Delhi High Court
Sanjeev Sharma And Ors. vs Shri Gurdeep Singh on 25 January, 2006
Equivalent citations: 128(2006)DLT453
Author: A.K. Sikri
Bench: A.K. Sikri
JUDGMENT A.K. Sikri, J.
1. In this petition filed by the petitioners under Section 11(4) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as `the Act') prayer made is to the effect that an independent arbitrator in pursuance to clause 12 of the Agreement to Sell (for short `the Agreement' ) dated 18th August, 2002 be appointed and disputes referred to him for adjudication.
2. The petitioners claim that they are the bona fide purchasers of property No.35, Block 205-B, known as 8, Babar Lane, Bengali Market, New Delhi measuring 330 sq.yds. According to them, the respondent had agreed to sell the aforesaid portion of the property to the petitioners for a total consideration of Rs.28 lacs vide Agreement dated 18th August, 2002. The petitioners paid a sum of Rs.6 lacs as earnest money. Rs.5 lacs was paid to the respondent on 18th August, 2002 and Rs.1 lacs was paid through post dated cheque and remaining consideration was to be paid on execution of lease deed. The respondent had also handed over physical and vacant possession of this portion of property to the petitioners which fact is also incorporated in clause 2 of the Agreement dated 18th August, 2002. As per the Agreement, the respondent was to take permission for sale from LandDO , Nirman Bhavan but he had failed to discharge this obligation and did not take steps for obtaining the requisite permission. The petitioners were constrained to give legal notices dated 10th January, 2004 and 28th January, 2004 but to no effect. The petitioners became suspicious that the respondent was backing out of the contract. This suspicion was confirmed when on 9th September, 2004 the petitioners came across a public notice published in the daily edition of the newspaper Hindustan Times. In this notice which was issued on behalf of Sh.S.Rivjit Singh Joher, B-35, defense Colony, New Delhi, general public was informed that entire property bearing No.8, Babar Lane, New Delhi was a subject matter of valid and subsisting Agreement to Sell dated 9th May, 2003 between Mr.H.N.Singh, Mr.Gurdeep Singh(respondent herein) and their brothers and the said Mr.Joher. The petitioners at that stage filed an application under Section 9 of the Act wherein exparte injunction order dated 29th September 2004 was granted subject to certain conditions, including the condition that the petitioners shall take steps for appointment of an arbitrator by filing an application under Section 11 which was not filed. The said application was dismissed on 17th May, 2005 primarily on the ground of non- payment of requisite deposit ordered by the court. This petition is, therefore, now filed for appointment of an arbitrator.
3. In the reply filed by the respondent, few preliminary objections to the maintainability of this petition are taken. Notably among them, which were pressed at the time of arguments, are:
(a) In view of filing of petition by the petitioners under Section 9 of the Act and dismissal thereof the alleged arbitration agreement stands waived/abandoned/given up.
(b) Existence of arbitration clause and valid contract is disputed which was disputed even in earlier proceedings. The petitioners have dishonestly created/forged/fabricated the Agreement as no such Agreement was ever executed.
(c) The petitioners have concealed these facts and have not disclosed the complete facts and reasons because of which application under Section 9 (OMP No.338/2004) came to be dismissed.
It is highlighted that along with paper book served upon the respondent there is a document styled as receipt of payment of Rs.1 lac which is dated 18th September, 2002. The said receipt does not find its incorporation either in documents filed along with the petition or as an averment in the petitioners' list of documents. The respondent has placed reliance on copy of the said receipt. It is contended that reference to said receipt would make it clear that:
(i) no agreement to sell ever came into existence either on or prior to 18th September, 2002;
(ii) it does not contain any description of parties to alleged contract till 18th September, 2002;
(iii) till 18th September, 2002 a payment of Rs. 1 lac is only made to the respondent and averment of making payment of Rs.6 lacs stands falsified;
(iv) Non-existence of any agreement to sell or payment before 18th September, 2002 i.e. date of receipt.
(v) Said receipt as also alleged agreement to sell are attested by Notary public on same date. Receipt is dated 18th September, 2002 while agreement allegedly is dated 18th August, 2002 and attested on 31st August, 2002. Falsity of the document is borne out writ large on the face of it. It is also alleged that the petitioners had not the capacity to buy out the share of the property at any point of time. RE: WAIVER
3. The first and foremost question is about the waiver of the petitioners' right to file this petition in view of the orders passed in OMP No.338/2004 The two orders passed in the said proceedings are dated 29th September, 2004 whereby exparte injunction was granted and order dated 17th May, 2005 whereby the said petition was dismissed. In the order dated 29th September, 2004, after taking note of the averments made in the petition, the court granted exparte ad interim injunction in the following terms and conditions: I am satisfied that a prima-facie case has been made out and for the issuance of ex-parte ad-interim injunction and if only notice is issued in the first instance. It will defeat the purpose of filing the petition. The balance of convenience is in the favor of the petitioner who is to suffer irreparable loss if not protected. Counsel for petitioner undertakes to deposit the balance sale consideration with the Registrar General of this court within four weeks from today. He further undertakes to take steps for the appointment of an Arbitrator in terms of clause 12 within two weeks from today. In these circumstances the respondent, their servants, representatives, employees and agents are restrained from interfering with the possession of the petitioner in the property and from creating any further rights therein.
4. While protecting the petitioners the two conditions imposed were (a) deposit of balance sale consideration of Rs.22 lacs with the Registrar General of this court within four weeks for which the petitioners had given an undertaking and (b) the steps for the appointment of an arbitrator in terms of clause 12 within two weeks and in this behalf also undertaking of the petitioners' counsel was recorded. The petitioners did not deposit the balance sale consideration. There is some dispute as to whether they took steps for appointment of an arbitrator. However, in the order dated 17th May, 2005, while dismissing this application, the court noted that neither the money was deposited nor steps were taken for appointment of the arbitrator and for this reason injunction order was vacated and the petition dismissed. This order is hereby reproduced verbatim:
Learned counsel for the petitioner argued that compromise talks are in progress and in term of the compromise, token amount has also been paid and prays for a short adjournment. Learned counsel for the respondent submits that on 29.9.2004, the petitioner had undertaken to deposit the amount of balance sale consideration of Rs.18 lacs with the Registrar of this Court. The amount till date has not been deposited and steps have not been taken for appointment of Arbitrator in terms of clause 12 till date, therefore, interim order dated 29.9.2004 is liable to be vacated. Learned counsel for the respondent submits that it was an undertaking by the counsel for petitioner. Learned counsel very fairly conceded that there is violation of the undertaking however, he submits that the property be protected in the interest of justice as they are negotiating for settlement, therefore, interim orders be continued. On 12.1.2005, learned counsel for the respondent submitted that possession of the property in question was with the respondent and the same was never handed over to the petitioner and took time to file reply. On last date of hearing, petitioner took time to file rejoinder which till date has not been filed. In view of the above I am not inclined to extend the interim order and the same has to be vacated. Nothing survives in the petition and is dismissed.
5. The following admitted position would emerge from the aforesaid discussion:
(a) OMP No.338/2004 filed by the petitioners earlier was under Section 9 of the Act and the petitioners were seeking interim injunction.
(b) Interim injunction was granted subject to fulfilllment of the two conditions, namely,
(i) deposit of balance sale consideration of Rs.22 lacs with the Registrar of this Court and
(ii) taking steps for appointment of an arbitrator in terms of clause 12 within two weeks.
(c) The aforesaid two conditions were not complied with as a result of which the court vacated the injunction order and dismissed the petition. If the petitioners did not take steps for appointment of an arbitrator, whether right to seek appointment of the arbitrator is waived, is the question Answer has to be in the negative in view of the discussion that follows.
6. In Sundaram Finance Ltd. v. NEPC India Ltd. reported as , the Apex Court had drawn the distinction between the provisions of the Arbitration Act, 1940 and the new Act, namely, Arbitration and Conciliation Act, 1996. Discussion was with reference to Section 9 of the present Act. Observing that while interpreting the provisions of 1996 Act, the court is not to be influenced by the principles underlying the 1940 Act, the court opined that a party to an arbitration agreement can approach the court for interim relief by moving an application under Section 9 of the Act not only during the arbitral proceedings but even before the arbitral proceedings. It was clarified that under the 1996 Act the court can pass interim orders under Section 9. Arbitral proceedings commence only when the request to refer the dispute is received by the respondent as per Section 21 of the Act . The material words occurring in Section 9 are before or during the arbitral proceedings. This clearly contemplates two stages when the court can pass interim orders, namely, during the arbitral proceedings or before the arbitral proceedings. The apprehension that if the application under Section 9 is filed before the arbitral proceedings and order obtained, the said party may not initiate steps for appointment of arbitrator at all was assuaged by the court by indicating that while passing an order under Section 9 of the Act, the court can direct the said party to take steps for appointment of arbitrator within stipulated period as is clear from the following observations contained in the said judgment:
When a party applies under Section 9 of the 1996 Act it is implicit that it accepts that there is a final and binding arbitration agreement in existence. It is also implicit that a dispute must have arisen which is referable to the arbitral tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties. Mr.Sumbramaniam is, therefore, right in submitting that when an application under Section 9 is filed before the commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings if, at the time when the application under Section 9 is filed, the proceedings have not commenced under Section 21 of 1996 Act. In order to give full effect to the words before or during arbitral proceedings occurring in Section 9 it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application under Section 9 can be filed. The issuance of a notice, in a given case, be sufficient to establish the manifest intention to have the dispute referred to arbitral tribunal but a situation may so demand that a party may choose to apply under Section 9 for an interim measure even before issuing a notice contemplated by Section 21 of the said Act. If an application is so made the Court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied the Court will have the jurisdiction to pass orders under Section 9 giving such interim protection as the facts and circumstances warrant. While passing such an order and in order to ensure that effective steps are taken to commence the arbitral proceedings, the Court while exercising jurisdiction under Section 9 can pass conditional order to put the applicant to such terms as it may deem fit with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings. What is apparent, however, is that the Court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under Section 21 of the 1996 Act.
7. The observations that while passing an injunction order the court can pass conditional order with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings were made in the context that an application under Section 9 was maintainable even before commencement of the arbitral proceedings and even when no notice under Section 21 of the 1996 Act was given by the applicant. That would only mean that in a given case when injunction order is passed on the condition that steps are to be taken for commencing the arbitral proceedings, and if such a condition is not complied with, the applicant would run the risk of losing the benefit of an injunction order. That precisely happened even in the instant case as well as the court ultimately vacated the injunction order and dismissed application filed by the petitioners Section 9. However, it would not lead to further consequence, namely, the petitioners would lose their right to seek such an appointment forever. The condition is imposed for grant of the injunction order and the consequence cannot be forfeiture of right of a person to seek appointment which right is otherwise available under the law. To put it differently, by not complying with the condition the petitioners are relegated to the position as if no such application under Section 9 was filed. However, if they have otherwise right to seek arbitrator's appointment under Section 11 of the Act and the said remedy has not become time barred, they can avail that remedy.
8. I may state at this stage that the petitioners have given their own reasons for not complying with the conditions. According to them, settlement talks were in progress and, therefore, Section 11 petition was not filed. It has, however, been averred that legal notice dated 12th October, 2004 was given by the petitioners to the respondent invoking the arbitration clause and nominating Mr.Mukesh Gakhar as their arbitrator. This averment is made in para 16 of the petition. Copy of the notice with acknowledgment is annexed as Annexure-E (colly). In reply to para 16, this averment is not specifically refuted/traversed and the only plea taken is that order dated 17th May, 2005 passed in OMP No.338/2004 falsifies this averment. Therefore, the petitioners had served notice dated 12th October, 2004 even invoking the arbitration clause but had not filed any application under Section 11 of the Act and the observations of this court in its order dated 17th May, 2005 to the effect that steps have not been taken for appointment of arbitrator is to be read to mean that effective steps by filing application under Section 11 of the Act were not taken. The issuance of legal notice dated 12th October, 2004 would also indicate that the petitioners had not waived their right to seek the appointment of the arbitrator.
9. Burden to prove waiver lies on the person who sets up the ground of waiver. Unlike estoppel which is rule of evidence, waiver is contractual and may constitute a cause of action. Whenever waiver is pleaded it is for the party pleading the same to show that an agreement waiving the right in consideration of some compromise came into being. There is no such agreement between the parties. Even conduct of the petitioners in the present case does not indicate that they had waived their right. [See: Krishna Bahadur v. Purna Theatre and Ors., ]. RE: EXISTENCE OF ARBITRATION AGREEMENT
10. The petitioners have filed on record copy of the Agreement dated 18th August, 2002. This Agreement is on a non-judicial stamp paper of Rs.50/-. In this Agreement which is between the petitioners and the respondent, name of the respondent is typed out and names of the petitioners are written in hand. The date of the Agreement is written in hand. Likewise, the total consideration of Rs.8 lacs agreed upon is filled in hand. Advance payment of Rs.6 lacs received is also filled in hand. Rest of the Agreement is typed. On the bottom of each page, signatures of both the petitioners as well as respondent appear. Signatures are on the last page also. In addition, on the side of each page as well, signatures of all the three persons appear. The respondent has alleged that this document is dishonestly created/fabricated. However, the respondent has not disputed his signatures on this document. What is sought to be stated is that on a receipt of Rs.1 lacs which is dated 18th September, 2002 particulars of this Agreement are not mentioned. These disputes between the parties can be thrashed out on the basis of evidence which can be led before the arbitrator. No doubt, in view of decision of the seven Judge Bench of the Supreme Court in the case of S.B.P.and Co. v. Patel Engineering Ltd and Anr. reported as JT 2005 (9) SC 219, the existence of a valid agreement can be looked into in these proceedings. Prima facie, I am of the view that once the Agreement is placed on record by the petitioners and signatures on the said document are not specifically denied by the respondent and this Agreement contains arbitration clause, there is an arbitration clause between the parties. Binding nature thereof or validity of this Agreement can be gone into before the arbitrator and it would be open for the respondent to take all possible defenses in this behalf.
11. I am not inclined to accept the plea of the respondent that the petitioners have not disclosed the complete facts regarding the earlier petition. In paras 13 and 14, there is a specific mention of filing of the earlier petition (OMP No.338/2004) and it is also stated that the said petition was dismissed. No doubt order vide which the said petition was dismissed, was not enclosed, However, that would not disentitle the petitioners to seek appointment of an arbitrator.
12. I also do not agree with the contention of learned counsel for the respondent that there are no specific disputes which can be referred after the injunction is refused. If the petitioners are able to ultimately prove that the Agreement dated 18th August, 2002 was executed between the parties, the enquiry which will be neeed to be gone into by the arbitrator, would be as to who has committed the breach of the contract. The effect of refusal of stay in OMP No.338/2004 would have bearing on the relief to be granted. Instead of relief of specific performance, the arbitrator may, if convinced, grant some other relief. It cannot be said that simply because the injunction was vacated and the petition under Section 9 dismissed, there are no disputes left to be adjudicated upon. Other submissions made by the learned counsel for the respondent and noted above, relate to the merits of the disputes.
13. This petition is accordingly allowed. Mr.M.L.Sahni, retired Additional District Judge, Delhi and former Member, Central Administrative Tribunal is appointed as the arbitrator. His fee is fixed at Rs.30,000/- plus actual expenses which shall be shared by both the parties equally.
14. No costs.