Dismissed

M/S Madhavi Assests Pvt. Ltd. v. Mr.Amit Kumar

Karnataka HC27 Jan 2021MFA/1149/2020

Case brief

AI extract

What is this about?

The High Court dismissed an appeal filed by sellers against an arbitral award and Trial Court judgment enforcing specific performance of a sale agreement. The court held that the termination of construction agreements by the buyer due to seller default did not invalidate the sale agreement, as no time was fixed for sale deed execution and the buyer was ready to pay the balance.

What did the court decide?

Impugned judgment and award directing specific performance of sale agreement and execution of sale deed were confirmed; appeal dismissed.

M/S Madhavi Assests Pvt. Ltd. Vs Mr.Amit Kumar — Arbitration | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 27^TH DAY OF JANUARY, 2021

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PRESENT

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THE HON’BLE MRS.JUSTICE B.V. NAGARATHNA

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AND

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THE HON’BLE MRS.JUSTICE M.G.UMA

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MISCELLANEOUS FIRST APPEAL NO.1149 OF 2020(AA)

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BETWEEN:

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M/S MADHAVI ASSETS PVT. LTD HAVING ITS REGISTERED OFFICE AT NO.289, 1^ST FLOOR, 15^TH MAIN RMV EXTENSION BENGALURU-560 080. REPRESENTED BY ITS MANAGING DIRECTOR SRI.RAVI SHANKAR SHETTY

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MR.MUNIANJINAPPA SON OF LATE.MUNIHANUMANTHAPPA AGED ABOUT 77 YEARS RESIDING AT NO.29 GOVERNMENT SCHOOL ROAD JAKKUR, BENGALURU-560 064.

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MR.M.H.NAGARAJ SON OF LATE.MUNIHANUMANTHAPPA AGED ABOUT 71 YEARS RESIDING AT NAGARAJ COMPLEX 2^ND MAIN, 1^ST CROSS NARAYANAPURA DHARWAD-580 008.

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MR.M.H.SHAMANNA SON OF LATE.MUNIHANUMANTHAPPA AGED ABOUT 66 YEARS RESIDING AT CHOUDANAHALLI VILLAGE KUNADANA HOBLI, HEGGANAHALLI POST DEVANAHALLI TALUK BENGALURU RURAL DISTRICT-560 037.

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APPELLANT NOs.2 TO 4 ARE REPRESENTED BY THEIR GPA HOLDER M/S. MADHAVI ASSETS PVT. LTD., HAVING ITS REGISTERED OFFICE AT NO.289, 1^ST FLOOR, 15^TH MAIN RMV EXTENSION, BENGALURU-560 080. REPRESENTED BY ITS MANAGING DIRECTOR SRI.RAVI SHANKAR SHETTY.

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... APPELLANTS

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(BY SRI:T.PRAKASH, ADVOCATE (PH))

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AND:

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MR.AMIT KUMAR SON OF MR.S.P.SINGH AGED ABOUT 47 YEARS PERMANENT RESIDENT OF PREMISES IN NO.C-348 VIKASPURI NEW DELHI – 110 018

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REPRESENTED BY HIS POWEROF ATTORNEY MR.SATISH NARAIN SARABAHI AGED ABOUT 71 YEARS RESIDING AT NO.C-348 VIKAPURI, NEW DELHI – 110 018

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SHRI.N.NARAYANA DISTRICT JUDGE (RETD) SOLE ARBITRATOR ARBITRATION AND CONCILIATION CENTRE

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BENGALURU (DOMESTIC AND INTERNATIONAL) HIGH COURT OF KARNATAKA

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M/S. METROCORP HOUSING CORPORATION PVT.LTD., (EARLIER KNOWN AS M/S METROCORP) PRESENT OFFICE AT DOOR NO.1 SRIRAM SAI NILAYAM ORIGON ENCLAVE DODDAJALA VILLAGE, JALA HOBLI BENGALURU NORTH TALUK BENGALURU-562 157.

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...RESPONDENTS

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(BY SRI:THONTADHARYA R.K., ADVOCATE FOR SRI: P.B.AJITH, ADVOCATE FOR R1 (PH) R2 SERVED)

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THIS MISCELLANEOUS FIRST APPEAL IS FILED UNDER SECTION 37(1)(C) OF ARBITRATION AND CONCILIATION ACT, AGAINST THE JUDGMENT DATED 11.10.2019, PASSED IN A.S. NO.15009/2018, ON THE FILE OF THE V-ADDITIONAL DISTRICT AND SESSIONS JUDGE, DEVANAHALLI, BENGALURU RURAL DISTRICT, DISMISSING THE SUIT FILED UNDER SECTION 34(2) OF THE ARBITRATION AND CONCILIATION ACT, 1996.

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THIS MISCELLANEOUS FIRST APPEAL IS COMING ON FOR ORDERS THIS DAY, M.G.UMA, J., DELIVERED THE FOLLOWING:

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J U D G M E N T

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The appellants, who were respondent Nos.1 to 4 before the learned Arbitrator and plaintiff Nos.1 to 4 before

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the learned V Additional District Judge, Bengaluru Rural District at Devanahalli, (hereinafter referred to as “the Trial Court” for the sake of brevity), have preferred this appeal praying to set aside the award dated 16/10/2017 (Annexure-B) passed by the learned Arbitrator in A.C.No.57 of 2016 and also to set aside the judgment dated 11/10/2019 (Annexure-A) passed by the Trial Court in A.S.No.15009 of 2018, confirming the award passed by the learned Arbitrator.

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The parties shall be referred to as per their rank before the learned Arbitrator, for the sake of convenience.

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Brief facts of the case are that, respondent No.1 herein is the claimant before the learned Arbitrator and he had entered into an agreement to purchase residential plot bearing No.D-52 (plot No.45) as per Bengaluru International Airport Planning Authority (BIAPPA) layout formed by ‘METROCORP NIRVANA’ in Sy.Nos.94, 95, 96, 97 and 98 of Ellthore Village, Kundana

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Hobli, Devanahalli Taluk, Bengaluru Rural District, totally measuring 4847 sq.ft, for a total consideration of Rs.57,45,500/-, with respondent Nos.4 and 5. Respondent Nos.4 and 5 being the developers executed the sale agreement representing that respondent No.4 had entered into the registered Joint Development Agreement (‘JDA’) dated 19/05/2005 with respondent Nos.1 to 3 being the members of a Hindu Undivided Joint Family and the owners of the land in question. It is stated that respondent Nos.1 to 3 also executed the registered General Power Of Attorney (GPA) deed dated 19/05/2005 in favour of respondent No.4 as per the terms of JDA. Respondent No.4 in turn assigned all its rights under JDA and executed GPA deed in favour of respondent No.5 and therefore, respondent Nos.4 and 5 became entitled to enter into agreement for sale with the prospective purchasers and also to execute the sale deed in respect of the sites.

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It is stated that BIAPPA accorded sanction for

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formation of a residential layout over the subject property vide consent letter dated 09/06/2006 under supersession of earlier plans. Respondent Nos.1 to 3 acting under JDA, executed relinquishment deed dated 20/08/2005 and also gift deed dated 17/10/2006 by relinquishing/conveying the open area/parks/civic amenities over the subject property in favour of the Government of Karnataka as required under the bye-law evolved by BIAPPA. Since the plot in question agreed to be purchased by the claimant was part of 40% sites which are yet to be released by BIAPPA, respondent Nos.4 and 5 represented and assured them that they had evolved the Scheme for development of the subject land with respondent Nos.1 to 3 as envisaged under JDA.

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As per the Scheme, respondent Nos.4 and 5 were authorized to execute the agreement of sale to transfer the residential plots developed in the land in so far as developed share, in favour of the intending purchasers

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for mutually accepted price. The said intending purchasers simultaneously, with the execution of the agreement of sale for the plot to enter the construction agreement for the purpose of construction of residential villa and also the facilities agreement for the purpose of providing facilities in the layout with M/s Metrocorp Infrastructure, which is the sister concern of respondent No.5. Respondent No.5 was entitled to receive the consideration as stipulated under the agreement for sale of the plot, while M/s Metrocorp Infrastructure was entitled to receive the amount payable under the construction/facilities agreements from the intending purchasers. Respondents together or their duly constituted power of attorney i.e, respondent No.4 was required to execute the registered sale deed transferring the absolute rights over the plot/s in question in favour of the intending purchasers, subject to payment of money as confirmed by respondent No.5.

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Accordingly, it is stated that the claimant simultaneously entered into agreement of sale,

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construction agreement for construction of residential villa over the subject property and also facilities agreement with M/s Metrocorp Infrastructure on 18/07/2006. Respondent Nos.4 and 5 represented to the claimant that M/s Metrocorp Infrastructure would be the contractors who would execute the construction work and to provide common facilities and amenities in the layout formed on behalf of all the prospective buyers. As per the sale agreement, the claimant was required to pay Rs.57,45,500/- and he had paid in all Rs.48,61,100/-, viz., he paid Rs.10,99,984/- at the time of booking and balance of Rs.37,61,116/- on 31.08.2006. Thus, the claimant had paid in all Rs.48,61,100/- to respondent No.4 and M/s Metrocorp Infrastructure in terms of the agreements mentioned above. Respondent No.4 and M/s Metrocorp Infrastructure also acknowledged the receipt of the amount by issuing separate receipts. The balance amount of Rs.8,84,400/- was required to be paid by the claimant at the time of registration of sale deed and the claimant was said to be always ready and willing to pay the balance

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consideration amount and to get the sale deed registered in his name.

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It is contended by the claimant that when he requested respondent No.5 to execute the registered sale deed, he was postponing the same on one pretext or the other and representing that, as and when the construction of the residential villa on the schedule property nears completion, the sale deed would be registered in his favour. The construction and development work in the layout was delayed and almost stopped. But respondent No.5 promised that the work would be completed and necessary sale deed would be executed in favour of the claimant. However, all the construction and development work over the subject property was stopped by the end of 2009 and there was no activity whatsoever on the site since then. Even though there was no construction and development work carried out in the subject property, there was no impediment for respondent No.4 and M/s Metrocorp Infrastructure to execute the sale deed in

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respect of the site agreed to be sold in favour of the claimant. Since there was inordinate delay in recommencement of the work despite several assurances, the claimant along with other intending purchasers got issued legal notice dated 26/11/2012 to M/s Metrocorp Infrastructure informing that the construction and facilities agreement are rescinded and called upon it to refund the amount received under those agreements and also to pay the difference amounts in terms of the agreements. Thereby, the claimant terminated the services of M/s Metrocorp Infrastructure and claimed to be entitled to seek damages for deficiency in service.

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It is stated that the respondents who were

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duty bound to execute the sale agreement did not do so in spite of repeated demands in that regard. It is stated that as on the date of execution of agreement, respondent No.4 was the partnership firm, but subsequently, it was incorporated as a company under the provisions of Companies Act. It abrogated all the obligations under the

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sale agreement entered into with the claimant. Since the respondents were not ready and willing to execute the registered sale deed in respect of the plot in question, disputes arose and they were called upon to refer the dispute to the Sole Arbitrator as provided under Clause 17 of the sale agreement. Since the said demand was not complied with, the claimant filed Civil Miscellaneous Petition No.4 of 2015 before this Court. Accordingly, the Arbitrator was appointed to resolve the dispute between the parties.

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The claimant sought for a direction directing the respondents to execute necessary sale deed in respect of the subject property and to put him in position after receiving balance consideration amount of Rs.8,84,400/-, failing which, he also sought for an award to be passed by the Arbitrator to be enforced as per Section 36 of the Arbitration and Conciliation Act, 1996. The claimant also sought for an alternative relief for refund of the advance

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sale consideration with interest at 18% per annum from the date of payment till realization.

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When the matter was referred to the learned Arbitrator, respondent No.1 filed its statement of objections stating that the claimant is relying on the agreement dated 18/07/2006 which was allegedly executed by respondent Nos.4 and 5. Respondent No.1 was not a party to any of the transactions between the claimant and respondent Nos.4 and 5 and he had not authorized respondent Nos.4 and 5 to enter into any such transactions. It is stated that, if at all there is delay on the part of respondent No.5, the relief should be sought against it. No notice of termination of the agreement is issued to respondent Nos.1 to 3. It was also contended that the claimant never approached respondent No.1 seeking specific performance of the contract. As per Clause-3 of the agreement, the termination of the agreement for sale would automatically terminate the construction agreement. Therefore, it is contended that

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termination of construction agreement also terminated the agreement dated 18/07/2006. Respondent No.5 had undertaken to develop the land in question and if at all there was an interse dispute between respondent Nos.4 and 5, respondent No.1 was not responsible for the same. It is also stated that since the claimant terminated construction and facilities agreement and requested refund of amount from respondent No.5, all the agreements entered into between the parties automatically gets terminated. Therefore, the claimant cannot seek specific performance of a part of the contract. However, it was contended that the claimant cannot seek relief of recovery of money as the same is barred by limitation and therefore prayed for dismissal of the claim.

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Respondent No.4 re-iterated similar objections

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as that of respondent No.1 and prayed for dismissal of the petition.

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Respondent No.5 filed separate objections stating that it is not a party to any of the agreements.

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According to the claimant, respondent No.4 has entered into JDA with respondent Nos.1 to 3 and respondent Nos.1 to 3 had executed GPA in favour of respondent No.4 and respondent No.4 had assigned its rights to respondent No.5, but by an unregistered deed of assignment in favour of M/s Metrocorp which is a registered partnership. But respondent No.5, M/s Metrocorp Housing Corporation Private Limited, a company incorporated under the Companies Act, is an independent entity and not related to the partnership firm. The partnership firm is not a party before the learned Arbitrator. There is no explanation as to why respondent No.5 was made a party to the proceedings. It was also contended that there was no arbitration agreement between the claimant and respondent No.5. Therefore, the petition was liable to be dismissed in limine.

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The learned Arbitrator considered these rival contentions of the parties in light of the evidence of PW1 and RW1 and also documents that were marked as Exs.P1

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to P26 and proceeded to allow the claim of the claimant with cost by holding that the claimant was entitled for specific performance of agreement of sale dated 18/07/2006 - Ex.P2, in respect of plot No.D-52 in the layout known as M/s Metrocorp Nirvana, formed in Sy.No.94, 95, 96, 97 and 98 of Ellthore Village, Kundana Hobli, Devanahalli Taluk, Bengaluru Rural District. The respondents were directed to execute the sale deed in respect of the said property in favour of the claimant and to get the same registered by receiving the balance sale consideration amount of Rs.8,84,400/- at the time of registration of sale deed within four months from the date of award. The respondents were further directed to deliver possession of the schedule property to the claimant upon execution of sale deed. It was held that the claimant was entitled for the cost of the Arbitral Proceedings from the respondents. It was made clear that in the event of failure on the part of the respondents in complying with the directions in the award, the claimant was entitled to seek enforcement of the award as per Section 36 of the Act.

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Being aggrieved by the award, respondent Nos.1 to 4 filed the Arbitration Suit in A.S.No.15009 of 2018 and Plaintiff Nos.2 to 4 were represented by Plaintiff No.1 being their GPA holder. The Trial Court, after taking into consideration the contention of the parties in light of the materials placed before it, came to the conclusion that there was no reason to interfere with the award passed by the learned Arbitrator. Accordingly, the suit was dismissed with cost, confirming the award.

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Being aggrieved by the Arbitral award and also dismissal of the suit by the Trial Court, respondent Nos.1 to 4 before the Trial Court have preferred this appeal. Appellant Nos.2 to 4 are represented by their GPA - appellant No.1.

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We have heard Sri.T.Prakash, learned counsel for the appellants and Sri.R.K.Thontadharya, learned counsel for Sri.P.B.Ajith, learned counsel for the

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respondent No.1 and perused the material on record as well as the Trial Court records.

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Even though the arbitral proceedings was initiated by the claimant against respondent Nos.1 to 5 and though respondent No.5 had contested the claim by filing statement of objections and cross examined PW1 and also deposed before the learned Arbitrator in support of his defence, he has not chosen to challenge the common judgment passed by the Trial Court in the arbitration suit. Therefore, the findings recorded by the learned Arbitrator and the Trial Court in the Arbitration suit have reached finality against respondent No.5.

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The material on record discloses that respondent Nos.1 to 4 resisted the claim of the claimant on the ground that there was inordinate delay on the part of the claimant in approaching the Arbitrator and therefore, his claim was barred by limitation.

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It was also contended that the enforcement of agreement of sale which was admittedly executed in favour of the claimant depended on the compliance of other two agreements i.e., construction agreement and facilities agreement. Since those two agreements were already terminated by the claimant, the agreement of sale also automatically got terminated. On these grounds, respondent No.5 contested the claim before the learned Arbitrator.

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On perusal of the agreement of sale - Ex.P2, it is noted that it does not stipulate any time frame for completion of the contract. As per Clause-5.1 of Ex.P2, the vendor has undertaken to get the owners of the schedule land or their duly constituted attorney to execute the sale deed in respect of the plot in question in favour of the purchasers after payment of sums and on compliance of terms of the agreement. But, however, no time was stipulated for the respondents to perform their part of the contract. When no time was fixed for performance of the

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contract, the limitation to seek specific performance of the contract begins when the claimant was put on notice that the respondents have refused performance of the agreement.

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Exs.P13 to 16, 19 and 21 are various e-mails on behalf of M/s Metrocorp Infrastructure Limited, which indicate that it pleaded difficulty in completion of the construction of the villas and providing necessary facilities and indicated fresh time schedule for completion of the work. As per the revised schedule, completion of villas had to be by September, 2011. But admittedly, even the revised time schedule was not adhered to. Under such circumstances, the claimant issued legal notice terminating the construction agreement and facilities agreement by issuing Ex.P23 on 22/05/2014 invoking the Arbitration clause in the agreement of sale.

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In view of Section 21 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act” for the sake of brevity), the arbitral proceedings are

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deemed to have been commenced from the date of the said notice i.e., 22/05/2014. Therefore, it cannot be held that there is delay in demanding specific performance of contract or initiation of arbitral proceedings. Hence, the claim of the claimant cannot be discarded as being barred by limitation.

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The contention raised by respondent No.5 is with regard to the nature of three agreements i.e., agreement of sale, construction agreement and facilities agreement, being co-terminus and therefore, the termination of the construction and facilities agreement automatically led to termination of agreement of sale.

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The learned Arbitrator, while answering issue No.7, relied on the decisions of the Hon’ble Apex Court in Associated Builders Vs Delhi Development Authority [2015 (3) SCC 49 and Rathnavati and another Vs Kavita Ghanashamdas [(2015) 5 SCC 233], and interpreted Section 28(3) of the Act and held that the arbitral Tribunal has to decide the lis in accordance with

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the terms of the contract and has to take into consideration the usage of trade applicable to the transaction, conduct of the parties etc. Admittedly, the claimant and respondent No.4 led evidence before the learned Arbitrator.

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The agreement of sale was marked as Ex.P2, which is an admitted document. On going through the terms and conditions of Ex.P2, it stipulates the grounds on which respondent No.1 can terminate the agreement. Clause-1.4 in Ex.P2 authorized respondent No.1 to terminate the agreement in the event of delay/default by the claimants to pay balance sale consideration as per the payment schedule. Ex.P2 did not provide termination of agreement of sale in the event of termination of the construction and facilities agreement by the claimant on account of default committed by respondent Nos.4 and 5.

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Clause-2 of Ex.P2 sets out the purpose for which the sale of schedule land was proposed. It stated that it was to enable the claimant to get the villa

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constructed through the developers under the Scheme evolved and to engage common developers and therefore, the claimant was barred from carrying out any construction of villa through any other agency other than the developers. Even though Clauses-2 and 3 of Ex.P2 provided that all the three agreements were treated as part and parcel of one transaction and they were coterminus, the termination of one of the agreement would result in termination of all the agreements. The purport of the aforesaid clause has to be looked into. It was only to ensure that the claimant is prevented from taking advantage of his own fault and being selective in his conduct and action so as to take advantage of the situation. The agreement of sale – Ex.P2 did not contemplate that the co-terminus nature of the contract would prevail even when the respondents were defaulters. Ex.P8 the construction agreement is silent about the consequences in the event of default or breach on the part of first party in completing the construction of villa within the time stipulated therein when the claimant is not at

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fault and when he has performed his part of the contract by paying the amount as per the time schedule.

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We have to take into consideration the candid admission given by RW1 before the Arbitrator. Admittedly, he was the signatory to the agreement of sale Ex.P2, being the Managing Director of respondent No.4. He categorically admitted that he had signed the agreement Ex.P2 on behalf of respondent No.4 and also on behalf of respondent Nos.1 to 3. He has further admitted that except paying the amount as per the time schedule, the claimant was not required to perform any other act under the contract. This witness categorically admitted the termination of construction agreement and facilities agreement by claimant on account of default on part of the developers would not have any effect on the agreement of sale i.e., Ex.P2. If this evidence led by respondent No.4 is taken into consideration in light of various clauses found in Exs.P2, 8 and 9, the intention on the part of the performance is very clear and it cannot be concluded that

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termination of two agreements i.e., Exs.P8 and 9 will not automatically terminate the agreement of sale - Ex.P2.

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If the conduct of parties to the contract is taken into consideration, the claimant had admittedly paid an amount of Rs.37,61,116/- to the vendor under the agreement of sale, he had paid Rs.10,99,984/- as advance and therefore, total amount of Rs.48,61,100/- was paid towards sale consideration. It is not in dispute that only an amount of Rs.8,84,400/- was due from the claimant to be paid at the time of execution of registration of sale deed. Therefore, it cannot be said that there was any default on the part of claimant in making payment as per

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the terms agreed upon. Even though, the agreement to sell is dated 18/07/2006 and the construction of villa was required to be completed within a period of 24 months as per Ex.P8, the same was not adhered to even after revised time schedule. When no default could be attributable to the claimant in performing his part of the contract and when, admittedly, default was on the part of respondents

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in adhering to the terms of the contract, they could not take advantage of their own fault and cannot find fault with the claimant so as to contend that he was not entitled for the specific performance of the contract Ex.P2.

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We find that the learned Arbitrator considered the contention of the parties in detail and arrived at a right conclusion to direct specific performance of agreement of sale dated 18/07/2006 by accepting the balance consideration amount of Rs.8,84,400/- out of a total consideration of Rs.57,45,500/-. The said finding of the learned Arbitrator is confirmed by the Trial Court after appreciating the material on record. We do not find any substance in the contention raised by the appellants herein. Therefore, no reason to interfere with the impugned judgment.

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In view of the aforesaid discussion, we do not find any merit in this appeal. The appeal is hence,

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dismissed.

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In the event, the appellants do not comply with the directions issued by the learned Arbitrator, the Executing Court may appoint a Commissioner to execute the sale deed in favour of the respondents who are entitled to the said sale deed and to put them in possession of the same.

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In view of the dismissal of the appeal, pending application also stands dismissed.

No costs.

Sd/JUDGE

Sd/JUDGE

*bgn/-

M/S Madhavi Assests Pvt. Ltd. v. Mr.Amit Kumar

Case brief

What is this about?

What did the court decide?

M/S Madhavi Assests Pvt. Ltd. v. Mr.Amit Kumar

Case brief

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What did the court decide?

What the court decided

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