Allowed

M.Devender Raju v. K.Vivek Rao

Telangana HC7 Jan 2016CRP/4184/2015

Case brief

AI extract

What is this about?

The court allowed a civil revision petition, setting aside the lower court's dismissal of an application for arbitration reference. The court held that a certified copy of a registered agreement satisfies statutory requirements and that contract expiration does not disqualify arbitration if the dispute arose within the agreement period.

What did the court decide?

Civil Revision Petition allowed; Impugned order of 15.07.2015 set aside; Application under Section 8(1) of the Arbitration and Conciliation Act allowed.

M.Devender Raju Vs K.Vivek Rao — Arbitration | Telangana HC (2016)

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HON’BLE SRI JUSTICE R. SUBHASH REDDY AND HON’BLE SRI JUSTICE A. SHANKAR NARAYANA CIVIL REVISION PETITION No.4184 of 2015

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ORDER: (Per R. Subhash Reddy, J)

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This Civil Revision Petition is filed under Section 115 of the Code of Civil Procedure, 1908 by the defendant in O.S.No.36 of 2013 aggrieved by the order dated 15.07.2015 passed in I.A.No.455 of 2013 by the V Additional District Judge, Medak at Sangareddy, dismissing the said I.A., filed under Section 8(1) of the Arbitration and Conciliation Act, 1996 (for short “the Act”).

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2. The aforesaid I.A., is filed under Section 8(1) of the Act stating that the petitioner-defendant is the absolute owner of the land bearing Sy.No.687, admeasuring Ac.01.09 Gts., situated at Beeramguda, Ameenpur village, Patancheru Mandal, Medak District and respondentplaintiff is the developer of the land and he approached the petitioner-defendant to develop the land by constructing apartments as per specifications - cellar plus ground plus 4 upper floors at his cost and they have agreed to share the built-up area in the ratio of 45% and 55% between the petitioner and respondent respectively. The respondent-developer executed development agreement dated 20.01.2008 and promised to get it registered later and in terms of clause 6 of the agreement, respondent has agreed to pay Rs.1 crore interest free

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refundable deposit to the petitioner out of which he has paid Rs.25 lakhs through cheques and agreed to pay further

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Rs.25 lakhs in cash in future but did not pay the remaining amount as agreed. It is stated that as per clause 8 of the agreement, 50% of the interest free refundable deposit is to be refunded to the developer after completion of the structure of the complex and remaining 50% is to be refunded to the respondent after handing over possession of the flats which fell to his share, i.e. 45%. It is further agreed that if there is any delay in completing the structures, petitioner is entitled to claim damages and in para-26 of the agreement dated 20.01.2008, there is an arbitration clause. It is further alleged that respondent approached the petitioner stating that due to financial crisis he could not complete the construction and he has formed a partnership firm in the name and style of M/s.Navdurga Constructions with two other partners and it is a registered partnership firm. It is stated that respondent agreed to complete the construction with the assistance of the partners in the partnership firm and he executed fresh development agreement-cum-general power of attorney in continuation of the earlier development agreement. As per the second agreement, respondent has agreed that petitioner need not refund the deposit made by him and in lieu thereof, after executing the second agreement, respondent agreed that entire

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fundable amount is deemed to have been refunded to the respondent and in lieu thereof the percentage of built up area of the petitioner is reduced from 45% to 30%. New development agreement-cum-general power of attorney is executed on 17.03.2010 in favour of the partnership firm represented by partners and as per the second agreement the period of completion of the construction of the premises is fixed as 30 months from the date of agreement with grace period as 6 months and it is also kept open to the petitioner to take legal action if the construction is not completed within that period of 30 months and grace period of 6 months. It is stated that even in the new development agreement-cum-general power of attorney entered into on 17.03.2010, there is arbitration clause under clause 14; in spite of the same, respondent has filed suit for recovery of the deposited amount, without seeking resolution of the dispute by an arbitrator as agreed upon. Precisely it is the case of the petitioner that in view of the arbitration clause in both the agreements, dispute between the parties arising out of such agreements has to be referred to arbitrator for resolution.

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3. Respondent filed counter denying the allegations of the petitioner. It is stated that application filed by the petitioner under Section 8 of the Act is not in accordance with law and as the petitioner failed to file the arbitration agreement, which is mandatory, the I.A., filed by the

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petitioner is fit to be dismissed as not maintainable. It is stated that the suit is filed for recovery of money based on the development agreement dated 17.03.2010 and there are no disputes with regard to development agreement and the amount due and payable by the petitioner was paid towards advance pursuant to the first development agreement for which legal notice was issued on 12.03.2012 calling upon the petitioner to pay the amount due. It is further stated that the clause referred by the petitioner in the development agreement only refers to mediation, but not arbitration and as mediation is already effected and failed, the question of seeking reference to arbitrator does not arise.

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4. Along with the I.A., filed by the petitioner, Exs.P.1 and P.2 are filed. Ex.P.1 is unregistered development agreement dated 20.01.2008 and Ex.P.2 is the attested copy of registered development agreement bearing document No.2244 of 2010 dated 17.03.2010. On behalf of the respondent, no documentary evidence is filed.

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5. While considering the plea of the petitioner, the court below mainly dismissed the I.A., filed by the petitioner on the ground that the agreement period for construction expired by 17.03.2013, whereas the I.A., under Section 8(1) of the Act was filed on 30.11.2013 and both parties have not taken any steps to extend the agreement for a further period. Further, it is stated in the impugned order that suit is filed within time on 25.02.2012.

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6. Heard learned counsel for the petitioner and learned counsel for the respondent and perused the material on record.

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7. It is contended by the learned counsel for the petitioner that as per the terms of the agreements, the disputes, if any, arising thereof, are to be resolved by the arbitrator and in spite of the specific clause in the agreements dated 20.01.2008 and 17.03.2010, the court below has rejected the I.A., filed by the petitioner without any reasons. It is further contended that the reason assigned for rejecting the application filed by the petitioner under Section 8(1) of the Act, i.e. contract period has expired is not a valid reason. Inasmuch as attested copy of the registered development agreement dated 17.03.2010 is filed along with the I.A., it cannot be said that the I.A., filed by the petitioner is not maintainable. Learned counsel, in support of his contentions, relied on the judgments of the Supreme Court in Bharat Sewa

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Sansthan v. U.P. Electronics Corpn. Ltd .^[1] and Rashtriya Ispat Nigam Ltd. and another v. Verma Transport Co .^[2]

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8. On the other hand, it is contended by the learned counsel for the respondent that recovery of money is based on the development agreement dated 20.01.2008, as such, claim is made before the court below and there is

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no valid reason to seek reference to arbitrator for resolution of dispute; in any event I.A.No.455 of 2013 filed by the petitioner is neither accompanied by original copy of the agreement nor certified copy as required under Section 8(1) of the Act, as such, on that ground also, the said I.A., is liable to be rejected, which is rightly done by the court below and there are no grounds to interfere with the same. In support of the contentions, learned counsel for the respondent has relied on an unreported judgment of the Supreme Court in M/s. Sundaram Finance Limited and another v. T. Thankam passed in Civil Appeal No.2079 of 2015 and judgment of a Division Bench of this Court in Asian Securities and Estates Limited v. . Nausheen Riyaz^[3]

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9. It is not in dispute that petitioner has entered into agreement with the respondent initially on 20.01.2008 for developing the property of the petitioner by constructing apartment complexes and a copy of the said agreement is placed on record. Clause 26 of the said agreement reads as under:

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“In case of any disputes arises between the parties hereto touching these presents the matter shall be referred the Mediator one chosen by each party and in case of any difference of opinion between such arbitrators, they shall nominate a common umpire and their award shall be final and binding on both the parties and the relevant provisions of the Mediator shall apply.”

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10. As the construction was not completed, respondent entered into another development agreement-cumgeneral power of attorney on 17.03.2010 and the same is registered in the office of the

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Sub-Registrar, Medak at Sangareddy. Clause 14 of the said development agreement reads as under:

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“That in the event of any dispute and reference arising with regard to interpretation, scope and ambit of various clauses stipulated herein above and in respect of this Agreement, the parties hereto shall seek redressal of the same through arbitration by nominating one arbitrator each and the decision of the said arbitrators shall be conclusive and binding on the parties hereto.”

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11. In clause 18 of the agreement dated 17.03.2010, it is categorically stated that the said agreement is in continuation of the development agreement dated 20.01.2008 which was entered between the petitioner and the respondent. In the first as well as the second agreement, the parties have clearly agreed for reference of the dispute to the arbitrator in the event of any dispute. It is true that in the first agreement, in clause 26, at one place, instead of arbitration, it is referred to as mediation, but upon a comprehensive reading of the clause, it is clear that parties have intended to go for arbitration in the event of any disputes arising out of such agreements, which is further clear from clause 14 of the agreement dated 17.03.2010. From a perusal of the averments in the plaint in O.S.No.36 of 2013, it is clear that money claim

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made in the said suit is arising out of the same contract which is the subject matter of the two agreements referred above. It is to be noticed that agreement period in the second agreement dated 17.03.2010, period in which construction was to be completed was mentioned as 30 months with 6 months grace period. Agreement period was upto 17.03.2013 whereas the suit was filed even before expiry of that period, i.e. 25.12.2012. When the claim made by the respondent is traceable to the agreed terms in the aforesaid agreements, only on the ground that agreement period is over, the application filed under Section 8(1) of the Act ought not to have been rejected. It is suffice if the dispute has arisen within the time period of the contract entered into, wherein parties have agreed to seek redressal in the event of any disputes, through the process of arbitration. In that view of the matter, we are of the view that the reason assigned by the court below for rejection the I.A., i.e. the contract period is over, pursuant to the agreement dated 17.03.2010, is not sustainable.

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12. In the judgment in Bharat Sewa Sansthan (1 supra), the Hon’ble Supreme Court has held that in view of the power conferred on the Supreme Court under Article 142 of the Constitution of India, it can grant appropriate relief where there is some manifest illegality or where there is manifest want of jurisdiction or where some palpable injustice is shown to have resulted to the parties. In the said case, when the photocopy of the original agreement

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was filed and when both parties were denying possession of the original lease agreement, the Hon’ble Supreme Court has approved the view of the High Court that in such case, photocopy of the original agreement can be taken on record for ascertaining the existence of arbitral clause. Further, in the case of Rashtriya Ispat Nigam Ltd. (2 supra), the Supreme Court, at para-24 held as under:

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“In the instant case, the existence of a valid agreement stands admitted. There cannot also be any dispute that the matter relating to termination of the contract would be a dispute arising out of a contract and, thus, the arbitration agreement contained in clause 44 of the contract would be squarely attracted. Once the conditions precedent contained in the said proceedings are satisfied, the judicial authority is statutorily mandated to refer the matter to arbitration. What is necessary to be looked into therefore, inter alia, would be as to whether the subject-matter of the dispute is covered by the arbitration agreement or not.”

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13. In the case on hand, though it is not dealt with by the court below, it is argued by the learned counsel for the respondent that application under Section 8(1) of the Act itself is not maintainable when it is not accompanied by the original arbitration agreement or duly certified copy thereof. In support thereof, learned counsel for the respondent relied on the unreported judgment of the Supreme Court in the case of M/s. Sundaram Finance Limited and another v. T. Thankam passed in Civil Appeal No.2079 of 2015 referred supra, wherein it is held that no

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option is left to the Court once the prerequisite conditions of Section 8 of the Act are fully satisfied. Further, the Division Bench of this Court, in the case of Asian Securities and Estates Limited (3 supra), as relied on by the learned counsel for the respondent, held that filing of the original or certified copy of the agreement is mandatory. But, after perusal of Ex.P.2 filed before the Court, it is clear to us that development agreement-cumgeneral power of attorney dated 17.03.2010 is a registered document, registered on the file of the SubRegistrar, Medak at Sangareddy and certified copy which is digitally signed and certified by the Sub-Registrar, Medak at Sangareddy is filed along with the application in the I.A. Hence, the claim of the petitioner cannot be rejected only basing on the description of Ex.P.2, which is mentioned as attested copy of the development agreement. In fact, as the said document is accompanied by digital signature of SubRegistrar, Medak at Sangareddy, it is a certified copy but not attested copy. Hence, the I.A., filed by the petitioner complies the requirement under Section 8(2) of the Act. As such, the said I.A., is fit to be allowed.

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14. For the aforesaid reasons, the Civil Revision Petition is allowed by setting aside the order dated 15.07.2015 passed in I.A.No.455 of 2013. Consequently, the said I.A., stands allowed. No order as to costs. As a sequel, miscellaneous petitions if any pending

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in the C.R.P., shall stand closed.

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R. SUBHASH REDDY, J

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A. SHANKAR NARAYANA, J

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January 2016 MRR

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