Allowed

M/S United Engineers v. Ramalingam and 3 Others

Telangana HC14 Mar 2011ARBAPPL/167/2010

Case brief

AI extract

What is this about?

The court appointed N. Vidya Prasad as the sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, directing him to decide on the subsistence of the Development Agreement after evaluating evidence, as the validity of the agreement's cancellation by the respondents could not be determined on affidavits alone.

What did the court decide?

Appointment of Sri N. Vidya Prasad as sole arbitrator; Arbitration application allowed.

M/S United Engineers Vs Ramalingam and 3 Others — Arbitration | Telangana HC (2011)

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THE HON’BLE Ms. JUSTICE G.ROHINI

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ARBITRATION APPLICATION No.167 OF 2010

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Dated: 14.03.2011

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Between

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M/s. United Engineers, rep. by its Managing Partner Mr. Avinash Phadke, Secunderabad. … Applicant

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And

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1. Ramalingam and 3 others. … Respondents

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THE HON’BLE Ms. JUSTICE G.ROHINI

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ARBITRATION APPLICATION No.167 OF 2010

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ORDER :

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This application is filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator according to the terms and conditions contained in the Development Agreementcum-General Power of Attorney, dated 17.09.2004 to adjudicate upon the dispute between the applicant and the respondents 1 and 2.

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The applicant which is a partnership firm entered into a Development Agreement dated 17.09.2004 with the respondents 1 and 2 herein for the development of Plot Nos.92/C, 92/D & 92/E admeasuring 967 sq. yards in Sy.No.7/D, Green Hills Colony, Saroornagar Village, Rangareddy District.

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It is alleged that though the applicant had completed the constructions in accordance with the terms and conditions of the agreement and handed over the same within the stipulated time, the respondents 1 & 2 failed to refund the advance amount of Rs.15 Lakhs as agreed upon. It is further alleged that the respondents 1 and 2 have also failed to pay the amounts payable towards extra works done and etc. It is claimed that a total sum of Rs.65,83,324/- is payable by the respondents and that they failed to pay the same in spite of repeated demands made by the applicant. On the other hand, the respondents 1 and 2 got issued a legal notice dated 28.12.2007 claiming that after adjusting the deposit amount of Rs.15,00,000/-, a sum of Rs.1,96,000/- is due from the applicant and calling upon the applicant to pay the said amount within two weeks. The applicant by reply dated 8.1.2008, while repudiating the claim of the respondents 1 and 2, reiterated that the respondents 1 and 2 are liable to pay Rs.42,74,886/-. In the said notice, dated 8.1.2008, the applicant has also invoked the arbitration clause under the agreement for settlement of the dispute. Thereafter by notice dated 14.04.2008 the applicant had appointed and nominated Sri T.V. Sanjeeva Rao as arbitrator and called upon the respondents 1 and 2 to nominate their arbitrator within ten days. The respondents 1 and 2 by letter dated 26.04.2008 had appointed and nominated Sri C.V. Vachaspati as their arbitrator. Though the said arbitrators met once in the month of May, 2008, there was no progress.

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While so the respondents 1 and 2 by notice dated 16.11.2009 informed the applicant that the agreement dated 17.09.2004 stood cancelled. The applicant issued a reply notice dated 24.11.2009 while contending that the agreement cannot be unilaterally cancelled, called upon the respondents 1 and 2 to proceed with the arbitration. As there was no response from the respondents 1 and 2, the applicant got issued a legal notice dated 3.9.2010 to the arbitrators (respondents 3 and 4 herein) marking a copy to the respondents 1 and

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2 calling upon the arbitrators to proceed with the arbitration within eight days and complete the proceedings failing which it would be presumed that the arbitration was abandoned. Though the said notice was received by all the respondents, there was no response from them. Hence the present application.

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In the counter-affidavit filed on behalf of the respondents

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1 and 2, it is contended that the Development Agreement-cumGeneral Power of Attorney, dated 17.09.2004 is not subsisting at all and therefore the application is liable to be dismissed in limini. While denying the plea of the applicant that the construction work was completed by them within the stipulated time, it is contended that the applicant had abandoned the unfinished and semi-finished flats. It is also contended that in spite of several demands made, the applicant failed to complete the construction and therefore the respondents 1 and 2 were constrained to take up the abandoned work with their own funds.

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Though the fact that the applicant by notice dated 14.04.2008 had appointed the 3^rd respondent herein as its arbitrator and the respondents 1 and 2 had appointed the 4^th respondent herein as their arbitrator has not been disputed, it is contended that the arbitrators could not proceed with the arbitration due to the non-cooperation of the applicant. It is also contended that since the respondents 1 and 2 failed to make the payment as demanded in the notice dated 16.11.2009, the unregistered Development Agreement-cum-GPA stood cancelled, and therefore further arbitration is not possible. It is also pleaded that since the agreement stood cancelled, the respondents 1 and 2 had sold the three flats to the third parties and the sale proceeds were adjusted towards the amounts spent by them for completing the abandoned work. With regard to refundable deposit of Rs.15 lakhs, it is claimed that the same was adjusted towards damages and compensation as per Clause (vi) of the agreement and in fact a sum of Rs.1,96,000/- has to be paid by the

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applicant himself. Thus it is contended that the application under Section 11 (6) for appointment of arbitrator cannot be maintained and the grievance, if any, of the applicant has to be resolved by the competent civil court.

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I have heard the learned counsel for both the parties and perused the material available on record.

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The execution of the Agreement for Development-cum-GPA, dated 17.09.2004 between the parties is not in dispute. It is also clear that certain disputes arose between the parties with regard to the work agreed to be executed under said agreement. Admittedly the agreement contained a specific clause that in the event of any dispute between the parties pertaining to the said agreement, the parties shall refer the dispute to the two arbitrators, and the award passed by the arbitrators shall be final. In terms of the said arbitration clause, the respondents 3 and 4 herein were appointed as arbitrators without intervention of this Court. The arbitrators have taken up the proceedings and pending the said proceedings, the respondents 1 and 2 got issued a legal notice dated 16.11.2009 calling upon the applicant to pay a sum of Rs.39,45,000/- and agreeing to transfer the three unsold flats to the applicant on receipt of the said amount within seven days. It was also made clear in the said notice that in the event of failure to pay the said amount within the stipulated period of seven days, the agreement dated 17.09.2004 stands cancelled.

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It is contended before this Court by the learned counsel for the applicant that the agreement cannot be cancelled unilaterally thus it is still subsisting and it is open to the applicant to seek appointment of arbitrator in terms of the said agreement. On the other hand, it is contended by the learned counsel for the respondents that since the applicant failed to pay the amount within the time stipulated the respondents had sold out the flats in question and the sale proceeds were adjusted towards the cost incurred by them for completing the flats that fell to their share and even the arbitration agreement is not

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subsisting and therefore nothing remains for referring for resolution by arbitration.

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As held in M/s. SBP & COMPANY v. M/s. PATEL ENGINEERING LIMITED^[1] while constituting an arbitral tribunal, the Chief Justice or his designate has to consider whether he has jurisdiction in relation to the contract, whether there is an arbitration agreement in terms of Section 7 of the Act, whether the applicant is a party to the arbitration agreement and whether there is an arbitrable dispute.

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It is further explained in NATIONAL INSURANCE CO. LTD. v. BOGHARA POLYFAB (P) LTD .^[2] that the issues whether the claim is a dead claim or a live claim and whether the contract has come to an end on account of repudiation, frustration, breach, etc., or by recording satisfaction of their mutual rights and obligations may be decided by the Chief Justice or his designate or they may be left open to be decided by the arbitral tribunal on taking evidence.

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Since the rival contentions of the parties in the case on hand with regard to the subsistence of the agreement dated 17.9.2004 cannot be decided on mere affidavits, I deem it appropriate to leave the said question to be decided by the arbitrator on evidence.

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The claims and counter-claims made by the parties on the basis of the terms and conditions of the agreement also require consideration by the arbitral tribunal. Particularly in view of the claim of the respondents that they have already sold three flats in terms of their final notice dated 16.11.2009 and moreover as the parties could not reach an agreement expected of them by arbitration through the respondents 3 and 4, I am of the opinion that it is necessary to appoint an arbitrator as sought by the applicant.

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Accordingly, Sri N. Vidya Prasad, District Judge (Retired), is hereby appointed as sole arbitrator. It is open to the learned Arbitrator to fix his own fee. Both the parties are at liberty to file their claims before the Arbitrator and the further proceedings shall be taken up in

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accordance with law.

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Arbitration Application is accordingly allowed. No costs.

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______________ G. ROHINI, J.

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Dt. 14.03.2011 gbs

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[1] AIR 2006 SC 450 [2] (2009) 1 SCC 267

M/S United Engineers v. Ramalingam and 3 Others

Case brief

What is this about?

What did the court decide?

M/S United Engineers v. Ramalingam and 3 Others

Case brief

What is this about?

What did the court decide?

What the court decided

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