Delhi High Court
M/S D.C.M. Ltd vs M/S R.K. Towers (India) Pvt Ltd on 22 August, 2008
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Arb.A.415/2006 & OMP 362/2006
% Date of decision : 22.08.2008
M/S D.C.M. LTD ....... Petitioner
Through: Mr. Jayant Bhushan, Sr. Advocate
& Mr. Siddharth Silwal, Advocate.
Versus
M/S R.K. TOWERS (INDIA) PVT LTD ....... Respondent
Through : Mr. Upamanyu Hazarika, Mr. Neeraj Malhotra Advocates CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may YES be allowed to see the judgment?
2. To be referred to the reporter or not? YES
3. Whether the judgment should be reported YES in the Digest?
RAJIV SAHAI ENDLAW, J
1. This common order is made on AA.No.415/2006 filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator and OMP 362/2006 under Section 9 of the said Act for interim measures during the proposed arbitration proceedings.
2. The petitions are opposed on the grounds (i) that the claims for the adjudication of which appointment of arbitrator is sought, are barred by time; (ii) that the petitioner did not raise the claims now being raised, in spite of being so entitled to, at the time of earlier Arb.A.415/2006 & OMP 362/2006 Page no. 1 of 16 arbitrations arising out of the same agreement; (iii) on the ground of estoppel, waiver and constructive res judicata; (iv) on the ground of the petitioner having no locus to raise the disputes alleged. If there is to be no arbitration, the question of interim measures does not arise.
3. For adjudication of the aforesaid disputes, reference may be made to the agreement between the parties. The petitioner as the owner of a plot of land bearing No.16, Barakhamba Road, New Delhi, entered into an agreement dated 13th January, 1978 with the respondent whereunder the respondent at its own cost and expense agreed to construct a multi storied building comprising of basement, ground floor, first floor, upper first floor and second to 9th floors and 10th service floor on the said plot of land. It was further agreed that upon completion of the building the petitioner shall be entitled to 63% of the entire saleable space between the second and the ninth floor and 63% of usable area(s) in basement of the building and shall be entitled to transfer the same. The respondent was to retain the remaining saleable area and was entitled to transfer the same. The agreement also contained an arbitration clause.
4. It is not in dispute that (i) the construction of the building was completed in the year 1989; (ii) that Shri Dharma Vira, the agreed nominated arbitrator on 1st January, 1988, gave an award with respect to the disputes between the parties of allocation of space, finalization of the amount to be paid by the petitioner towards fire fighting and electric sub-station, settlement of accounts and provision to the petitioner of area which had been taken out of their share towards fire Arb.A.415/2006 & OMP 362/2006 Page no. 2 of 16 fighting as refuge area; (iii) the agreed nominated arbitrator gave another award dated 22nd June, 1998 on the claims of the petitioner for recovery of loan, amount paid by the petitioner on behalf of the respondent, damages, share in ground rent etc and on the counter claims of the respondent for refund of security deposit, maintenance charges, additional expenses etc.
5. The agreed nominated arbitrator who had given two awards (supra) having expired, the petitioner, in this petition, raised the following disputes and sought resolution of the same through arbitration of an independent arbitrator: (a) that the respondent has illegally and unauthorizedly retained control over common areas and facilities in the building and is charging exorbitant amount as maintenance charges in contravention of the agreement of the said common areas and facilities to be maintained by a holding organization. It is alleged that the respondent has thereby wrongfully withheld and enjoyed the monies and properties belonging to the holding organization; (b) that the respondent has committed fundamental breach of the agreement by violating mandatory terms thereof. The L&DO being the lessor of the land underneath the building has issued notices to the petitioner as lessee of the land, for unauthorized construction on the property, wrongfully covering of open areas and misuse and as a consequences of which L&DO has now threatened to terminate the lease and to re-enter the premises and impose penalty. The said notices are stated to be dated 27th December, 2004, 23rd January, 2006 and 16th March, 2006; (c) that the respondent has put up an unauthorized construction on the roof of the Arb.A.415/2006 & OMP 362/2006 Page no. 3 of 16 10th floor of the building thereby constructing 11th floor against the terms of the agreement and sanctioned plan. The respondent has also allowed the building to be misused by the occupiers of the basement, ground and first floor - the said occupiers have been put into possession by the respondent.
6. The respondent in paras 14-15 of its reply has, inter alia, stated that the petitioner cannot agitate the issue of maintenance of common areas and amenities as the petitioner is not in possession of any portion of the building and has no locus to raise the said issues; the petitioner in the year 1990-91 sold of its entire space allocation in respect of the said building in respect of third parties and walked out of the said building - the said fact has been admitted by the petitioner and in the absence of any presence of the petitioner in the said building, it could not have contributed to the upkeep and maintenance of the building.
7. The petitioner filed a rejoinder to the aforesaid reply in which, in response to the averments aforesaid in paras 14 and 15, the petitioner has stated that physical presence of the petitioner is not required as obligations of upkeep and maintenance of the building are those of the holding organization to be constituted and with respect to which the claims have been raised. In spite of specific averment of the respondent, that the petitioner in the year 1990-91 sold of its entire space allocation in respect of the building to third parties and walked out of the said building, the petitioner neither controverted the same nor made any averment that it was holding /owning any Arb.A.415/2006 & OMP 362/2006 Page no. 4 of 16 portion of the built up space allocated to it in the building. The petitioner in the rejoinder in para 4 of preliminary submissions stated that the disputes are now two fold, i.e., firstly of misuse and unauthorized construction and secondly of failure of respondent to constitute holding organisation.
8. Article VI of the agreement provides as under :
"Article VI - Holding organization:
(1) BUILDER shall in consultation with OWNER either reconstitute, re-organise and/or otherwise do all that shall be necessary to authorise an existing society, company, firm or other body authorized to take charge of the BUILDING for the purposes of managing the same rendering necessary services and/or shall constitute a new society, company, firm or other body for the purpose.
(2) That the capital of the Holding Organisation shall be Rs one lakh which shall be contributed by the OWNER and the transferees of the BUILDER, the OWNER contributing 63% thereof and the balance to be contributed by such transferees in the ratio of their holdings.
(3) The costs and expenses for preparing, engrossing,
stamping and registering any Deed and/or other
documents required for formation of Holding
Organization (inclusive of stamp duty payable) shall be borne by the Holding Organization, the same to meet by it from the above said capital.
(4) The Holding Organisation shall invest the balance of the capital in a proper manner and the income thereof shall be first utilized for payment of its office expenses and services rendered and the balance of the amount of such charges shall be paid by the OWNER to the extent of 63% and the transferees of the builder to the extent of the balance of 37%.
(5) The OWNER shall join the other transferees of space in the BUILDING to reconstitute, re-organise or constitute or form, as the case maybe, such society, company, firm or body and shall become a member of shareholder thereof.
(6) Said society, company, firm or body, as the case may be, shall upon its re-constitution / re-organization or upon its constitution / formation be the Holding Organisation.
Arb.A.415/2006 & OMP 362/2006 Page no. 5 of 16
(7) The Memorandum constitution, Articles, Rules,
Regulations and/or bye-laws, as the case may be, and other documentation of an relative to the reconstitution or formation of the Holding Organization and relative to the registration and organisation thereof shall be prepared by the Advocates or Attorney designated by BUILDER, but must be approved by the OWNER.
(8) Upon the completion of the BUILDING by the BUILDER, the OWNER shall apply for permission under the relevant provisions specially Section 27, of the Urban Land (Ceiling & Regulation) Act, 1976 for transfer of the saleable space allocated to the Builder under the terms of this agreement.
(9) That as and when any transfer of any space purchased by the transferee of the Builder, is made in favour of such transferee, the stamp duty, transfer charges under the Punjab Municipal Act, or equivalent legislation and any other charges including Registration Fee, shall be borne by such transferees.
(10) That on and after the said building is completed, the transferees of the Builder shall be liable to pay proportionate charges on account of ground rent/less money for the proportionate area of the plot at the rate as may be fixed from time to time, but this shall not be construed as transfer of any right or interest in the plot or any part thereof."
9. The agreement envisages the maintenance of common areas and amenities in the building by a society, company or other body and not by the petitioner. The said society, company or body was to also have the participation of transferees of built up space in the building. The said society, company or other body is referred to in the Agreement as the holding organisation. The said holding organisation was to collect common maintenance charges from transferees or occupiers of built up space in the building. The question which arises is whether the petitioner can raise any dispute with respect to non formation of such holding organisation or with respect to the alleged exorbitant charges being collected by the respondent from the transferees/ occupiers of Arb.A.415/2006 & OMP 362/2006 Page no. 6 of 16 built up space in the building.
10. After the parties entered into the agreement dated 13.01.1978 agreeing inter alia to formation of a holding organisation for maintenance of common areas and amenities in the building, the legislature enacted the Delhi Apartment Ownership Act, 1986.
11. The said legislation was enacted to provide for the ownership of an individual apartment in a multistoried building and of an undivided interest in the common areas and facilities appurtenant to such apartment and to make such apartment and interest heritable and transferable. It was not disputed by the petitioner also that the saleable areas sold by the petitioner and the respondent in the multistoried building are an apartment within the meaning of Apartment Act. Even otherwise individual flats in a multistoried commercial building fall within the definition of apartment as in Section 3(c) of the said Act. Section 3(e) defines an apartment owner as the person owning an apartment and an undivided interest in the common areas and facilities appurtenant to such apartment. Section 3(f) defines an association of apartment owners as of all the owners of the apartments therein. Section 3(j) defines common areas and facilities as including the land on which the building is constructed, foundations, stairways, lobbies, entrances, exits, common areas for services, elevators, tanks, pumps and such other community facilities as may be prescribed. Section 3(k) defines common expenses as the sums assessed against the apartment owners by the Association of Apartment Owners for meeting the expenses of administration, Arb.A.415/2006 & OMP 362/2006 Page no. 7 of 16 maintenance and repair of common areas and facilities.
12. Under Section 4 of the said Act every person to whom any apartment is allotted, sold or otherwise transferred shall be entitled to the exclusive ownership and possession of the apartment so allotted and such person also becomes entitled to an undivided interest in the common areas and facilities. Section 5 makes the apartment heritable and transferable. Section 15 provides for the management of common areas and facilities to vest in the Association of Apartment Owners and Section 24 makes the Act binding on apartment owners, tenants etc.
13. This court in Sagar Apartments Flat Owners Society (Regd.) and Ors. v. Sequoia Construction Pvt. Ltd. and Ors 1993 Raj LR 446 : 1993 26 DRJ 71 has held that the Apartment Act is in force and rights of the parties created under the said Act have to be taken into consideration and the purchasers of the apartments must get protection and the court has to ensure that the legislative intent is fulfilled rather than allow it to be flouted.
14. Thus, under the agreement of the petitioner with the respondent, the petitioner merely had a right to subscribe to a certain extent in the holding organisation which was to carry on the maintenance of common areas and amenities. The petitioner itself had no rights to manage the common areas and facilities or to interfere in any manner in the same. The petitioner does not even plead that it is so entitled. Grievance is made that the holding Arb.A.415/2006 & OMP 362/2006 Page no. 8 of 16 organisation has not been constituted and the respondent is continuing to maintain the common areas and amenities in the building and profiteering therefrom.
15. The question which arises is, whether the petitioner has any locus standi in the matter of maintenance, specially in the light of the petitioner having sold of the entire built up area which under the agreement had fallen to its share and further in the face of the petitioner not being the owner of any apartment in the building and also not being in possession of any space in the said building.
16. In my view, the right, if any, of the petitioner under the agreement even to subscribe to the holding organisation, which under the agreement was to carry on maintenance of common areas and amenities, stands superseded by the Apartment Act. After coming into force of the Apartment Act, this court cannot allow anything in contravention thereof. The petitioner under the Apartment Act has no right to be a member of the Association of Apartment Owners or to interefere in any manner with the maintenance of the building. If the respondent is in the wrong in continuing to maintain the common areas and facilities in the building and in profiteering from the same, the grievance, if any, is of the apartment owners and not of the petitioner. Allowing this petition would tantamount to this court holding that the petitioner has a locus to interfere in the maintenance of common areas and amenities and which, as aforesaid, does not exist under the law of the land. This court, whenever approached, has been enforcing the rights of the apartment owners. See Star Estate Arb.A.415/2006 & OMP 362/2006 Page no. 9 of 16 Management Pvt Ltd v Neo Securities Limited FAO(OS) 390/1996 decided on 31.10.1996 where Division Bench held that only an Association of Apartment Owners has the right to maintain. The Division Bench of this court again in Ganesh Prasad Seth v Karam Chand Thapar 1998 IV AD Delhi 657 held that apartment owners have a definite specific interest in the common areas and facilities which form part of the building and cannot be deprived of the same and these rights cannot be altered without the written consent of all the apartment owners. Also Shri Om Prakash Charaya v Ashok Kamal Capital Builders Pvt Ltd 2000 VII AD Delhi 67 where the Association of owners/residents was held to have a right in lis with respect to common areas and amenities in the building. Also see Municipal Corporation of Delhi v A.M. Khanwilkar 2002 65 DRJ 38 where it was held that common areas and facilities cannot be the separate property for the purposes of levy of property tax. In R.L. Bhardwaj v. Shivalik Co-Operative Group Housing Society Limited and Ors 56 1994 DLT 600 it was held that no one person has exclusive right over the roof which falls in the definition of common areas. Similarly in Dhawan Deep Resident Welfare Association v Star Estate Management Limited IA 8139/2006 in CS(OS) 1474/2006 decided on 20th September, 2007 also the owners/residents of a multistoried building were held to have a right of maintenance of common areas and amenities.
17. It cannot also be lost sight of that though the building was constructed in 1989 and the question of maintenance of common areas and amenities arose immediately on occupation of the building Arb.A.415/2006 & OMP 362/2006 Page no. 10 of 16 thereafter, the petitioner in 17 years prior to the institution of this petition did not claim any such dispute and in spite of two previous arbitration proceedings between the parties.
18. The petitioner has now for the first time sought to resurrect its claim, if any, of formation of holding organisation in terms of the agreement. The petitioner in the facts and circumstances is deemed to have given up and abandoned the right, if any, of formation of holding organisation in terms of the agreement. The claim for formation of the holding organisation can no longer be called a live claim. The senior counsel for the petitioner urged that no time for formation of holding organisation has been provided in the agreement and thus the claim, in the nature of specific performance under Article 54 of Schedule I of Limitation Act can be made when demand is made and performance is refused. In my view a party to the agreement if does not claim performance for a long time, specially when the other is acting contrary to the agreement, is still deemed to have waived/given up claim for performance and cannot resurrect the same on the ground that it had earlier not claimed performance. Transaction cannot be left in such state of flux and be permitted to extend indefinitely.
19. The counsel for the petitioner has contended that the present petition is concerned only with the appointment of the arbitrator and all these questions ought to be left to be decided by the arbitrator. The Apex Court in SBP & Co v Patel Engineering Ltd Company 2005 8 SCC 618 in para 32 while interpreting Section 11(6) of the Act Arb.A.415/2006 & OMP 362/2006 Page no. 11 of 16 held that the party ought not to be compelled to participate in arbitration proceedings extending over a long period of time, by incurring substantial expenditure and then to come to the court with an application under Section 34 of the Act seeking setting aside of the award on the ground that there was no arbitration agreement or that there was nothing to be arbitrated upon when the tribunal was constituted. The Apex court further held that the court can at the stage under Section 11(6) of the Act decide whether the claim was a dead one or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations. In the present case I find that the transaction between the parties relating to enforcement of mutual rights and obligations under the agreement dated 13th January, 1978 stood concluded and dead claims are now being sought to be resurrected.
20. The senior counsel for petitioner relied upon Chunni Lal v RPG Home Finance Pvt Ltd 134(2006) DLT 212, particularly on para 8 thereof. The Hon‟ble Judge in that case while referring to SBP & Co., reiterated that Judge exercising jurisdiction under Section 11(6) must be, prima facie, satisfied that disputes for arbitral adjudication exist. In the present case, for reasons recorded, I am not, prima facie, satisfied. Though the petitioner in its list of citations also included Shree Ram Mills v Utility Premises Pvt Ltd 2007 4 SCC 599, Madhucon Projects Ltd v Indian Oil Corporation 2007 2 Arb. L.R. 227 (Delhi), and IVRCL Infrastructure & Projects Ltd v Bhanu Construction Ltd MANU/AP/0230/2007 but no arguments were Arb.A.415/2006 & OMP 362/2006 Page no. 12 of 16 addressed with reference thereto. The said judgments do not persuade me to hold otherwise.
21. The claim of the petitioner of interference in maintenance of common areas and facilities in the building is thus found contrary to law. The Apex Court in ONGC v Saw Pipes Ltd AIR 2003 SC 2629 has held the award contrary to fundamental policy of Indian Law to be against the public policy of India and liable to be set aside. The claim of the petitioner for formation of holding organisation in terms of agreement with the respondent is against the Apartment Act and thus no purpose will be served in directing the parties to arbitration for the said claim.
22. There is another aspect of the matter. Even the agreement envisaged association of the transferees in the holding organization. The said transferees are not parties to the arbitration agreement. It is not even suggested that the said transferees are to be involved in the arbitration. Can in the absence of the said transferees, the arbitrator, even if appointed, make any order of enforcement, formation or functioning of the holding organization. The answer necessarily has to be „no‟. Inescapable conclusion is that the dispute, as far as with respect to the holding organization, is not arbitrable.
23. The next dispute raised is of unauthorized construction including of the 11th floor and of misuse of various portions of the property. The petition is conspicuously silent as to when the said Arb.A.415/2006 & OMP 362/2006 Page no. 13 of 16 constructions were done. Reliance is sought to be placed on the notices of L&DO, first of which is of 27th December, 2004 and on the basis thereof it is argued that the claims / disputes are alive and not stale or dead. The senior counsel for the petitioner has urged that the cause of action for the removal of unauthorized construction is a continuing cause of action, as long as the unauthorized construction continues and for this reason also the claims are not barred by time.
24. I had during the hearing inquired from the counsel as to, under the agreement, who was entitled to the terrace rights above the 10th floor where unauthorized construction of 11th floor is alleged. I was informed that under the agreement, the terrace rights above the 10th floor belonged to the respondent. The petitioner for this reason also has no locus to object to the same.
25. The only claim of the petitioner before the arbitrator can be for mandatory injunction for removal of the said unauthorized construction. It has been held by this court in the Rawal Singh v Kwality Stores AIR 1986 Delhi 236 that the limitation for instituting a claim for mandatory injunction for removal of unauthorized construction is three years from the date of unauthorized construction. In my view the existence of unauthorized construction does not give a continuing cause of action to enable the persons seeking to have the same demolished apply at any time for its demolition as long as it existed. Here private and not public rights are sought to be enforced. The position is different when public authorities are seeking removal of unauthorized construction or when Arb.A.415/2006 & OMP 362/2006 Page no. 14 of 16 court, in public interest is approached to have the same removed. The respondent has stated that the 11th floor was constructed in the year 1991. As aforesaid, the petitioner has not given any date of construction thereof and only relied upon the L&DO having taken objections to the same for the first time on 27th December, 2004. However, the date on which the L&DO objects to the same for the first time does not furnish any cause of action to the petitioner.
26. There is yet another aspect of the matter. The said 11th floor as well as the other portions of the building allegedly having unauthorized construction or being misused are in occupation of 3rd parties. As aforesaid, they are not parties to the arbitration agreement. Upon being confronted with the same, it was argued that they being the assignees of the petitioner or the respondent in the immovable property, would be bound by the arbitration agreement. I have my doubt on the said proposition. However, I do not deem it appropriate to decide this issue in the absence of the said persons. If the petitioner considered the said persons being so bound by the agreement, they ought to have been impleaded as parties. Sukanya Holdings P Ltd v Jayesh Pandya & Another (2003) 5 SCC 531, though on Section 8 of the Act is an authority on the proposition that the parties cannot be referred to arbitration where the third parties are also involved in the dispute. The counsel for the respondent has rightly relied on India Household & Health Care Ltd v LG Household & Health Care Ltd 2007 5 SCC 510. No rights with respect to the unauthorized construction/misuse in portions of the property/apartment which under the Apartment Act have vested in the Arb.A.415/2006 & OMP 362/2006 Page no. 15 of 16 persons to whom the apartments have been sold can be adjudicated in the absence of the said persons and it would again be an exercise in futility.
27. The senior counsel for the petitioner has also contended that perpetual lease of land underneath building is in the name of the petitioner and notices have been issued by L&DO in name of petitioner. The same however will also not entitle the petitioner to raise dispute with the respondent. Under the Apartment Act the land underneath the building is also common and vests in the apartment owners and the petitioner cannot claim any right in the same or at least without the presence of apartment owners.
28. Thus I hold that neither of the two fold disputes raised are arbitrable.
29. The AA 415/2006 is thus dismissed. Axiomatically OMP 362/2006 is also dismissed. Parties are left to bear their own costs.
RAJIV SAHAI ENDLAW
(JUDGE)
August 22, 2008
M
Arb.A.415/2006 & OMP 362/2006 Page no. 16 of 16