Calcutta High Court
Mayavati Trading Pvt. Ltd vs Pradyuat Deb Burman on 12 March, 2019
Equivalent citations: AIRONLINE 2019 CAL 415, (2019) 2 CALLT 588 (2019) 4 CIVLJ 446, (2019) 4 CIVLJ 446
Author: Arindam Sinha
Bench: Arindam Sinha
Judgment
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
AP No. 565 of 2018
MAYAVATI TRADING PVT. LTD.
Versus
PRADYUAT DEB BURMAN
BEFORE:
The Hon'ble JUSTICE ARINDAM SINHA
For petitioner : Mr. Dhruba Ghosh, Sr. Adv.
Mr. Suman Dutta, Adv.
Mr. Souvik Majumdar, Adv.
Mr. Aniruddha Sinha, Adv.
For respondent : Mr. Sabyasachi Choudhury, Adv.
Ms. Labanyasree Sinha, Adv.
Heard on : Several dates. Judgment on : 12th March, 2019.
Arindam Sinha, J.: This arbitration petition has been made invoking provisions of sub-sections (6) and (6A) under section 11, Arbitration and Conciliation Act, 1996.
Mr. Dutt, learned advocate appeared on behalf of petitioner and submitted, there is existing arbitration agreement contained in agreement dated 7th December, 1998 between his client and respondent. Respondent's father on having decided to develop his property, this agreement was entered into by his client, as developer. Apart from the agreement in respect of development of subject matter of it, parties had agreed as a term in said agreement, that which is as follows:- 2
"22 (vi) In case in future the Landlord shall be desirous of developing the remaining part of the said premises then and in such event, the Developer shall have the first preference to act as Developer."
His client came to know respondent is desirous of developing remaining part of the premises, in breach of above agreed term. Said agreement contains arbitration agreement under clause 16 therein. As such, there is existing arbitration agreement, for referring disputes arisen. His client by letter dated 8th June, 2018 had notified reference of disputes and nominated its arbitrator. Respondent not having nominated his arbitrator within thirty days therefrom, his client is before Court for appointment of nominee arbitrator of respondent, for the arbitrators to then appoint third arbitrator and proceed with the reference.
Mr. Ghosh, learned senior advocate also appearing for petitioner submitted, there is distinction made in the agreement, as it describes to be developed area of the property as 'said portion', more fully and particularly described in schedule B of it and the property itself, described as 'said premises', more fully and particularly described in schedule A of it. His client being a developer had caused the 'said premises' to achieve a state in which a portion of it could be developed. Hence, clause 22(vi) reserving to his client right of preference to develop any other portion in 'said premises' in future.
3
He submitted further, Supreme Court in Damodar Valley Corporation versus K.K. Kar reported in (1974) 1 SCC 141 formulated question for determination as, where one of the parties refers a dispute or disputes to arbitration and the other party takes a plea that there was a final settlement of all claims, is the Court entitled to enquire into the truth and validity of the averment as to whether there was or was not a final settlement on the ground if that was proved, it would bar a reference to arbitration inasmuch as the arbitration clause itself would perish? He submitted, law is settled that arbitration agreement contained in parent agreement is an altogether separate agreement. He placed paragraph 7 to demonstrate there are certain instances, which Supreme Court discussed, as might bring end to arbitration clause contained in an agreement. Relying on paragraph 9 he submitted, a difference arisen between parties as to whether there has been breach by one side or there has been discharge from further performance, are questions 'upon', 'in relation to', or 'in connection with' the contract.
He placed paragraph 11 to demonstrate instances where arbitration clause would perish with the contract in which it is contained. For arbitration clause standing apart from rest of the contract, he relied upon paragraph 12. He submitted, paragraph 13 says, inter alia, the question whether there has been a settlement of all claims arising in connection with the contract also postulates the existence of the contract. He 4 also relied on paragraph 14, particularly to the sentence reproduced below:
"In the circumstances, as we have held that where in a contract there is an arbitration clause, notwithstanding the plea that there was a full and final settlement between the parties, that dispute can be referred to arbitration. The Subordinate Judge is directed to dispose of the petition of the appellant according to law".
He then relied on judgment of Supreme Court rendered after the Act was amended in year 2015, in Duro Felguera, S.A. versus Gangavaram Port Limited reported in (2017) 9 SCC 729. Two learned Judges of said Court gave separate but concurrent views on inserted, by amendment, sub-section (6A) in section 11. He submitted, Supreme Court discussed pre-amendment development of interpretative law on sub-section (6) in section 11, as going from order made thereunder by Chief Justice or delegate as being administrative order, to it being a judicial order and thereafter what would be considered for making of it leaving balance to be decided by arbitral tribunal appointed. Such interpretative law is no longer good law since, as said in paragraph 59, legislative policy and purpose is essentially to minimise Court's interference at stage of appointing arbitrator as incorporated in section 11(6A). So it was his submission that separate arbitration agreement exists. There has to be given some meaning to clause 22(vi) in the agreement, which is a matter of dispute to be referred to arbitration.
5
Mr. Chowdhury, learned advocate appeared on behalf of respondent and drew attention to declaration dated 3rd August, 2006 executed by parties. He submitted, this declaration is in respect of said agreement dated 7th December, 1998. He referred to last recital and sub-clause (f) in clause 3 of declarations made therein by petitioner. Said recital and declaration clauses are reproduced below:-
"AND WHEREAS the First Party and the Second Party have started selling and/or dealing with and/ or disposing of their allocated flats and the flats which are the joint properties of the parties. Both the First Party and the Second Party in terms of the said agreement have complied with their respective obligations more or less without leaving any dispute and both the parties by this Mutual Declaration want to declare their satisfaction in respect of the compliance made by them is pursuant to and in terms of the said agreement."
"3. ......... ......... .......... ............ ............. ...... ...... .........
(f) This declaration shall always be treated as full compliance by the parties of the said agreement and the First Party shall be free to deal with the allocations of the First Party and Second Party shall be free to deal with the allocations of the Second Party without being dependent of each other. The parties shall as and when requested by the other execute and Registrar, the 6 conveyance for various units/portions either as vendor or as a Confirming Party, as the case may be."
He submitted, agreement was for development entered into in year 1998. Declaration by parties, of compliance and working out of said agreement, was executed in year 2006. Recital and declaration clauses, he emphasised declaration made by petitioner, uses phrase 'said agreement' in context of full compliance. No reservation was made regarding any term of 'said agreement' as outstanding for performance or compliance. Thus, arbitration agreement contained in 'said agreement', declared to have been performed, does not exist. His client should not be compelled to participate in arbitration.
Mr. Chowdhury on Damodar Valley Corporation (supra) relied on following sentences extracted from paragraph 7:-
"7. . . . . . . . . . . . . . . . A repudiation by one party alone does not terminate the contract. It takes two to end it, and hence it follows that as the contract subsists for the determination of the right and obligations of the parties, the arbitration clause also survives. . . . . . . . . . . . . . . . . As the contract is an outcome of the agreement between the parties it is equally open to the parties thereto to agree to bring it to an end or to treat it as if it never existed. . . . . . . . . . . . "
He submitted, by the declaration both parties had declared performance of said agreement. This brought into operation sub-clause (iii) in termination clause of the agreement itself whereby parties had agreed on the end of it. 7 As such, facts in this case are covered by interpretation given by Supreme Court in paragraph 7, of parties agreeing to bring an end to the contract. End would include end of arbitration clause contained in said agreement, to also come to an end. He submits, careful reading of paragraph 14 would show decision in that case was on many reasons including that the High Court was in error in directing dismissal of appellant's petition in toto. Thus, it cannot be said that ratio of it would apply against case of his client.
Moving on to Gangavaram Port Limited (supra) he submitted, adjudication on examining question of existence of arbitration agreement between parties must, therefore, be that it does not exist since parties themselves had agreed to record their satisfaction on performance of parent agreement in which it was contained. He reiterated, drawing attention to sub-clause (iv) in termination clause 19 of the agreement, even otherwise it stood ipso facto terminated, by parties having performed it as declared by them. The declaration read with termination sub-clause (iv) gives meaning to clause 22(vi), to be operative only till before termination, for exercise of right of preference on contingency happened.
Sub-section (6A) under section 11 of the Act requires Court's adjudication to be confined to examination of existence of arbitration agreement. The arbitration agreement between parties is contained in agreement dated 7th December, 1998. The agreement was for development of a portion of the property owned by respondent. On behalf of petitioner 8 it was submitted, so far as development of the portion is concerned, that has been performed. Petitioner is seeking enforcement of right of preference as developer in respect of development of remaining part of the property.
It would be useful to reproduce recital clauses 3 to 8 of said agreement dated 7th December, 1998.
"(3) At that relevant point of time, the said premises was affected by a notification under the Land Acquisition Act, there were pending proceedings with regard to the Urban Land (Ceiling & Regulation) Act, 1976, and moreover the portion which was marked for development was under wrongful occupation of one Karmin Brinda, an organisation allegedly registered with the Societies Registration Act.
(4) The Landlord and the Developer principally decided that an agreement would be entered into after the said portion will be free from all encumbrances mentioned hereinabove.
(5) The Developer for and on behalf of the Landlord gets the said portion and/or premises free from the Notification of the Land Acquisition and/further the Appellate Authority under the Urban Land (Ceiling & Regulation) Act, 1976, had decided that there is no excess vacant land in the said premises at the said order of the Appellate Authority is still in force and has not been set aside by any Court of Law.9
(6) The said Karmi Brinda, the unauthorised occupiers of the said portion filed various litigations in the Alipore Judges' Court as well as before the Hon'ble High Court at Calcutta but ultimately a settlement has been arrived at by and between the Landlord and Karmi Brinda at the instance of the Developer and the said settlement was filed before the Hon'ble Division Bench of the Calcutta High Court and all disputes and differences between the Landlord and Karmi Brinda stood settled and the said Karmi Brinda vacated the said portion and an order recording the settlement has been passed by the Division Bench of the Calcutta High Court on 13th December, 1997.
(7) The Calcutta Municipal Corporation claimed huge sum as arrear of taxes of the said premises which was disputed by the Landlord as the valuation was fixed arbitrarily and ex-parte and the Developer on behalf of the Landlord took all necessary steps to have the said demand of arrear taxes cancelled and/or set aside and ultimately the Calcutta High Court by its Order dated 08.05.98 set aside and/or quashed the demand notice issued by the Calcutta Municipal Corporation.
(8) The said portion is now free from all encumbrances, liens, lispendens, mortgages, charges of any nature whatsoever or howsoever.10
Also necessary for purpose of this adjudication would be reproduction of following extract of arbitration agreement:-
"16. ARBITRATION :
In case of any dispute between the parties with regard to the development of the said portion or with regard to the interpretation of this agreement or in case of any other disputes relating to the development of the said portion or with regard to the implementation of this agreement, the parties shall take the following steps:-........."
To determine whether arbitration agreement exists, Court has perused above extracted recital clauses in said agreement as well as extract of arbitration clause therein. Where parties had recited that they had in principle decided an agreement would be entered into after the portion will be free from all encumbrances and in context, inter alia, of such recital parties agreed to refer disputes between them with regard to development of the portion to be developed, the 'interpretation' or 'implementation' of the agreement, as in the arbitration agreement, must be viewed taking into account declaration, without reservation, made by parties themselves, of compliance of the agreement. Submissions of Mr. Chowdhury on Damodar Valley Corporation (supra) as well as meaning given to said agreement clause 22(vi) are accepted. As such, this Court does not find the arbitration agreement exists or survived beyond declared performance of said agreement in which it is contained. 11
For reasons aforesaid, arbitration petition is dismissed.
(ARINDAM SINHA, J.) sp/sb/nm.