Rajasthan High Court - Jaipur
Aerens Goldsouk International Ltd. Co. vs Samit Kavadia And 5 Ors. on 5 December, 2006
Equivalent citations: RLW2007(4)RAJ3283
JUDGMENT Shiv Kumar Sharma, J.
1. The present petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (in short the Act) for referring the matter to Sole Arbitrator to resolve the dispute between the petitioner and the respondents.
2. As per the facts stated in the petition, the petitioner company having its registered office at Mumbai and Branch office at Jaipur engaged in the real Estate Business. The respondents 1 and 2 represented in the petitioner company that they are absolute and exclusive owner/lessee khatedar and in actual physical possession of 1.50, 5.16 and 0.81 Hectares of land situated in village Nangal Susavatan, Amer Tehsil, Jaipur on Jaipur Delhi National Highway No. 8. Out of this land about 7.33 Hectares land has been converted and approved as lease hold land for 99 years for use as Tourism related activities like Hotels, Motels, Resorts, Restaurant etc. By a Memorandum of understanding executed on April 3, 2004 it was agreed between the petitioner and the respondents 1 and 2 that the respondent No. 1 shall sell the said land with structure to the petitioner company at the rate of Rs. 17,25,000 per bigha. The respondent No. 2 on behalf of respondent No. 1 received a sum of Rs. 1,00,000 in cash and Rs. 4,00,000/- vide cheque dated April 3,2004 drawn on ICICI Bank New Delhi as an advance consideration towards the said transaction of land. On April 20,2004 an agreement to sell was executed between the respondent 1 and the petitioner and two cheques in the sum of Rs. 6,00,000 and Rs. 49,00,000 drawn at State Bank of Indore New Delhi in the same of Samit Kavdia were handed over by the petitioner to the respondent 1. On receiving Rs. 60,00,000/- (Rupees sixty lacs), the respondents land 2 allowed the petitioner to get the said land surveyed by one Mr. Manish Jain, B.E. Civil. Thereafter the petitioner engaged the services of M/s. Aesthetic Point Architects, Landscape and Interior Designers prepare a lay out plan of a motel having 200 beds. The said plan was submitted to the JDA. But the respondent No. 1 on April 8, 2005 asked the petitioner company in writing to close the matter. Cheque in the sum of Rs. 60,00,000/- (sixty lacs) was enclosed with the letter. Contention of the petitioner company is that the respondents 1 and 2 had committed breach of contract. The petitioner company replied the said letter informing respondents 1 and 2 the details of MOU and agreement to sell.
3. On April 23, 2005, the Government granted permission to respondent No, 1 to sale the land to the extent of 6.52 Hectares in the name of the respondent No. 3 that shows the dishonest intention of respondent No. 1 to wriggle out of the contract. No efforts were made by the respondents 1 and 2 to obtain the sanction of the land relating to 81 hectares of Khewat containing the names of respondents 4 and 5.
4. The petitioner company vide letter dated May 18,2005 reminded respondents 1 and 2 for getting the sale deed of entire land executed and further assured that the petitioner has the balance sale consideration for the entire land.
5. The respondents No. 1 and 2 did not reply the letter but sent a notice dated June 6, 2006 through M/s. Kasliwal Chamnbers asking the petitioner to make payment of the balance amount of Rs. 4,37,00,000 (rupees four crores thirty seven lacs) along with interest within 30 days of the receipt of the notice, failing which the amount already advanced by the petitioner shall be forfeited and the agreement dated April 20, 2004 shall stand cancelled without any further reference.
6. The petitioner sent a reply to the said notice through their counsel reiterating that the deal was of one project and of entire land and that the plans were submitted under the signatures of the respondent 1 accordingly. The transfer of entire land was the very basis for the transactions. The transactions could not be performed on piecemeal basis. The petitioner could not be made to be agreed to purchase the land of 7.02 hectares in isolation. It was submitted by the petitioner in the reply that they had incurred a huge amount in getting the land surveyed and the plans prepared. They were ready to purchase total land measuring 7.83 hectares. By the said reply the petitioner warned respondents 1 and 2 not to create any other right and interest in the land to be transferred to the petitioner. Any attempt made in that directions shall lead to the cause of action to the petitioner for enforcing the contract. It was pointed out that the act of the respondents if converted in to action would amount to fraud and cheating.
7. Thereafter the respondents 1 and 2 vide communication dated July 11,2005 stated that they have forfeited the amount and cancelled the entire agreement.
8. The petitioner thereafter published a Notice dated July 26, 2005 in the daily Newspapers namely Hindustan times, Dainik Bhaskar and Rajasthan Patrika warning all concerns and the public that the land in question was subject matter of the agreement to sell cum memorandum of understanding and anyone who will be dealing with the land with the respondents 1 and 2 shall be doing the same at their own risk and responsibilities.
9. On August 24, 2005 the respondent No. 1 in the name of respondent No. 3 executed a sale deed in favour of respondent No. 6 and in furtherance of their dishonest intention resulting also into a dispute between the petitioner and respondents.
10. The petitioner averred that there subsists an Arbitration agreement/memorandum of understanding dated April 3, 2004 with the agreement dated April 20, 2004 between the parties. In accordance with the arbitration clause, the petitioner addressed a notice dated October 17, 2005 to the respondents for their consent for the appointment of an arbitrator. The respondents have neither replied to the said notice for have consented to the appointment of the sole Arbitrator. Instead the respondent No. 6 in connivance with the respondent 1 and 2 further started making efforts to get their name mutated in the recorded of the Government and further to change the character of the land. The petitioner thereafter preferred a petition under Section 9 of the Arbitration and Conciliation Act, 1996 before the District Judge Jaipur (for short DJ) seeking the relief of injunction. The DJ passed a detailed order on November 25, 2005 and restrained the respondents by way of interim injunction from getting the name of respondent No. 6 mutated for the land in question and further they were restrained from alienating by way of sale, lease, mortgage or creating any charge or interest by way of further agreement to sell to any third party or raising any structure on the land more specifically shown in colour red in the site plan till the settlement of dispute between the petitioner and the respondents by Arbitrator.
11. After passing of order by the DJ the instant petition has been filed by the petitioner on July 7, 2006.
12. The respondent No. 6, who has purchased the land from the respondents No. 1 and 2, filed separate reply whereas the respondents No. 1, 2, 4 and 5 filed joint reply to the petition.
13. The respondent No. 6, in the return stated that they came to know about the MOU dated April 3, 2005 when they have been wrongfully made party in the proceedings under Section 9 filed by the petitioner before the DJ. It was alleged that the alleged MOU was signed by respondent No. 3 I.S. Kavdia, who had no legal right to execute it on behalf of Samit Kavdia HUF. The MOU is not a legal document and not binding on them. The MOU did not survive after the execution of the alleged agreement of sale dated April 20, 2004. It is further stated that documents produced by the petitioner demonstrates that 0.81 hectares of land belongs to the respondents 4 and 5 and no sale deed was executed in favour of the respondent 1 and 2 by the respondents 4 and 5. It is a settled law that till the sale deed is not executed in favour of the vendee, the vendee does not become the owner. In regard to notice published in the news papers dated July 26, 2005 it is stated that it was not read by them. The execution of sale deed dated August 24, 2005 by respondents 1 and 2 has been admitted by respondent No. 6.
14. The respondents No. 1,2,4 and 5 in their joint reply stated that the petitioner company was not ready and willing to perform its part of the contract and since breach was committed by the petitioner thus the present petition is not maintainable.
15. Constitution Bench of the Apex Court in S.B.P. & Co. v. Patel Engineering Ltd. 2005(3) Arb. L.R. 285 (SC) indicated that functions to be performed under Section 11(6) of the Act is appointing an arbitrator are administrative functions. There is no "duty to act judicially on the part of the Chief Justice or the person designated by him and only prima facie satisfaction that the conditions laid down in Section 11 are complied with, is required. It is the arbitral tribunal that has power and jurisdiction to rule "on its own jurisdiction" under sub rule (1) of Section 16 of the Act and thereafter the award of arbitral tribunal can be challenged under Section 34 and Section 37 of the Act.
16. Bearing these guidelines in mind I proceed to consider the rival submissions advanced before me.
17. Section 19 of the Specific Relief Act provides that the specific performance of a contract may be enforced against-
(a) either party thereto;
(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;
(c) any person claiming under a title which, though prior to the contract and known to the plaintiff, might have been displaced by the defendant;
18. Their Lordships of the Supreme Court in Durga Prasad v. Deep Chand held thus-
The proper form of decree is to direct Specific Performance of the contract between the vendor and the plaintiff and direct the subsequent transferee to join in the conveyance so as to pass on the title which resides in him to the plaintiff. He does not join in any special covenants made between the plaintiff and his Vendor; all he does is to pass on his title to the plaintiff.
19. In S.B.P. & Co. v. Patel Engineering Ltd. (supra) the Apex Court propounded as under- (Para 8) While exercising the power or performing the duty under Section 11(6) of the Act, the Chief Justice has to consider whether the conditions laid down by the Section for the exercise of that power or the performance of that duty, exist. Therefore, unaided by authorities and going by general principles, it appears to us that while functioning under Section 11(6) of the Act, a Chief Justice or the person or institution designated by him, is bound to decide whether he has jurisdiction, whether there is an arbitration agreement whether the applicant before him, is a party, whether the condition for exercise of the power have been fulfilled and if an arbitrator is to be appointed, who is the fit person, in terms of the provision. Section 11(7) makes his decision on the matters entrusted to him, final.
20. Having scanned the material on record, I am prima facie satisfied that the conditions laid down by the Hon'ble Supreme Court are met in the present case, in as much as the petitioner is a party to the Arbitration Agreement, there is an arbitration agreement and there is contract between the petitioner and respondents No. 1 and 2 and respondent No. 6 had knowledge of the contract.
21. RUSSEL, an Authority on the Law of Arbitration also indicated as to who are the parties to the Arbitration Agreement. The observations of Russell in 19th Edition at page 69 are relevant that read as under-
Parties to the Arbitration Agreement - an arbitration agreement will bind not only the actual parties to it, but also an 'assignee' of a contract containing it, the personal representative of a deceased party, a trustee in backruptcy who adopts a contract containing it, and general all persons claiming under a party to it but not stranger to the agreement.
22. Ratio indicated in Sukanya Holdings (P) Ltd. v. Jayesh Pandya and Anr. may be noticed at this juncture. It was indicated in para 15 thus-
The relevant language used in Section 8 is: "in a matter which is the subject of an arbitration agreement." The court is required to refer the parties to arbitration. Therefore, the suit should be in respect of "a matter" which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced- "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words "a matter" indicate that the entire subject matter of the suit should be subject to arbitration agreement.
23. Placing reliance on the afore quoted judicial pronouncement, the learned senior counsel for the respondent No. 6 canvassed that since the respondent No. 6 was not the party to the arbitration agreement the matter could not be referred to the arbitrator. My attention was also drawn to Section 2(l)(h) of the Act which defines term 'party' as the 'party to the arbitration."
24. Coming to the Arbitration clause is incorporated in Annexure P. 6(0, it may be noticed that according to the said clause any disputes and differences arising between the parties under the agreement to sell are to be referred to the arbitrator mutually appointed by the parties. In view this clause, it is contended by learned Senior Counsel that arbitration clause is not applicable to the respondent No. 6.
25. I find no merit in this contention. In S. Chattanatha Karayalar v. Central Bank of India Ltd. AIR 1965 SC 1856 observations indicated in Moulton, L.J. In Manks v. Whiteley (1912) 1 Ch 735 were quoted and that read as under-
Where several deeds form part of one transaction and are contemporaneously executed they have same effect for all purposes such as are relevant to this case as if they were one deed. Each is executed on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole.
26. Undeniably the respondent No. 6 purchased the property in question after publication of notice in the News papers. Therefore it will be deemed that the respondent No. 6 had knowledge about the MOU and the agreement to sell between the petitioner company and the respondent No. 1 and 2. Since the respondent No. 6 stepped in the shoes of respondents No. 1 and 2, it cannot now say that they are not bound by the Arbitration agreement entered between the petitioner and the respondents No. 1 and 2. In the ultimate analysis I find that it is a fit case for appointment of arbitrator under Section 11(6) of the Act.
27. Resultantly I allow the application and appoint Hon'ble Justice Ranveer Sahai Verma (Retd.) as Sole Arbitrator to resolve the dispute between the parties. The fee and other conditions shall be settled by the Arbitrator. The Registry shall inform Hon'ble Justice R.S. Verma accordingly.