Botta Naga Chiranjeevi Reddy, Vijayawada Vs Mohammad Jamsheed, Vijayawada & 6 Others

This is an application filed under Section 11 of the Arbitration and Conciliation Act, 1996, seeking reference of the disputes for adjudication to an arbitrator.

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The applicant claims that he is a builder and is engaged in the construction business. It is stated that he entered into a Development Agreement, dated 08.08.2008, with the respondents to develop a commercial complex over land belonging to them for better economic returns.

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According to the terms and conditions of the Development Agreement

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dated 08.08.2008, the parties had agreed that the applicant would deposit with

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the respondents an amount of Rupees One Crore as a refundable security deposit which was to be refunded in two installments without interest, i.e. Rs.50,00,000/- (Rupees Fifty Lakhs Only) within 15 days on receipt of notice of completion of fourth slab and the remaining 50% i.e. Rs.50,00,000/(Rupees Fifty Lakhs Only) within 15 days on receipt of notice of the taking over the possession from the applicant, failing which the respondents were liable to pay interest @ 24% per annum from the date of accrual. The said amount according to the applicant was paid through various cheques.

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The case of the applicant is that after taking over possession of the vacant land, a Supplementary Development Agreement-cum-General Power of Attorney, dated 21.01.2009, was executed before the Sub-Registrar, Patamata, Vijayawada. The project, according to the applicant, was completed and refund of the security amount demanded was refused.

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For facility of reference, Clause 28 of the Agreement dated 21.01.2009, is reproduced hereunder:

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“28. In case any disputes arise between the parties hereto touching these presents the matter shall be referred to the Arbitrators one chosen by each party and in the case of any difference of opinion between such Arbitrators shall nominate a common umpire and their award shall be final and abide on both the parties and the relevant provisions of Arbitration act shall apply.”

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It is not out of place here to mention that the arbitration clause supra was contained in the Development Agreement-cum-G.P.A., dated 21.01.2009, while there was no such arbitration clause in Development Agreement dated 08.08.2008.

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A notice, dated 17.08.2013, is stated to have been served upon the respondents, invoking the arbitration clause. Since the notice did not elicit requisite response, the present application is filed.

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The stand of the respondents, on the other hand, is that the Agreement dated 08.08.2008, which contained the clause with regard to refundable security amount with interest @ 24%, was an Agreement which did not contain any arbitration clause, and further that the Agreement dated 21.01.2009, was not a Supplementary Agreement but an independent Agreement, where the refundable security deposit was only to an extent of Rupees Five Lakhs, which was to be paid in two installments i.e. Rs.2,50,000/- (Rupees Two Lakh Fifty Thousand only) within 15 days of receipt of notice of completion of fourth floor and the remaining 50% i.e. Rs.2,50,000/- (Rupees Two Lakh Fifty Thousand only) within 15 days of taking over possession from the Second Party-Applicant herein and further that it was only upon failure to refund the security deposit within the stipulated time that the applicant would be entitled to claim interest @ 24% per annum.

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The existence of the arbitration clause, however, in the agreement dated 21.01.2009, is not denied.

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It can thus be seen that there does exist a dispute between the parties which was agreed to be resolved through the mechanism of arbitration in terms of Clause 28 of the Development Agreement dated 21.01.2009.

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Since the respondents had failed to nominate their arbitrator in terms of Clause 28 of the Agreement, dated 21.01.2009, we appoint Justice A. V. Sesha Sai, former Judge of the High Court of Andhra Pradesh, as an Arbitrator, apart from the Arbitrator nominated by the applicant. The two Arbitrators shall be at liberty to nominate a Presiding Arbitrator. The Arbitral Tribunal so constituted shall enter upon the reference and adjudicate upon the disputes arising out of and in connection with Agreement, dated 13.02.2009 and render the Award within the statutory period. The parties shall be free to file detailed claims and counter-claims, before the Arbitral Tribunal. The learned Arbitrators shall be entitled to claim the fee in consultation with the parties.

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While it is true that the Agreement dated 08.08.2008, did not contain

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any arbitration clause, and further, it can also be seen that the Agreement dated 21.01.2009, did not specifically mention the subsequent agreement to be a Supplementary Agreement to the earlier Agreement dated 08.08.2008, yet, we leave this issue to be decided by the arbitral tribunal.

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Accordingly, this arbitration application is allowed. No order as to costs. Pending miscellaneous applications, if any, in this application, shall stand closed.

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A copy of this order be communicated to the learned Arbitrator on the

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address mentioned herein below:

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Justice A.V. Sesha Sai, Villa No:C-31, Rain Tree Villas, Opp: Nagarjuna University Road, Namburu, Guntur District, Andhra Pradesh – 522 510 Ph: 83310 10693

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DHIRAJ SINGH THAKUR, CJ.

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SSN

Botta Naga Chiranjeevi Reddy, Vijayawada v. Mohammad Jamsheed, Vijayawada & 6 Others

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Botta Naga Chiranjeevi Reddy, Vijayawada v. Mohammad Jamsheed, Vijayawada & 6 Others

Case brief

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What did the court decide?

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