Partly allowed

Smt Tushyati Sai Maudgalya v. M/s. Gharonda Builders and Developers

Telangana HC20 Apr 2022ARBAPPL/86/2018

Case brief

AI extract

What is this about?

This order addressed an application to appoint an arbitrator in a dispute arising from an unstamped Agreement of Sale. The Court referred to the evolving Supreme Court jurisprudence on arbitration in unstamped contracts, noting conflicting rulings. The Court granted time for registration, appointed a sole arbitrator, and directed proceedings to commence post-registration while keeping contentions

What did the court decide?

Appointed Sri V.V.Raghavan as sole arbitrator. Granted time for impounding and stamping the agreements. Directing arbitration to commence upon adequate registration of documents.

Smt Tushyati Sai Maudgalya Vs M/s. Gharonda Builders and… — Arbitration | Telangana HC (2022)

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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WEDNESDAY, THE TWENTIETH DAY OF APRIL TWO THOUSAND AND TWENTY TWO

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PRESENT

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THE HONOURABLE SRI JUSTICE UJJAL BHUYAN

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ARBITRATION APPLICATION NO: 86 OF 2018

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Betwee n:

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Smt Tushyati Sai tr,4audgalya, D/o Late Sri. Bandhakavi^{Parabrahmam Aqgd about.} 42 years,' Occ. Management Professlonal, R/o. Plot^no. 42, P^{and T colony,} Pra6hanthi, Qpp. Vikrampuri, Secunderabad^- 500009.^{Temporarily staying at # 215,} SE 8tn Ave, Apt 2760, Fort Lauderdale, Florida USA^{33301. Rep. by its GPAholder} Smt. Bandhaliavi Saraswathi D/o. Late Sri. V.V.Sastry,^{Aged about. 75 years, Occ.} Retired Principal, R/o. Plot No. 42, P and T Colony,^{Prashanti,Opp. Vikrampuri,} Secunderabad - 500009

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...AppLrcANT

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AND

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M/s. Gharonda Builders and Developers, Rep.^{By its IVanaging partner} Mr.Sunil.J.Sachdev S/o. Sri.Jayantilal L Sachdev,^{H.No.4-4-93211 to 3,} Kandaswamy Lane, Sultan Bazar, Hyderabad^- 500095

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2 Mr. Sunil J S'achdev, S/o Sri Jayantilal^L Sachdev^{Aged about. 56 yearsOcc.} Partner to M/s. Gharonda Builders and Developers ,^{Rl/o 3-6-175, Hyderguda,} Hyderabad - 500029.

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3 M's. Sonal Sachdev @ Ms.Sonal Thakrar D/o Mr.^{Sunil J Sachdev Aged} about. 35^years, Occ.Partner to [V/s. Gharonda^{Buildersand Developers,Rl/o} 3-6-175, Hyderguda, Hyderabad^- 500029.

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4 lvlrs. Rekh5 Sachdev, W/o Mr. Sunil J Sachdev Aged about. 55^years,Occ. Partnerto M/s. Gharonda Builders and Developers, R/o 3-6-175,^Hyderguda, Hyderabad - 500029

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5 Mrs. Roopal Sachdev, D/o tr/r. Sunil J Sachdev Aged about. 33^years,Occ- Partnerto M/s. Gharonda Builders and Developers, R/o 3-6-175,^Hyderguda, Hyderabad - 500029

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...RES'oNDENT.

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Application under Section 11 (5 & 6) of the Arbitration and^{ConciliationAct,} 1996 and Scheme of Appointment of Arbitrators 2000^praying that^{in the} circumstances stated in the affidavit filed therewith, the^{High Court maybe} pleased to appoint an Arbitrator to resolve the disputes between the Applicants and the Respondents arising out or the Agreement of Sale dated^21.05.2011.

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The application coming on for hearing, upon^perusing the application and affidavit filed in support thereof and upon hearing the arguments^{of Ms. Gayathri,} Advocate for the Applicant and of Sri N.Jeevan Kumar,^{Advocatefor the} Respondent.

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The Court^{made the following: ORDER}

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THE HON'BLE SRI JUSTICE UJJAL BHTryAN

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ARBITRATION APPLICATION No.86 OF 2018

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ORDER:

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Heard Ms.Gayatri, learned counsel for the applicant and Mr.Jeevan, learned counsel lor the respondent.

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2 Learned counsel for the applicant submits that the original of the agreement of sale dated 21 .05.201 1 u'as submittecl to the Court of I1 Additional Chief Judge, City Civil Court at Hyderabad in Arbitration O.P.No.2347 of 2018 Since the a-foresaid agreement of sale u'as not registered, applicant had liled an application before the Court below for impounding the said document for registration. Recently, learned Court below had allowed the saicl prayer.

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3 In view of above, learned counsel for the applicant prays for some time so that steps can be taken for registration of the agreement of szrle.

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4 At this stage, learned counsel lor the respondent fairly submits that in vieu, of recent decision of this Court dated 04.04,2022 in Arbitration Application Nos.54, 112 and 118 of 2018, both the processes can be simultaneously proceeded i.e. appointment of arbitrator as u,ell as impounding for the purposp '

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of registration though actual arbitration may commence after^{</sup> registration}

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5 Submissions made have been duly considered.

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6 Perused the agreement of sa-le dated 2I.OS.2Oll including clause 27 thereol which says that all disputes under the said agreement would be referred to arbitration of one or more persons and that the award of arbitrator shall be finar and binding on the parties.

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6.L Also perused the letter d,ated. 24.11.2012 of the appiicant invoking the arbitration clause. From the above letter it is seen that despite paymenr made by the applicant, the flat in question has not yet been handed over. Hence the dispute.

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7 An analysis of the controversy i.e. whether arbitration on unstamped / inadequately stamped document can proceed or await impounding and stamping was gone into in the order dated 04.04,2022 referred supra. The same is extracted hereunder:

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33 As already noticed above, at the end of a contentious hearing, Iearned.counsel for the parties had resorved tr,ut tt" three arbitration applications can be disposed of rvithout rr.aiting for rectifying the defects at the first instance. Nonetheless, since the issu'e raiJ ina hvotved is of cons-iderable importance, therefore, it would U. ^ppo"it. for the Court to briefly highlight as to how the larv has ueen tnt..prlilJ by the Supreme Court and where it stands todav.

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34 In SMS Tea Estates private Limited Vs. Chendmari Tea Company Private Limited, l(2011) f4 SCC 661 Supreme Court held that where an arbitration clause js contained in an un"tamped agreement, E:::l::i: :l:ll: :.",0^{Acr,18ee u,ould requireu J,ag.he-aring the} necnon I I apptrcation to impound the agreement and ensure that siamp

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duty and penalty, if any, are paid thereon before proceeding with the Section 11 application. That rvas a d ec isio n rendered by a two Judge bench.

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35 Thi" ui"rr,, was adopted b-y a subsequent t$o Judge bench of the Supreme Court in Garware Wall Ropes Llmited Vs. Coastal Marine Constructlons and Engineering Limited {l2of9) 9 SCC 2O9} wherein it was held that when an arbitration clause is contained in a contract, the agreement onl) k,ecomes a contract if it is enlorceable b,v larv. Arbitration clause in an agreement !ould not exist \'hen it is not er.rlorceable by law, Finally, the bence held that rvhile proceeding with a Section 11 application the High Court nlust impound the instrument rvhich has not borne stamp duty and hand i1 over to the conccrned authority who will then decide the issues, qua, payment of stamp duty and penalty, if any. As soon as stamp duty and penaltl, if any, are paid on the instrument, any of the parties can bring the instrument to the notice of the High Court which will then proceed to expeditiously hear and dispose of the Section 11 application.

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36 This vies, expressed in SMS Tea Estates Private Limited and follou,ed in Garware Wall Ropes Limited^,,,,'as adopted b1'a three Juige bench of the Srrpreme Court in Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram Vs. Bhaskar Raju {(2O2O} 4 SCC 612}

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37 Another three Judge bench ol the Supreme Court in Vidya Drolla Vs. Durga Trading Corporation ll202ll 2 SCC 1) examined the question as to whether a landlord tenant dispute governed by the provisions of the Transfer of Property Act, 1882, would not be arbitrable as this would be contradictory to public policy. Two distinct yet interconnected aspects also arose for consideration before the Supreme Court. These two aspects were, meaning of non-arbitrability and who decides the question of nonarbitrability. Of course, Supreme Court answered the reference by holding that a landlord-tenant dispute is an arbitrable dispute as the Transfer of Property Act, 1882 does not forbid or foreclose arbitration.

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38 While cxamining the aspects of non-arbitrability and who decides non-arbitrability, Supreme Court also interpreted the word 'existence' appearing in Section 11; whereafter it came to the conclusion that an agreement evidcnced in writing has no meaning unless the parties can be compelled to adhere to and abide by the terms. A party cannot sue and claim rights bilsed on an unenforceable docLlment. Existence of an arbitration agrcement means an arbitration agreement that meets and satisfies the statutory requirements of both the 1996 Act as well as the Contract Act arrd uhen it is enforceable in 1a\'. Existence and vaiidity are intertwined an(l an arbitration agreement does not exist il it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement.

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39 In a separate but supplementary opinion, Justice N.V.Ramana opined that arbitration is a creature of consensus. It is completely dependent on party autonomy and the intention expressed in the agreement. A contract having multiple clauses including an arbitration agreement car. be divided into two parts; the clauses relating to the commercial relationship can be referred to as the main contract, whereas the arbitratiorl agreement would be a separate contract by itself. Explaining further, and upon reference to Section 8 of the 1996 Act, it has been held that the Court should refer the matter to arbitration if the validity of the arbitration agreement cannot be determined on a pima facie basis. The rule for the Court would be lvhen in doubt, do refer'. Finally,^it has been held that subject matter arbitrability cannot be decided^{at the}

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stage of Sections 8 or 11 of the 1996 Act unless it is a clear case of deadwood.

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40 Hou'ever, in N.N.Global Mercantile private Limited Vs. Indo Unique Flame Limited ll2}2l) 4 SCC 3791 a tfrree-..luOge bench of the Supreme Court has taken the r,,ieu, that there'is no legal impediment to the enforceability oI the arbitration.agreeme n r pending p"-1rn..,, of stamp duty on the substanrive contract, AdJudication of tnE riifris and obligations under the work order or under tlle substantive "oa_E."i"l contract*would not proceed before, com,plying u ith the mandatory provisions of the Stamp Acr. Ubservrng that decision in SMS Tea Estates prlvate Ltmited (i supra) does not lay down the correct position in law, it has been held that since the arbitration agreement is an^{'independe.ri} .gi.."rt between the parties and is not chargeable to payment of "tr-p a""ty, tn" non_payment of. stamp duty on the commeiciil contract wtulJ'not invalidate the arbitration clause or render it unenforceable "ir.,"" ii t u" an independent existence of its own. On that basis judgment .enaereO in SMS Tea E-states Private Limlted (1 supra) was overiuled. Since the view tal<en in SMS Tea Estates private Li,nited (1 supra) *""-rt"o followed by a coordinate bench in Vidya Drolla 1+ supra),^'ttre terrctr in N.N.Global Mercantile Private Limited (5 supraj expressed doubt over the correctness ofthe view expressed in Vldya Drolia 14 supra) and referred it to a constitution bench of five judges for an authoritative pronouncement. In that case-both the parties^-had admitted ."i"i.,.r.. of arbitration agreement. Therefore, the Court directed the Secretary General of the supreme court to impound the concerned instrument and forward it to the authority for assessment of stamp duty to be paid by the applicant.

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41 Confronted with the above situation, recently, a three judge bench of the Supreme Court in Intercontinent.i got"ti'C-.rp (India) pvt. Llmited Vs. Waterline Hotels pvt. Ltmtted l2OZ2 SCC Cinl,ine S'C Se1 held that while there is a need to constitute u fu.!.. L".,"t to settle the jurisprudence it was also cognizant _of time senslil?ity *hile dealing with arbitration issues. It rvas observed that all the uppti"ltio.,s were at a pre appointment stage and that Court could not leavl'them hanging until the issue is settled by the constitution bench, ff.,"..io.., tlU such time the issue is decided Court should ensure that arbitrations are carried on unless the issue before the Court patentlt, indicates existence of deadwood.

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42 In the facts of that case, ir rlas found that applicants had in lact paid the stamp duty. Thererore, the Supreme cou.t ouse-ea that whether the stamp dut),so paid is insufficient or approprrare ," " iu""tio, that may be. gone into at a later stage; Supreme Cou.t'ould .,ot-...ria or go into this aspect under Section I I (6) oi the 1996 Act.

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CONCLUSION S:

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43 In view of the above legal position, learned counsel for the parties have reached a broad consensui i.,'th. following;-;,-^-

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i. Applicants shall produce the respective development agreements dated 91.91 ?911:^{roan agreement dared26.o2ioL4 (";;pi;;;;;;;} asreemenr dared 12.02.2015) and construction agreement dallJd ,3.O4.2017 in"original before the Registrar General of this Court within ttr.". *..ts i.o_ toj.v,^"'

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''. Those agreemenrs shall be sent lor scrutiny before the respective c-omp,etent aurhority by the Rcgistrar Generai of this court within two weeks of recelpt,

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iii. While the competent authority^{will addresslhe issue regarding stamping} of the documents, the^{dispute raised bctween theparties are to be referredto} arbitration of sole arbitrator^{eachto be appointed in terms of the above three} agreements,

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iv. However, the arbitration shall^{commence once adequatestampingis} done. 44 Ordered accordingly."

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8 Thus, keeping all contentions^{open, parties are hereby} referred to arbitration to be conducted^{by Sri V.V.Raghavan,a} retired District Judge,^{No.3O2, LegendsResidency, StreetNo.2,} Shantinagar Masab Tank, Hyderabad^{-28, who is appointed as} the sole arbitrator to arbitrate^{on the dispute betweenthe parties.}

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9 Both the parties shall report^{beforethe learned arbitratoron} 15.06.2022 at¹ 1.00 am whereafter^{learned arbitrator shall} commence the arbitral^{proceedings. It is expectedthat by that} time the agreement of sale^{would be duly registeredby the} applicant. In any event, actual^{arbitration shall commencepost} registration.

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1O This disposes of the arbitration^{application.No order as to}

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costs.

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