Delhi High Court - Orders
Randhawa Construction Private Limited vs Hcbs Promoters And Developers Private ... on 25 January, 2021
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 27/2021
RANDHAWA CONSTRUCTION
PRIVATE LIMITED ..... Petitioner
Through: Mr. Parmanand Yadav and Ms.
Divya Jyoti Singh, Advs.
versus
HCBS PROMOTERS AND
DEVELOPERS PRIVATE LIMITED ..... Respondent
Through:
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
ORDER
% 25.01.2021 IA 1203/2021 (Section 151 CPC for exemption)
1. Allowed, subject to all just exceptions.
2. The application stands disposed of.
O.M.P.(I) (COMM.) 27/2021
1. This is a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act").
2. The facts, from which the petitioner emanates, as stated in the Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 1 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09 petition, may be set out thus:
(i) The dispute arises out of a Collaboration Agreement, dated 11th June, 2013, between the petitioner and the respondent. Under the said Agreement, the respondent undertook to develop the petitioner's land into a Group Housing Complex. According to the petitioner, the Collaboration Agreement required costs and expenses to be borne by the respondent, also casting responsibility on the respondent to procure the requisite licenses, permissions, sanctions and approvals. On the completion of the development, the respondent was to deliver possession of the constructed complex to the petitioner within the time frame stipulated in the Collaboration Agreement. The petition also adverts to various clauses of the Collaboration Agreement.
(ii) Three Addenda were executed to the Collaboration Agreement on 7th September, 2013, 29th October, 2013 and 8th November, 2013. For the purposes of the present petition, no detailed reference to these Addenda is necessary.
(iii) Consequent to the aforesaid Collaboration Agreement, a Letter of Intent was granted by the petitioner to the respondent on 4th December, 2014.
(iv) Licence, for development of the land was issued by the Directorate of Town and Country Planning (DTCP), Haryana, Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 2 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09 on 11th June, 2014, and the building plans were approved on 1st October, 2014.
(v) The Collaboration Agreement required all receivables from the project, to be deposited in an escrow account. In consonance therewith, on 2nd July, 2015, an Escrow Agreement was executed between the petitioner, the respondent and the Yes Bank, being the Escrow Bank. As per this Escrow Agreement, all funds received from the project, were to be deposited in the escrow account.
(vi) On 31st March, 2017, consequent to a request by the respondent, an advance of ₹ 2,07,66,666/- was paid by the petitioner to the respondent and to the contractor engaged by the respondent to construct the housing complex, namely, M/s.
Millennium Engineers, as the respondent pleaded financial stringency.
(vii) Consequent to the Real Estate Regulation Act, 2017 (hereinafter referred to as "RERA") coming into effect on 1st April, 2017, the respondent wrote to the petitioner on 9th May, 2017, requiring the petitioner to revise the Escrow Agreement, in accordance with Section 4(2)(I)(D) of the RERA and to provide for deposit of 70% of the amount realized for the project from the allottees in a separate bank account, to be used only towards the land costs and the costs of construction. The petitioner asserts in the petition, that this was unnecessary, as Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 3 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09 the amounts were already being deposited in an earmarked escrow account.
(viii) On 13th December, 2017, the respondent wrote to the petitioner, stating that out of the payment proceeds from the clients and customers in the escrow account, (a) 10.714% was being transferred to statutory dues account, (b) the balance was being transferred to the HCBS Promoters and Developers Private Limited Sports Ville collection in RERA account number ending with 000266300000506 and (c) the amount received in the RERA account would be allocated, as per the stipulated allocations share in the Collaboration Agreement, to the accounts of the petitioner and the respondent.
(ix) The petitioner objected to this course of action; nevertheless, it is stated that the respondent started depositing the proceeds from the project, including the amounts collected from the allottees of the flats and housing units, in non-escrow accounts. This fact, it is stated, was admitted by the respondent in its email dated 24th July, 2018.
(x) It is further alleged that in July, 2018, the petitioner came to know that the respondent had diverted funds from its existing escrow account no. 000280200000419 to another account no. 000280200003755. The petitioner addressed a communication, dated 23rd July, 2018, to the respondent, seeking an explanation therefor. The respondent replied, on the next date, i.e. 24th July, Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 4 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09 2018, asserting that it was following the same procedure, which it had been following in the past.
(xi) On 7th August, 2018, the respondent sent a collection summary to the petitioner. According to this summary, the petitioner alleges that an amount of ₹ 75,29,332/- was payable by the respondent to the petitioner, apart from the amounts which had been transferred from one escrow account to the other and the amounts deposited in non-escrow accounts.
(xii) Objecting to these actions, a legal notice was addressed by the petitioner to the respondent on 12th September, 2018, calling on the respondent to revert, forthwith, to the escrow account, all payments received, under the project. The respondent was also exhorted to ensure, that in future, all payments were transferred to the designated escrow account and distributed, from the said account, as per the share allocations stipulated in the Collaboration Agreement.
(xiii) This legal notice, it is asserted, invoked no response. Rather, on 17th December, 2018, the respondent wrote to the petitioner, stating that the flats, which were held to the share of the petitioner under the Collaboration Agreement, would be allocated as per the draw of lots to take place on 22nd December, 2018.
(xiv) The petition alleges that as on date, an amount of over ₹ Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 5 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09 10 crores is payable by the respondent to the petitioner.
(xv) It is further alleged that the respondent changed the layout plan of the project without the consent of the petitioner and allocated the areas, which were allocated for the commercial activities to the stilt areas, resulting in reduction of parking space as well as reduction of costs of the commercial space and consequent loss to the petitioner. It is further alleged that the respondent encroached on an area of approximately 500 sq. metres. of adjoining land belonging to the petitioner, and constructed a park thereon.
3. Principally, the petition alleges that the respondent has continuously been defaulting in depositing the receipts, from the project, whether from allottees or otherwise, in the escrow account, as required by Clause 15 of the Collaboration Agreement, as well as the covenants of the Escrow Agreement, dated 2nd July, 2015, executed in furtherance thereof. For ready reference, Clause 15 of the Collaboration Agreement may be reproduced thus:
"15. The built up residential space shall be sold as per The Affordable housing policy to the eligible applicants after allotment as per the policy. All proceeds of the same shall flow and be received in an escrow account which shall be operated by the DEVELOPER with specific irrevocable instructions to the escrow banker to transfer 72% to the DEVELOPER's specified Bank Account and 28% to the OWNERS's specified Bank Account, That 28% (Twenty eight percent) of the revenue generated from the saleable area in respect of aforesaid apartments, built on the land with proportionate, undivided, indivisible or impartible ownership rights in the land underneath the said complex as also in Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 6 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09 common areas and common facilities shall belong to and be owned by the OWNERS (herein referred (to as 'Owners' allocation) and the remaining 72% (Seventy Two percent) of the revenue generated from the saleable area in respect of aforesaid apartments, built on the land with proportionate, undivided, indivisible or impartible ownership rights in the land underneath the said complex as also in common areas and common facilities shall belong to and be owned by the DEVELOPER (herein referred to as the DEVELOPER's allocation) shall fall to the share of the DEVELOPER in consideration of the obligations undertaken by it under these presents and shall belong to and be owned by the DEVELOPER. Any money however received towards reimbursement of Internal/external Development charges from the prospective buyers shall accrue to The DEVELOPER, as all expenses of IDC/EDC are the responsibility of The DEVELOPER. However all receipts in excess of actual expenses on account of IDC/EDC shall be shared in the same proportion of 28:72 by OWNER DEVELOPER"
4. It is alleged that several attempts were made by the petitioner to reconcile accounts with the respondent, but to no avail. The Escrow Agreement, which initially expired on 31st March, 2020, now stands extended till 31st March, 2021.
5. On 18th June, 2020, the respondent wrote to the petitioner stating that it had undertaken overall reconciliation of the accounts, sold the inventory and demarcated the units to be allotted to the petitioner, and further called upon the petitioner to refund the security deposit of ₹ 31 lacs paid by the respondent.
6. The petitioner further wrote to the respondent on 19th June, 2020 and 6th August, 2020, calling upon the respondent to settle the disputes. There was, however, no response.
Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 7 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:097. It is further alleged, in para 51 of the petition, that, over the past two weeks, as per the knowledge of the petitioner, over 100 housing units have been sold by the respondent, without crediting the receipts therefrom in the escrow account, as required by the Collaboration Agreement and the Escrow Agreement.
8. In these circumstances, the petitioner has approached this Court, as the Collaboration Agreement provides for resolution of the disputes between the parties by arbitration and provides, in that regard, in clause 42, thus:
"42. In the event of any dispute, controversy or difference ("Dispute") of whatever nature, arising under, out of, in connection with or the terms and conditions of this Term Sheet or any provisions hereof such dispute shall be settled through good 'faith, negotiation amongst the parties to such dispute. In the event that such dispute cannot be resolved by negotiation within 30 days of the dispute having arisen, such dispute shall be referred to a sole arbitrator mutually appointed by the parties. The place of arbitration and the seat of arbitral proceedings shall be New Delhi. The decision of the arbitrator and any award given shall be final and binding upon the Parties. The proceedings shall be governed by the Arbitration and Conciliation Act, 1996."
9. Attempts at reconciliation of the accounts with the respondent having being failed, the petitioner submits that the matter would have to be referred to arbitration but that, given the manner in which the respondent is behaving, urgent pre-arbitral interim relief is necessary, in order that the corpus of the arbitration dispute is not triggered away and the arbitral proceedings rendered futile even before they take off.
Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 8 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:0910. In these circumstances, the petitioner, invoking Section 9 of the 1996 Act, has moved this Court by the present petition at the pre- arbitral stage, praying for the following relief.
"PRAYER:
In the facts and circumstances, Petitioner prays for interim protection in the form of injunction order thereby:
A. Direct the respondent to ensure that all the funds received in respect of the project from the customers in all heads must be credited to the escrow account No. 000280200000419 held with Yes Bank under the escrow agreement and restrain the respondent from receiving the funds in any other account other than the escrow account during the pendency of the present proceedings;
B. Restrain the respondent from transferring or alienating or receiving a booking in respect of the any apartment or commercial shop or any other charge in respect of the apartments without the permission of this Hon'ble Court.
C. Appoint a Forensic Auditor to audit the accounts of the entire project and the entire accounts books of the respondent in the interest of justice.
D. Direct the respondent to handover all the details of all the customers whether live or cancelled, all/any amount received from all the customers, details of interest charged from the customers, details of unsold flats etc. E. Direct the respondent to remove the encroachment from the land of the petitioner as reflected in Red colour in the map F. Direct the respondent to provide the petitioner with the copies of the consent letters of the respondent Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 9 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09 received from the customers in respect of the change of the location of the commercial part of the project.
G. With any other order which this Hon'ble Court may also pass as considered just fit, proper and expedient in the circumstances of the case."
11. Issue notice, returnable on 25th March, 2021.
12. Counter affidavit, if any, be filed within a period of four weeks with advance copy to learned counsel for the petitioner, who may file rejoinder thereto, if any, within a period of two weeks thereof.
IA 1202/2021 (Section 151 CPC)
1. Issue notice, returnable on 25th March, 2021.
2. Reply, if any, be filed within a period of four weeks with advance copy to learned counsel for the petitioner, who may file rejoinder thereto, if any, within a period of two weeks thereof.
3. The averments in the petition make out a prima facie case in favour of the petition. Given the number of flats that the respondent is alleged to have disposed of in the recent past, coupled with the allegation that the proceeds are not being deposited in the escrow account as required by the Collaboration Agreement, a case for directing compliance with the said requirement even at an ad interim stage is clearly made out, so that the proceeds are not diverted. The considerations of balance of convenience and irreparable loss, too, Signature Not Verified justify such ad interim directions.
Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 10 of 11By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09
4. In the aforesaid circumstances, the respondent is directed to ensure that, till the next date of hearing, all amounts received from the project, under all heads including, inter alia, amounts paid by the allottees of the housing units, are credited into escrow account no. 000280200000419, held with the Yes Bank. The respondent shall, therefore, be restrained from receiving the funds in any other account.
4. It is also directed that any booking of housing units or transfer of housing units to any customer, if undertaken by the respondent, shall be at its own risk and cost and shall abide by the outcome of these proceedings.
5. As the aforesaid order has been passed in the absence of the respondent, the petitioner is directed to comply with the provisions of Order XXXIX Rule 3 of the CPC within a period of one week from today.
6. Parties may act on the basis of the order, as emailed to learned counsel for the petitioner by the Registry.
C. HARI SHANKAR, J.
JANUARY 25, 2021 r.bararia Signature Not Verified Digitally Signed O.M.P.(I) (COMM.) 27/2021 Page 11 of 11 By:SUNIL SINGH NEGI Signing Date:26.01.2021 14:12:09