Arbitration Petition No.412 of 2009

2nd March, 2010

Petitioner Counsel: Mr. MILIND SATHE, Mr. MUKUL TALY, Mr. SHEIKH YUSUF ALI
Respondent Counsel: Mr. ARIF BOOKWALA, Mr. KIRAN GANDHI

Cases Cited:
Nasir Hussain Films Pvt. Ltd. Vs. Saregama India Ltd., Appeal No.457/2007 in Arbitration Petition No.81/2007, Dt.:-07-04-2008 [Para 21]
Oberoi Construction Pvt. Ltd. Vs. Worli Shivshahi Co.-op. Hsg. Society Ltd., 2008(5) Bom.C.R. 855 [Para 21]
Perma Container (UK) Line Ltd. Vs. Perma Container Line (India) Pvt. Ltd., MANU/MH/1045/2009 [Para 23]
National Insurance Company Limited Vs. Boghara Polyfab Pvt. Ltd., 2009(4) Bom.C.R. 891 [Para 23]
Chheda Housing Development Corporation Vs. Bibijan Shaikh Farid, 2007(3) Mh.L.J. 403 [Para 24]

JUDGMENT

JUDGMENT :- The Petitioner has invoked Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act) for interim relief/protection in view of the Memorandum of Understanding (MoU)/Agreement dated 1st March, 2008.

2. The basic events are as under :

In the year 2002, Mr. S. C. Pandey as the Chief Promoter of Gagan Vihar CHS (proposed) applied to MHADA (Maharashtra Housing and Development Authority) for allotment of land for the Co-operative Housing Society of Central Government Employees.

3. On 06/12/2007, MHADA by its letter of allotment bearing No.8512 and dated 06/12/2007 allotted land bearing Nos.RSC-52, RSC-59 and RDP-7 admeasuring in the aggregate 4179.69 sq. mts. Situate at Charkop, Kandivli Mumbai in favour of the Gagan Vihar C.H.S. (proposed).

4. On 06/12/2007, the essential condition of the letter of allotment was that an amount of Rs.3,13,69,015/- towards cost of land be paid to MHADA within 30 days from the date of receipt of the letter of allotment. The said letter of allotment also stipulated that in the event of the allottee not being able to pay the land cost to MHADA within 30 days a further extension of 90 days would be given on the written request of the allottee and on payment of interest at 13.5% p.a.. The said allotment also stipulated that on the expiration of the extended period of 90 days the allotment would stand cancelled.

5. On 30/12/2007, the Chief Promoter and other members approached Developers as such a huge amount need to be paid within the stipulated time. At a meeting of the members held on 30/12/2007, the Offers were scrutinized and the proposal of the Petitioner was accepted.

6. On 02/01/2008, the MoU dated 02/01/2008 was executed by the Chief Promoter of the Respondent in favour of the Petitioner.

7. On 04/01/2008, the Petitioner paid the consideration of Rs.1,00,00,000/- (Rupees One Crore only) to MHADA within the stipulated time.

8. On 17/01/2008, the Respondent Society was registered.

9. On 02/02/2008, the 1st General Body Meeting of the Respondent Society was held and the resolution to grant development rights to the Respondent Society was unanimously passed.

10. On 01/03/2008, the Development Agreement was executed between the Respondent Society and the Petitioners for the development of the said land and the Power of Attorney was also granted to the Developers. Both the documents are duly registered.

11. On 11/08/2008, letter from the Petitioner to the MHADA requesting them to take steps to give possession of the said land.

12. On 03/10/2008, letter from the Petitioners to MHADA explaining the cause for delay in taking possession of the said land.

13. On 16/10/2008, letter from the Petitioners to the Respondents being the 2nd reminder. This letter makes a detailed reference to the consideration paid by the Petitioner in consideration of the Agreement dated 1st March, 2008 and the irrevocable power of attorney in consideration thereof.

14. On 17/11/2008, the Petitioner received a letter from the Administrator along with the identical letters from the members denying the knowledge of registered Agreement dated 01/03/2008.

15. On 24/11/2008, a letter from the Petitioner to the Administrator of the Respondent Society being a reply to the letter dated 17/11/2008. On or about 2nd Week of December, 2008, the copies of the resolution passed on 29th November, 2008, was received by the Petitioners from some members.

16. On 18/12/2008, a letter from the Petitioner to the Administrator of the Respondent Society invoking the Arbitration Clause.

17. On 20/01/2009, a reply letter from the Advocate for the Respondent addressed to the Advocate for the Petitioner.

18. On 22/01/2009, further letter dated 22/01/2009 addressed by the Advocate for the Petitioner to the Advocate for the Respondent.

19. In the month of June, 2009, the Petitioner has learnt that the Respondent is taking steps to appoint a developer in respect of the property.

20. This Court on 19th June, 2009, after considering the averments made in paragraph 14 and as the case was made out, granted ad-interim relief in terms of prayer (a) and also directed to the parties to maintain status-quo while admitting the matter.

21. Heard the parties finally. The learned counsel appearing for the Respondent has contended that there is no agreement and arbitration clause which entitled the Petitioner to invoke the provisions of Arbitration Act as done in the present case. The strong reliance was placed on Nasir Hussain Films Pvt. Ltd Vs. Saregama India Ltd. & Anr., Appeal No.457 of 2007 in Arbitration Petition No.81 of 2007, dated 7th April, 2008 And Oberoi Construction Pvt. Ltd. Vs. Worli Shivshahi Co.-op. Hsg. Society Ltd., 2008(5) Bom.C.R. 855, and thereby contended that before passing any order under Section 9 of the Arbitration Act, the Court must consider the existence of agreement, as well as, Arbitrable dispute.

22. It is settled that existence of Arbitration Agreement/clause read with Arbitrable dispute are must before passing any order under Section 9 of the Arbitration Act.

23. I have already observed in Perma Container (UK) Line Ltd. Vs. Perma Container Line (India) Pvt. Ltd. & Ors., MANU/MH/1045/2009, after considering above Judgments cited by the learned counsel appearing for the Respondent and by following the Supreme Court Judgment in National Insurance Company Limited Vs. Boghara Polyfab Pvt. Ltd., 2009(4) Bom.C.R. 891, that the Court before passing any order under Section 9, need to consider and observe prima facie the existence of agreement/Arbitration Clause and Arbitrable issue, as relied by the learned senior counsel appearing for the Petitioner, and passed interim order/injunction under Section 9 by observing as under :

"31.It is observed in Adhunik Steels Ltd. Vs. Orissa Manganese and Minerals (P) Ltd.. In (2007)7 S.C.C. 125), referring to the Siskina, (1979) AC 210,

"The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction."

"16.Recently, in Fourie Vs. Le Roux, (2007)1 W.L.R. 320, the house of Lords speaking through Lord Scott of Foscote stated :

"An interlocutory injunction, like any other interim order, is intended to be of temporary duration, dependent on the institution and progress of some proceedings for substantive relief."

45. It is observed in Kishorsinh Ratansinh Jadeja Vs. Maruti Corp. & Ors., JT 2009(5) SC 180 as under :

"12.In addition to the above, Mr. Ranjit Kumar also referred to the decision of this Court in Mandali Ranganna & ors. Vs. T. Ramachandra [2008(11) SCC 1] wherein an additional principle was sought to be enunciated relating to grant of injunction by way of an equitable relief. This Court held that in addition to the three basic principles, a Court while granting injunction must also take into consideration the conduct of the parties. ....."

46. The Apex Court in Adhunik Steels Ltd. (Supra) has observed :

"It is true that Section 9 of the Act speaks of the Court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject-matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient."

"Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act."

24. In view of above fact, there remained no dispute that the parties have acted upon the said agreement/clauses of agreement/MOU, that itself sufficient to consider that the Petitioner has right/entitled to specific performance of the agreement as the interest has also been created in the land (Chheda Housing Development Corporation Vs. Bibijan Shaikh Farid & Ors., 2007(3) Mh.L.J. 403), and as the Petitioner based upon the agreement, acted and made the payment initially of Rs.1 Crore to the MHADA on 04/01/2008 and the balance of Rs.1,93,98,827/-, thereafter. On 2nd February, 2008, the Respondent Society unanimously passed the resolution confirming the grant of development rights in favour of the Petitioner with Arbitration Clause 13 of the agreement. The Respondent also executed and delivered an irrevocable power of attorney dated 1st March, 2008 in favour of the Petitioner for necessary acts arising out of the said agreement. The said power of attorney was also registered. The averments made in Para 14 of the Petition are not substantially denied, except now raising the plea that the signatures on the General Body Resolution are dishonest, fraudulent with intention to create valid and binding resolution and the agreement. The issue with regard to the fabrication of the document and/or of forged signature is a matter of detailed trial and inquiry before the Arbitral Tribunal. The existence of document, in view of above, itself is not in dispute and also the Arbitration Clause. The challenge by reply, is to the validity and/or execution of those documents.

25. Therefore, to say there exists no agreement or valid agreement or Arbitration clause, in view of above itself is unacceptable. Under what circumstance those documents were executed by the authorized or unauthorized person or by mis-representation or by playing fraud, that itself cannot be the reason to overlook, at this stage, under Section 9, that there exists no agreement/MOU/Arbitration Clause between the parties. In my view, there exists Arbitration Agreement and Arbitrable dispute.

26. The learned senior counsel appearing for the Petitioner has also relied on 2010(1) Bom.C.R. 360, Godrej Industries Ltd. Vs. Jer Rutton Kavasmaneck (Alias Jer Jaswahar Thadani) & Ors.. In that matter also validity of the MOU, having Arbitration Clause was challenged. In that case also the submission was that MOU is not enforceable and not binding agreement. I have already held in paras 27, 28 as under :

"27.The Petitioner, therefore, in my view, has made out a sufficient case under Section 9 of the Act read with Order 40, Rules 1 and 2 and/or Order 39, Rules 1 and 2 of the Code of Civil Procedure (C.P.C.) for appropriate order and/or interim measure as sought, unless and until the case of respondents 4 and 5 is accepted and/or decided finally in their favour through the Arbitral Tribunal which the parties are free to appoint/constitute as per the MOU.

28.There is no power under Section 9 of the Act to decide and declare such MOU null and void finally. The Arbitral Tribunal may do so. Therefore, unless it is declared so, in view of the agreed and signed MOU and the respective clauses referred above, that itself, in my view, sufficient to maintain the interim order already granted and/or pass such interim measure/protection as prayed."

27. In the present case, therefore, without observing anything on merits of the matter with regard to the rival submissions so raised on the documents about its validity, at this stage, as prima facie the case is made out and as the balance of convenience lies in favour of Petitioner and to avoid further complications and to protect/secure the property, pending the Arbitration, I am inclined to confirm the interim order passed on 19th June, 2009. However, a liberty is granted to the parties to take appropriate plea and defence before arbitral tribunal. All points are kept open. This order shall be in operation till the constitution of Tribunal and four weeks thereafter.

28. The Petition is allowed in terms of prayer clause (a). No costs.

Petition allowed.