred the case of N. V. International Vs. The State of Assam & Ors, CA No. 9244 of Arb No. 145/20 Page No.11 of 12 2019, decided on 06.12.2019, wherein, it was held that the appeal under Section 37 can be filed within a period of 90 days with a grace period of 30 days.
16. In the instant case, the appeal has been filed within 90 days from the date of the impugned order. Applying the principles laid down in the case supra, I am of the view that the appeal is not barred by limitation.
17. Since, in the instant case, the impugned order dated 03.01.2020 has been merged with the order dated 19.02.2020, which has not been challenged by the appellant, I am of the view that the appeal against the impugned order dated 03.01.2020 is not maintainable. It is also to mention that instant appeal has been preferred on 05.03.2020 after the order dated 19.02.2020. No reasons have been assigned for not preferring appeal against the order dated 19.02.2020, in which, the order dated 03.01.2020 has already been merged.
18. The appeal is accordingly dismissed with no order as to costs.
File be consigned to Record Room.
Announced in open court today i.e. 16th January, 2021 (Sanjiv Jain) District Judge (Commercial) 03 Patiala House Courts, New Delhi Arb No. 145/20 Page No.12 of 12