Bombay High Court
A.P. Properties (Builders) vs Harmohan Singh Chandhok And 3 Ors on 11 November, 2019
Author: G. S. Patel
Bench: G.S. Patel
25-CARAP358-19+.DOC
Atul
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM ARBITRATION APPLICATION NO. 358 OF 2019
AND
COMM ARBITRATION PETITION NO. 799 OF 2019
AP Properties (Builders) ...Applicant
Versus
Harmohan Singh Chandhok & Ors ...Respondents
Mr Sanjay Jain, with Aanchal Singhania, i/b LJ Law, for the
Petitioner/Applicant.
Mr Aashish Kamat, with Simantini Mohite, Arya Bile & Rohini
Nirwane, i/b M/s. Solomon & Co., for Respondents Nos. 1 to 3.
Mr Anil Sakhare, Senior Advocate, with Nitin Raut, for Respondent
No. 4.
CORAM: G.S. PATEL, J.
DATED: 11th November 2019
PC:-
1. The application is under Section 11 of the Arbitration and
Conciliation Act 1996 and it is accompanied by an arbitration
petition under Section 9. Mr Jain for the applicant/petitioner
immediately makes a statement that if the matter is referred to
arbitration, he will not press his Section 9 relief but will only request
that liberty be reserved to present the Section 9 petition itself as an
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application for interim relief under Section 17 before the learned
sole Arbitrator.
2. There are four respondents. Respondent No. 4, represented
by Mr Sakhare, submits that there can be no reference to arbitration
so far as he is concerned.
3. The agreement in question is of 25th September 2014. I will
take the relevant references from the arbitration petition. The
arbitration agreement is in Article 'IX' at page 68. Clauses 9.1 to 9.4
of the agreement read thus:
"9.1 In the event of a dispute arising out of or in
connection with this Agreement, the Parties to the dispute
shall discuss in good faith to resolve the diferences. In case
the diferences is not settled within thirty (30) calendar
days, it shall be referred to arbitration in accordance with
the Clause 9.2 hereinbelow:
9.2 All such disputes that have not been satisfactorily
resolved under sub-clause (a) above shall be referred to
arbitration before a sole arbitrator to be jointly appointed by
the Parties. In the event the Parties are unable to agree on a
sole arbitrator, one of the arbitrators shall be appointed by
the Owners and the second arbitrator shall be appointed by
the Developer and the third Arbitrator will be appointed by
the other two arbitrators. The arbitration proceedings shall
be carried out in accordance with the provisions of the
Arbitrators.
9.3 The place of arbitration shall be Mumbai. The
arbitration proceedings shall be conducted in English.
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9.4 The Parties shall equally share the costs of the
arbitrator's fees, but shall bear the costs of their own legal
counsel engaged for the purposes of the arbitration. The
award of the arbitral tribunal shall be fnal and conclusive
and binding upon the Parties."
4. The agreement itself relates to the development of a property
at Santacruz (West) on which there was a ground plus three foor
bungalow called Guru Ramdas Niwas. There were also two garages.
This structure was to be demolished and the property redeveloped.
Respondents Nos. 1, 2 and 4 are said to have been (or are) the co-
owners of this property. Respondent No. 3 himself does not seem to
have had any ownership rights in the property. Respondent No. 3
claimed to hold a power of attorney dated 29th November 2010
from respondent No. 4. The agreement of 25th September 2014 has
the actual signatures of respondent No. 1, respondent No. 2, and
respondent No. 3. Respondent No. 3 signed purportedly on behalf
of respondent No. 4. Respondent No. 4 himself did not sign this
document at all. Respondents Nos. 1, 2 and 3 then executed further
power of attorney of the same date, 25th November 2010, in favour
of the petitioner/applicant. According to respondent No. 4, he
learnt of this agreement and of respondent No. 3 having purported
to represent him in its execution only when the bungalow was
demolished.
5. Respondent No.4 fled Suit No. 820 of 2016 in this Court on
6th May 2015 challenging and assailing the agreement and power of
attorney of 29th November 2010 under which the 3rd respondent
purported to act on his behalf. By an elaborate order and judgment
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dated 1st October 2015 a learned Single Judge of this Court (AK
Menon J) granted relief on that notice of motion. He returned a
fnding that the respondent No. 4 as the plaintif in that suit had
indeed made out a very strong prima facie case. The applicant/
petitioner and respondents Nos. 1, 2 and 3 were all defendants to
that suit. They carried the matter in separate appeals. By an order
dated 5th July 2016 (AS Oka [as he then was] & AA Sayed JJ), a
Division Bench dismissed both appeals, and confrmed the order of
the learned Single Judge was confrmed. I need to reproduce a few
paragraphs of the appellate order:
"15. Therefore, there is a very strong prima facie case
established by the Plaintif to show that the 4th Defendant
had no authority at all to develop his undivided 1/3rd share
in a very valuable suit property. The terms and conditions
of the Development Agreement were admittedly not even
discussed with the Plaintif.
16. We may note here that the commencement
certifcate was granted to the 4th Defendant on 11th
February 2015. The suit was lodged on 30th April 2015.
Even the aspect of the alleged delay has been taken into
consideration by the learned Single Judge by noting that a
copy of the Development Agreement became available to
the Plaintif for the frst time in March 2015. Therefore, this
is not a case where it can be said that there is any gross
delay on the part of the Plaintif. There is no material placed
on record to show that till the date on which the copy of the
impugned Development Agreement became available to the
Plaintif, he had knowledge about the contents of the
impugned Development Agreement and the execution of
the impugned Power of Attorney dated 29th November
2010.
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17. Thus, it follows that by no stretch of imagination,
the 4th Defendant can be said to be a bona fde purchaser.
He has taken the risk of acting upon alleged Power of
Attorney relied upon by the 1st to 3rd Defendants even
without taking elementary precaution of verifying the
existence of the Plaintif and without ascertaining from him,
whether he has executed any such Power of Attorney.
18. No reasons are required to be recorded for coming to
the conclusion that the Plaintif will sufer irreparable loss,
if the suit property in which he has 1/3rd undivided share is
allowed to be developed in this fashion. Though the learned
Single Judge may not have framed separate points for
determination, the learned Single Judge in paragraph 25 has
also dealt with the argument that the 4th Defendant has
incurred substantial expenditure. The learned Single Judge
has dealt with the argument of the 4th Defendant that the
Plaintif and 2nd and 3rd Defendants together are entitled
to get the 65 percent of the constructed area and therefore,
interim relief should be restricted to the said 65 percent
area. In paragraph 26, the learned Single Judge after
reiterating that the 4th Defendant had never contacted the
Plaintif, has observed that the 4th Defendant cannot be
permitted to engage in potentially fruitless exercise. He
observed that the unsuspected third parties should not be
exposed by allowing the 4th Defendant to execute the
Agreements for sale of the premises in the redeveloped
property. Therefore, we do not agree with the submission
that the issues of irreparable loss and balance of
convenience have not been considered by the learned Single
Judge. Prima facie, the work of development was
commenced without the consent of the Plaintif who has
1/3rd share in the suit property.
19. As far as the issue of maintainability of the suit is
concerned, apart from the fact that the Court can mould the
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reliefs at the time of fnal hearing, the Plaintif can always
amend the Plaint.
20. We fnd that each and every fnding recorded by the
learned Single Judge can be justifed by the material on
record. Some of the fndings are based on admitted
position. Therefore, there is no reason to interfere with the
discretionary and equitable interim relief of temporary
injunction granted by the learned Single Judge. He has
denied the drastic relief of appointment of Court Receiver
to the Plaintif. Hence, we fnd absolutely no merit in both
the Appeals and pass the following order.
(i) Both the Appeals are dismissed;
(ii) No order as to costs;
(iii) All pending Notices of Motion do not survive
and the same are disposed of.
21. At this stage, learned Counsel appearing for the
Appellant prays for stay of the order. Admittedly, the
learned Single Judge did not stay his own order which is
operating till today. Hence, the prayer is rejected."
6. No special leave petition or review petition was ever fled
from this order. It has, therefore, attained fnality.
7. It is on this basis that Mr Sakhare submits that there is no
question of referring the disputes as between the
petitioner/applicant builder and the 4th respondent to arbitration.
That would result in an incongruous or anomalous situation. There
is now a judicial pronouncement by this Court on its Original Side
confrmed in appeal, though prima facie, substantiating the 4th
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respondent's case. An arbitral award cannot be made, or even
allowed to be made, that would run contrary to these fndings.
8. Mr Jain on instructions on behalf of the applicant/petitioner
makes a statement to this efect, which I will reproduce exactly as he
puts it:
"I have instructions to state that the petitioner/applicant
accepts the fndings of the High Court in appeal so far as
the 4th respondent is concerned as regards the execution of
the agreement dated 25th September 2014."
The statement is noted and accepted as made.
9. Mr Jain however maintains that his application to have the
matter referred to arbitration as between the petitioner/applicant on
the one hand and respondents Nos. 1, 2 and 3 on the other is
unafected. Respondent No. 2 has passed on and respondent No. 3 is
one of the heirs of deceased respondent No. 2. If respondent No. 3
did not sign as a validly constituted attorney of respondent No. 4,
then a question would undoubtedly arise as to the capacity in which
the 3rd respondent did in fact execute the document. In any case,
the 3rd respondent is an heir of respondent No. 2 who admittedly
executed the document. Consequently, as between the petitioner as
claimant and respondent No. 1, the heirs of respondent No.2
(including respondent No. 3), and respondent No. 3 himself, there
can be no impediment to the reference to arbitration.
10. Mr Kamat on behalf of respondent No. 1, the heirs of the
deceased respondent No. 2 and respondent No. 3 submits that since
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the petitioner/applicant at no point made any application to Court
under Section 8 to have the suit fled by the 4th respondent referred
to arbitration, therefore, the petitioner/applicant must be held to
have waived or abandoned his rights under the agreement, or, at any
rate to invoke arbitration.
11. It is difcult to accept this submission. Respondent No. 4's
suit and notice of motion were opposed not only by the
petitioner/applicant but also by Mr Kamat's clients, respondents
Nos. 1, 2 and 3. In that opposition, all of them re-afrmed the
contract in question and the validity of the power of attorney on
which respondent No. 3 purported to act on behalf of respondent
No.4. To allow them to say to the contrary now would amount to
allowing a party to approbate and reprobate and to take mutually
destructive stands.
12. In any case, in my judgment, the submission is materially
misconceived. What the petitioner/applicant seeks is an arbitration
as between it and respondents Nos.1, 2 and 3. That he did not seek
an arbitration in a suit fled by respondent no. 4 -- against whom he
makes no arbitral claim now -- is, therefore, quite immaterial.
The statute itself does not support this submission. Section 8 says
that a court (it refers to a 'judicial authority') before whom an action
is brought in a matter which is the subject of an arbitration
agreement must, 'if a party so applies' -- and which application
must be made at or before the fling of the frst statement on the
substance of the dispute -- refer the parties to arbitration. Sub-
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sections (2) and (3) are not material at this stage. The judicial
authority in question was this court. The suit was by respondent
No.4, to which the petitioner/applicant and the other three
respondents were defendants. Logically, therefore, if the petitioner/
applicant had to make any such application for reference to
arbitration, then it could only have been an application to have the
disputes as between the petitioner/applicant and the respondent
No.4 referred to arbitration. The petitioner/applicant made no such
application then, and it does not do so now either. I do not see how
respondents Nos.1, 2 and 3, none of whom were the plaintifs in that
suit can invoke any claim of waiver or abandonment as between the
defendants to that suit inter se.
13. Mr Kamat's next submission that allowing an arbitration to
proceed as between the petitioner/applicant and respondents Nos.
1, the heirs of respondent No. 2 and respondent No. 3 would cause
an 'embarrassment' is not a submission that commends itself in the
slightest. I am unable to understand who might be embarrassed or by
what. There is no dispute that respondents Nos. 1, 2 and 3 did in
fact physically sign the agreement. Their liabilities and obligations
under that document have to be interpreted and construed in terms
of the agreement they signed. That agreement contains an
arbitration clause and I can see no reason to absolve them from its
application.
14. Mr Kamat's submission that the relief that the
petitioner/applicant seeks must actually lie only in a counter-claim
in the 4th respondent's suit seems to me to be an argument that
stretches the present state of the law almost to breaking point.
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There are any number of decisions on this aspect of the matter but
the following three decisions settle the question once and for all:
Duro Felguera, SA v Gangavaram Port Ltd;1 Garware Wall Ropes Ltd v
Coastal Marine Constructions & Engineering Ltd;2 and Mayavati
Trading Pvt Ltd v Pradyuat Deb Burman.3
15. Section 11(6-A) of the Arbitration and Conciliation Act 1996
was part of Section 3 of the 2019 Amending Act. This received
Presidential assent on 9th August 2019. However, the Central
Government has not notifed the date on which Section 3 of the
Amending Act would come into force.
16. In any case, the decision in Mayavati Trading Pvt Ltd (see
paragraphs 3 to 11 of the SCC report) makes it clear that irrespective
of the amendment to delete Section 11(6-A), and which is for
entirely diferent reasons, those principles will continue to apply,
and the position prior to the introduction that section will not revive
or resuscitate even when the date for operation of Section 3 of the
2019 amendment is notifed. In other words, once the Court is
satisfed that as between the parties there exists an arbitration
agreement, it will confne itself to that, and refer the parties to
arbitration.
17. The fnal submission by Mr Kamat that without the presence
of respondent No. 4, he being a co-owner, no order of specifc
performance can ever be made is clearly incorrect, and the law in
1 (2017) 9 SCC 729.
2 (2019) 9 SCC 209, decided on 10th April 2019.
3 (2019) 8 SCC 714, decided on 5th September 2019.
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that regard is, I think, fairly settled for several decades. A court or a
tribunal can always decree that the defendant in a specifc
performance suit must take such steps as are necessary to obtain
sufciently complete title to pass to the plaintif seeking that relief of
specifc performance.
18. In any case, all questions of arbitrability and jurisdiction as
between the petitioner/applicant and respondents Nos. 1, 2 (by his
legal heirs) and respondent No. 3 are being capable of tried by the
arbitral tribunal under Section 16 of the Arbitration Act. I will keep
all contentions open, including Mr Jain's contentions that Section 16
would have no application at all.
19. Having regard to these circumstances, and since there exists
an arbitration agreement between the Petitioner/applicant and
respondent No. 1, respondent No. 2's legal heirs and respondent
No. 3, I proceed to appoint a sole arbitrator to decide the diferences
and disputes between the parties arising from the agreement dated
25th September 2014, subject to the liberties and reservations
referred to above. Hence the following
ORDER
(a) Appointment of Arbitrator: By consent, Mr Snehal Shah, learned Advocate of this Court, is hereby nominated to act as a Sole Arbitrator to decide the diferences and disputes between the parties arising from the agreement dated 25th September 2014, subject to the liberties and reservations referred to Page 11 of 14 11th November 2019 ::: Uploaded on - 13/11/2019 ::: Downloaded on - 13/11/2019 21:02:42 ::: 25-CARAP358-19+.DOC above. The arbitration shall be between the petitioner/applicant as claimant and respondent No.1, the heirs of respondent No.2 and respondent No.3.
(b) Communication to Arbitrator of this order:
(i) A copy of this order will be communicated to him by the Advocates for the Applicant within one week from today of the order being uploaded.
(ii) In addition, the Registry will forward an ordinary copy of this order to the learned Sole Arbitrator within one week of the order being uploaded at the following postal and email addresses:
Arbitrator Mr Snehal Shah, Advocate Address 4, Currimjee Building, 3rd Floor, 111-A, MG Road, Fort, Mumbai 400 023 Mobile +91 98204 17751 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 Page 12 of 14 11th November 2019 ::: Uploaded on - 13/11/2019 ::: Downloaded on - 13/11/2019 21:02:42 ::: 25-CARAP358-19+.DOC statement will be retained on the fle of this application.
Copies will be given to both sides.
(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 id.
(f ) Interim Application/s: Liberty to the parties to make an interim application or 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. The petitioner/applicant's petition under Section 9 will be presented and treated as an application under Section 17 against respondent no.1, the heirs of respondent No.2 and respondent No.3. Reply afdavits fled in court to be similarly presented and treated as reply afdavits to the Section 17 application. Liberty to apply to the learned Sole Arbitrator for leave to fle further afdavits.Page 13 of 14
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(g) Fees: The arbitral tribunal's fees shall be governed by the Bombay High Court (Fees Payable to Arbitrators) Rules, 2018.
(h) Sharing of costs and fees: Clause 9.4 states that the costs of the arbitrator's fees shall be borne 'equally'. To avoid all controversy, it is agreed that this means that 50% of all arbitral costs and the arbitrator's fees will be borne by the petitioner/applicant, and the remaining 50% will be borne by the contesting respondents. This is only by way of clarifcation, without detracting from the agreement in any way.
(i) 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.
(j) Venue and seat of arbitration: Parties agree that the venue and seat of the arbitration will be in Mumbai. This is already provided in the arbitration agreement.
(k) Contentions kept open. Rival contentions are kept open and will be unafected by any observations in this order.
20. The Arbitration Application and the Arbitration Petition are disposed of in these terms. There will be no order as to costs.
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