Gujarat High Court
Salarpuria Builders Pvt. Ltd vs Big Southern India Malls Pvt. Ltd on 20 February, 2015
Author: Akil Kureshi
Bench: Akil Kureshi
O/IAAP/13/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
PETN. UNDER ARBITRATION ACT NO. 13 of 2015
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SALARPURIA BUILDERS PVT. LTD.....Petitioner(s)
Versus
BIG SOUTHERN INDIA MALLS PVT. LTD.....Respondent(s)
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Appearance:
MR SI NANAVATI, SR. ADVOCATE WITH MS ANUJA S NANAVATI,
ADVOCATE for the Petitioner(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
Date : 20/02/2015
ORAL ORDER
This arbitration petition is filed seeking appointment of an arbitrator to resolve the disputes between the petitioner M/s. Salapuria Builders Pvt. Ltd. ('Salapuria' for short) and M/s.Big Southern India Malls Pvt. Ltd. ('Big Southern' for short) arising out of an agreement dated 20th July 2012. The agreement in question is titled as "indicative term sheet". Under such agreement, the parties noted down several terms and conditions which would be adopted in the definitive agreements which would include a joint development of a particular land. According to Salapuria, under such agreement, it also deposited a sum of Rs.1 crore with Big Southern in furtherance of such agreement. However, subsequently, dispute arose between the parties and it is an admitted position that no final agreement as referred to as definitive agreement in the said Page 1 of 7 O/IAAP/13/2015 ORDER indicative term sheet was ever executed. On the premise that the said term sheet contained an arbitration clause, Salapuria issue a notice dated 27.3.2013 for appointment of an arbitrator. Big Southern replied to such notice under a communication dated 8 th April 2013 taking various grounds including the ground that there was no arbitration agreement between the parties and no petition for appointment of an arbitrator would, therefore be maintainable. The Salapuria thereupon approached the Karnataka High Court by filing Civil Misc. Petition No.105 of 2013 which came to be disposed of by an order dated 11.8.2014 in following terms:
"Learned counsel for the petitioner has filed a memo seeking permission of this Court to withdraw the above Civil Miscellaneous Petition with liberty to pursue other remedies as available to it under law.
2. Memo is placed on record. The civil Miscellaneous Petition is dismissed as withdrawn with liberty as above. No costs."
The petitioner thereupon filed the present arbitration petition.
Learned Senior Advocate Shri Sudhir Nanavati for the petitioner submitted that the agreement referred to as the indicative term sheet contained an arbitration clause. Admittedly, disputes have arisen in working out the term sheet. Such arbitration clause cannot be confined to the later definitive agreement which may be entered into and would operate even in course of working out the term sheet. He, therefore, requested for appointment of an arbitrator.
Page 2 of 7O/IAAP/13/2015 ORDER Firstly I have serious doubt about the maintainability of this petition in view of the order passed by the designate of the Chief Justice of the Karnataka High Court. As noted, the petitioner had approached the Karnataka High Court for appointment of an arbitrator under section 11(5) of the Arbitration and Conciliation Act. Such petition was, however, withdrawn with a liberty to pursue other remedies as available under law. This had no reference to approaching an appropriate court which had territorial jurisdiction to entertain such a petition. Even otherwise, the subject matter property is situated within the jurisdiction of the Karnataka High Court. The agreement in question also was executed within the jurisdiction of the said Court. Merely because according to the parties, seat of the arbitration would be at Ahmedabad would not permit the petitioner to file fresh proceedings before this Court having once approached the Karnataka High Court and withdrawn the petition for for availing other remedy.
In any case, I have examined the petition on merits also. To appreciate the contention of the counsel for the petitioner, few terms of the indicative term sheet may be noted:
"The intent of this document is to describe the key terms of the proposed agreement between BIG Southern India Malls Private Limited hereinafter referred to as the "Big Southern", and Salapuria Builders Private Limited hereinafter referred to as "Sattva" hereinafter individually referred to as a "party"
and collectively as the "Parties", for the proposed development for the land located at No.42, Rajaji Industrial Extn, Page 3 of 7 O/IAAP/13/2015 ORDER Yashwantpur Tumkur Road, Bangalore (the land). The terms indicated in the Term Sheet shall be adopted in the definitive agreements, including a joint development agreement and a power of attorney, as may be necessary for joint development (Definitive Agreements" subject to applicable law, compliance with FDI Regulations and mutual agreement between the Parties."
xxxx 23 Exclusivity/ During the validity of this Term Sheet and for a period Definitive of 60 (sixty) days from the date of receipt of first draft Agreements of the joint development agreement and power of attorney, forming part of the Definitive Agreements, from Big Southern (and not for any extended period) and if the Parties sign the Definitive Agreements, until the completion of the Project, Big Southern shall not deal with the Land nor will they negotiate with any third party with regards to the sale/transfer and/or development of the Land. Big Southern and Sattva shall endeavour to enter into a Definitive Agreements as mutually agreed between the Parties, however, based on this Term Sheet. In the event, Big Southern and Sattva fail to do so, they may mutually agree to extend the time period for execution of the Definitive Agreements, with or without any commitment for exclusively during the extended period. The Definitive Agreements will contain standard representations and terms typical for a transaction of this nature by Big Southern and Sattva.
xxx xxx xxx 25 Non binding This Term Sheet is intended as an indication of
interest for discussion purposes only and is not intended to be and does not constitute a legally binding obligation on Big Southern and / or Sattva. No individual or entity will have any rights or obligations of any kind whatsoever relating to the development of the said Land contemplated herein unless and until Definitive Agreements with respect thereto are executed and registered. Both parties hereby explicitly acknowledge that they will not be entitled to any remedies based on this non-binding Term Sheet.
xxx xxx xxx
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O/IAAP/13/2015 ORDER
27. Arbitration All disputes arising between Big Southern and Sattva
touching, concerning or relating to any manner, question or issue under the Definitive Agreements or its construction or effect or the rights, duties or liabilities of Big Southern and / or Sattva shall be referred to arbitration of a sole arbitrator to be mutually appointed by Big Southern and Sattva. The proceedings shall be conducted under the provisions of the Arbitration & Conciliation Act, 1996. the arbitration proceedings shall be held in English. The proceedings shall be held in Ahmedabad."
It can be seen that the document in question is more in the nature of a memorandum of understanding. The preamble to the document would suggest that the parties enlisted the key terms of the proposed agreement which would be later on entered into between the two sides. The same would form part of the definitive agreement and the power of attorney necessary for joint development of the land in question. The term 'definitive agreement' is thus sufficiently clear in the preamble portion of the document itself. Under clause 23, this term is again referred to where it records that during the validity of the term sheet and for a period of sixty days from the date of receipt of first draft of the joint development agreement and power of attorney forming part of the definitive agreements and if ultimately such agreements resigned, until completion of the project, Big Southern shall not deal with the land nor will they negotiate with any third party with regard to the sale, transfer or development of the land. Clause 25 clarifies that the term sheet was intended to be an indication of interest for discussion purposes and not to be a legally binding obligation between the two sides. In the context of these provisions contained Page 5 of 7 O/IAAP/13/2015 ORDER in the indicative term sheet, one would have to interpret the arbitration clause. In such arbitration clause, the parties agreed that all disputes arising between the two sides concerning or relating to any matter, question or issue under the definitive agreements or its construction or effect or the rights, duties or liabilities of the parties shall be referred to arbitration of a sole arbitrator to be mutually appointed by both sides. In plain terms thus, the arbitration clause would apply in case of any dispute which may arise concerning or relating to any matter or question or issue under the definitive agreements. Unless and until, therefore, such definitive agreements were actually executed, the arbitration clause would not be activated. It is undisputed that no such documents were later on executed by the parties. The intention of the parties was thus amply clear. The arbitration clause would apply to bilateral relations between the parties in the definitive agreements which were yet to be executed between the two sides, if ultimately executed and in case of any dispute arising out of such agreement that the arbitration clause would apply. At any rate, the parties never intended to arbitrate any dispute which may surface while working out the terms of the indicative term sheet.
Counsel for the petitioner, however, submitted that including such a condition in the term sheet which was applicable only after the definitive agreements were executed serve no purpose and that therefore, the said clause should be interpreted in such a way as to apply to bilateral relations arising out of the indicative term sheet.
Such a contention cannot be accepted for two reasons. Firstly,
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O/IAAP/13/2015 ORDER
language of clause 27 is amply clear and permits no ambiguity. It is well settled that like a statutory provision, while interpreting any document also, primacy must be given to the plain language used. In the present case, when the arbitration agreement is made to apply only to definitive agreements, by any extension of interpretive process, the same cannot be made applicable to the term sheet. Further, it is not unknown to law that an arbitration clause may be contained outside of the principal agreement as long as such an arbitration agreement satisfied the requirements of section 7 of the Arbitration and Conciliation Act, 1996. It does not matter whether it forms part of the main agreement between the parties or outside of such agreement. Intention of the parties, therefore could well be that irrespective of what is stated in the definitive agreement which may be later on signed, there would be an arbitration clause to resolve the disputes arising out of such contracts.
In the result, the arbitration petition is dismissed.
(AKIL KURESHI, J.) (vjn) Page 7 of 7