Delhi High Court
M/S Kaiser Lands vs Mrs. Ethel Robinson And Others on 26 September, 2008
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+I.As. No. 2049/2007 and 13200/2007
in CS (OS) No. 2810/1999
% Date of decision : 26.09.2008
M/S KAISER LANDS ....Plaintiff
Through: Mr. Sanjeev Sachdeva,
Advocate
Versus
MRS. ETHEL ROBINSON AND OTHERS ....Defendants
Through: Mr. Amitabh Chaturvedi and
Mr. JeeveshNagrath,
Advocates for the Defendant
No. 5
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? Yes
2. To be referred to the reporter or not? Yes
3. Whether the judgment should be reported
in the Digest? Yes
RAJIV SAHAI ENDLAW, J.
1. The Plaintiff has instituted the suit for specific performance of an agreement of sale dated 19th April, 1993 by the Defendants in favour of the Plaintiff of the Rear Duplex Flat comprising of 50% of the ground floor and 50% of the basement in property no. E-7/14, Vasant Vihar, New Delhi. Though there are 5 Defendants, the Defendant No. 1 died during the pendency of the suit leaving, besides the Defendants No. 2 to 5, her daughters also as her legal I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 1 of 11 representatives. Neither the other legal representatives of the Defendant No. 1 nor the Defendants No. 2 to 4 have chosen to appear in the suit and have been proceeded ex parte. The Defendant No. 5 on being served, filed Criminal Misc. No. 1759/2000 which was put up before the court first on 23rd May, 2000 and is still pending. The counsel for the Defendant No. 5 thereafter on 12th September, 2000 stated that an application invoking the arbitration clause will be filed and the Defendant No. 5 will not be filing the written statement. The counsel for the Plaintiff on that date itself stated that the Defendant No. 5 having already moved the application under Section 340 of the Cr.P.C. (Cr.Misc. No. 1759/2000), was not entitled to invoke the arbitration clause. The matter thereafter remained pending for the service of the other Defendants. The Defendant No. 5 moved another application under Section 340 of the Cr.P.C. being Cr.Misc. No. 2537/2000 notice whereof was also issued and which is also still pending. The Defendant No. 5 after 5 years filed I.A. No. 8213/2005 under Section 8 of the Arbitration and Conciliation Act, 1996 notice whereof was issued and reply was filed by the Plaintiff. However, on 8th February, 2007, it was found that I.A. No. 8213/2005 was signed by the wife of the Defendant No. 5 on the basis of a Power of Attorney which did not pertain to the property, subject matter of the present suit. The counsel for the Defendant No. 5 thus sought permission to withdraw the application which was dismissed as withdrawn. It was thereafter that the I.A. No. 2049/2007 also under Section 8 of the Arbitration Act came to be filed by the Defendant No. 5. The Plaintiff on the other hand filed I.A. No. 13200/2007 under Order 8 Rule 10 of the CPC for striking off the defence of the Defendant No. 5 for having not filed the written statement. This order disposes of the said two applications. I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 2 of 11
2. It is the admitted case of the Plaintiff and the Defendant No. 5 that the Agreement dated 19th April, 1993 was executed between the deceased Defendant No. 1, predecessor of the Defendants No. 2 to 4 and the Defendant No. 5 on the one hand as owners of property no. E-7/14, Vasant Vihar, New Delhi and the Plaintiff. Under the said Agreement, the Plaintiff agreed to demolish the then existing single- storeyed construction on the said property and to, at the cost and expense of the Plaintiff, construct a basement, ground, 1st and 2nd floor thereon, in consideration of the Plaintiff on completion of the said construction acquiring rights with respect to 50% of the basement and ground floor and in the 2nd floor. This is what in common parlance is referred to as a collaboration agreement. The said Agreement contains an arbitration clause as under:
"19. That in the event of any question or dispute arising in connection with or incidental to or in respect of interpretation or scope of this Agreement of any part thereof, then the same shall be referred to the sole Arbitration of an Arbitrator mutually decided by the two parties for decision. The sole Arbitrator shall give a speaking order/Award."
3. It is the case of the Plaintiff that the Defendants had subsequently agreed to sell to the Plaintiff, the ground floor Rear Duplex Flat for a consideration of Rs. 52 lacs. The Plaintiff in this regard relies upon a document titled Receipt-cum-Agreement and which the Plaintiff in the plaint has stated was executed on 29th June, 1994. The said document is purportedly signed by the deceased Defendant No. 1, the Defendant No. 5 and the predecessor of the Defendants No. 2 to 4 as well as on behalf of the Plaintiff. The two applications aforesaid under Section 340 of the Cr.P.C. came to be I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 3 of 11 filed by the Defendant No. 5 with respect to the said document. It is the case of the Defendant No 5 in the said applications under Section 340 of the Cr.P.C. that he was posted by the Indian Army at Palampur and retired on 30th June, 1994 and on 29th June, 1994, the Defendant No. 5 as well as the Defendant No. 1 were at Palampur and as such could not have signed Receipt-cum-Agreement and the document has been forged and fabricated by the Plaintiff.
4. In the aforesaid facts, the following questions have a bearing on the disposal of the application of the Defendant No. 5 under Section 8 of the Arbitration Act.
a) Whether the Agreement alleged by the Plaintiff of sale is part and parcel of the Collaboration agreement containing the arbitration clause or is a separate and independent agreement?
b) Whether the Defendant No. 5 while denying the Agreement of sale can invoke the arbitration clause?
c) Whether the filing of the applications under Section 340 of the Cr.P.C. constitutes a first statement on the substance of the dispute within the meaning of Section 8 the Arbitration Act and debars the Defendant No. 5 from subsequently applying for reference to arbitration?
d) Whether the Defendant No. 5 by not invoking Section 8 of the Arbitration Act for nearly 5 years after service of summons has waived the right to apply thereunder?
e) Whether the Defendant No. 5 by reason of having earlier filed an application under Section 8 of the Arbitration Act and I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 4 of 11 having withdrawn the same, is debarred from filing the second application?
5. In my opinion, the Defendant No. 5 merely for the reason of having applied under Section 8 of the Arbitration Act after 5 years from the service of the summons and for the reason of having earlier filed an application and withdrawn the same, is not debarred from now invoking the said provision. Section 8 itself lays down the time and manner of applying. Under Section 8, the application is to be filed not later than while submitting the first statement on the substance of the dispute. Thus as long as the application is filed not later than while submitting the first statement on the substance of the dispute, the same cannot be dismissed for the reason of delay. See M/s Everest Electric Works vs. Himachal Futuristic Communications Ltd. 113 (2004) DLT 304. Similarly, the earlier application was withdrawn for the reason of the same having been signed by the wife of the Defendant No. 5 who was found to be not authorized to do so. Thus, the same cannot be considered as an application filed by the Defendant No. 5. Even otherwise there was no adjudication at that stage as to whether the provisions of Section 8 of the Act are attracted or not.
6. I, however, find the application filed by the Defendant No. 5 under Section 340 of the Cr.P.C., the first statement of the Defendant No. 5 on the substance of the dispute. It is significant that the Arbitration Act of 1996 has made a departure from the earlier law. The Legislature has not used the word „written statement‟ but has chosen the words "first statement on the I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 5 of 11 substance of the dispute." Thus, it has to be determined as to what was the substance of the dispute.
7. Substance of the dispute in the present case is an agreement of sale of Rear Duplex Flat in the property. The Plaintiff is claiming specific performance of the said Agreement. The Defendant No. 5 by filing the applications has denied the Agreement to Sell itself and has called the documents filed by the Plaintiff evidencing the Agreement to Sell to be a forged and fabricated document. Even though the Defendant No. 5 did not file the written statement but the Defendant No. 5 in the said application accompanied by the documents to show his presence on the date of the Agreement at Palampur, has sought prosecution of the Plaintiff and its partners. A suit for specific performance can be contested by the Defendant either by denying the Agreement to Sell itself or its terms or challenging the readiness or willingness of the Plaintiff or the entitlement of the Plaintiff to the relief of specific performance. In the present case, the Defendant No. 5 in response to the suit has denied the existence of the Agreement to Sell. The Defendant No. 5 was satisfied for nearly 5 years after knowledge of the suit to deny the existence of the Agreement and to call the Agreement to Sell forged and fabricated. The Defendant No. 5, by filing the applications under Section 340 Cr.P.C. called upon the court to adjudicate upon the existence of the Agreement to sell. The court under Section 340 Cr.P.C. is to direct prosecution only after prima facie recording a finding on the allegation of forgery and fabrication. The Defendant No. 5 having called upon the court to adjudicate his defence to the claim of the Plaintiff, in my view, cannot subsequently be permitted to reprobate and seek arbitration.
I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 6 of 11
8. While holding so, I am conscious of Rashtriya Ispat Nigam Ltd. vs. Verma Transport Company AIR 2006 SC 2800 where the Apex court held the filing of an opposition to interim injunction to be not precluding subsequent filing of an application under Section 8. The reasoning therefor was that in the reply to injunction application itself it was stated that the suit was not maintainable because of the arbitration clause. It was further reasoned that when ex parte injunction has been granted, the other party is forced to reply to have the same vacated and such compulsion cannot disclose an unambiguous intention to give up the benefit of arbitration agreement. The Apex court thus held that taking step in the proceeding must be confined to taking steps in the proceedings for resolution of the dispute and not to taking steps for contesting applications for interlocutory reliefs. However, in the present case the Defendant No. 5 was not under any compulsion for filing applications under Section 340 Cr.P.C. He, by calling upon the court to adjudicate the said application, invited the court to under Section 340 (1) (a) Cr.P.C. to hold a preliminary inquiry and record a finding to the effect that the document evidencing Agreement to sell of which specific performance was claimed was forged and fabricated. That is the very dispute which the arbitrator would be required to adjudicate. The Defendant No. 5 having called upon the court to return a finding on existence of Agreement to Sell, lost his right to have the said question referred to arbitrator.
9. Even otherwise, I do not find the existence of any arbitration agreement in the Agreement of sale of Rear Duplex Flat in the property. The counsel for the Defendant No. 5 contended that the Agreement of sale alleged by the Plaintiff was a change of allocation I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 7 of 11 of built-up areas from that provided in the Collaboration agreement. I do not find so. The built-up areas were allocated under the Collaboration agreement in lieu of the expense to be incurred by the Plaintiff in executing the works of demolition and reconstruction of the property. On the other hand, the subsequent Agreement was for the sale by the owners of a part of their allocation of built-up area under the Collaboration agreement, to the Plaintiff or its nominee.
10. It is significant that a Collaboration agreement is not assignable. The same is entered into by the owner of a property with a builder/contractor relying upon the personal skills and reputation of the said builder or contractor. On the contrary, an agreement of sale of immovable property is by its very nature, unless provides otherwise, assignable by the purchaser. A perusal of the Receipt- cum-Agreement relied upon by the Plaintiff also does not lead one to hold that the parties intended the Agreement to Sell to be a part and parcel of the earlier Agreement. Merely because the property, subject matter of the said Agreement was to come into existence in pursuance to the Collaboration agreement, would not make the Agreement to Sell a part and parcel of the Collaboration agreement. The counsel for the Defendant No. 5 has argued that on the date of the Agreement to Sell, the property subject matter thereof, was not even in existence and was to come into existence under the Collaboration agreement and thus, the Agreement to Sell should be deemed to be a change in allocation under the Collaboration agreement itself. I, however, do not find so. Under the law it is possible to enter into an Agreement to Sell with respect to a property, under construction. Under the Collaboration agreement, the Plaintiff was to acquire rights with respect to certain portions of I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 8 of 11 the built-up property in consideration of incurring expense on the construction. There was to be no sale by the owners of the said portions of the property to the Plaintiff. The Collaboration agreement is an agreement of exchange. Upon the completion of reconstruction of the property, the owners were to be the owners of the land and the builder was to be the owner of the superstructure and the owners in exchange of a portion of the superstructure had agreed to create rights in a portion of the land in favour of the builder or its nominee. The position with respect to the built-up area of the owner‟s allocation was entirely different. The owners were the owner of the land as well as the superstructure thereof and for consideration had agreed to transfer the same to the Plaintiff or his nominee.
11. The counsel for the Defendant has relied upon a notice dated 20th March, 1997 stated to be got issued by the Plaintiff/partner of the Plaintiff to the deceased Defendant No. 1 and the Defendant No. 5 and in which it is stated that they were to get prepared a combined agreement for the complete transaction including the transfer of the Rear Duplex Flat to the Plaintiff. The said notice has been given in reference to a MoU dated 14th December, 1996 stated to have been executed by the Plaintiff and the predecessor of the Defendants No. 2 to 4 and the Defendant No. 5. A perusal of the said MoU also shows that the parties have therein also treated the Collaboration agreement and the Agreement of sale of Rear Duplex Flat separately. The notice dated 20th March, 1997 definitely shows that according to the Plaintiff there was a proposal to have a composite agreement of collaboration and of sale of the Rear Duplex Flat but the fact remains that no such agreement was admittedly executed. The question of a I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 9 of 11 composite agreement would arise only when the agreement for the two transactions i.e. of collaboration and of sale were different. We do not know what may have been settled by the parties in the proposed composite agreement, whether the parties would have provided for arbitration therein or not. One can also take judicial notice of the fact that while Arbitration is generally the norm in Collaboration agreements which may entail technical disputes as to construction and its quality, the same is not the norm in Agreement of sale of immovable property.
12. The Defendant No. 5 has in his application also not stated as to how the disputes and differences, if any, between the parties, subject matter of the present suit may be interlinked to the disputes and differences under the Collaboration agreement. It is significant that the present suit itself has remained pending for the last about 9 years and no claims under the Collaboration agreement are stated to have been made by either party till date.
13. In the circumstances, I find the Agreement of sale, for specific performance of which the present suit has been filed, to be separate and distinct from the Collaboration agreement and I further find that there is no averment of the Defendant No. 5/Applicant that the adjudication of the present suit would, in any way, entail adjudication of any claims under the Collaboration agreement. Having found no arbitration agreement and having further found the application under Section 8 of the Act to have been filed after the Defendant No. 5/Applicant had filed his first statement on the substance of the dispute, I.A. No. 2049/2007 is dismissed and in the I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 10 of 11 circumstances aforesaid, with costs of Rs. 5,000/- payable by the Defendant No. 5 to Delhi Legal Services Authority.
14. The Plaintiff has applied vide I.A. No. 13200/2007 for striking of the defence of the Defendant No. 5. Undoubtedly, there is a long delay of 9 years in filing the written statement. The application under Section 8 of the Act itself owing to which the written statement is stated not to have been filed, was filed after 5 years of service of the Defendant No. 5. However, since the Defendant No. 5 was never put to terms, I deem it appropriate to, by way of last opportunity, give two weeks time to the Defendant No. 5 to file his written statement to the suit. This shall further be subject to payment of costs imposed on Defendant No. 5 while dismissing I.A. No. 2049/2007. Upon the failure of the Defendant No. 5 to so file the written statement within two weeks, his right to file the written statement shall stand closed. I.A. No. 13200/2007 is disposed of with these directions.
RAJIV SAHAI ENDLAW (JUDGE) September 26, 2008 smp I.A. No. 2049/2007 & 13200/2007 in CS (OS) No. 2810/1999 Page 11 of 11