2011(2) ALL MR 223
IN THE HIGH COURT OF JUDICATURE AT BOMBAY(NAGPUR BENCH)
B.P. DHARMADHIKARI, J.
M/S. Indo Pacific Software & Entertainment Ltd.Vs.The Nagpur Improvement Trust & Anr.
Writ Petition No.1859 of 2010,Writ Petition No.3473 of 2010
18th November, 2010
Respondent Counsel: Mr. R. D. CHHABRA
Other Counsel: Mr. S. P. DHARMADHIKARI,Mr. H. D. DANGRE
(A) Arbitration and Conciliation Act (1996) S.17 - Interim measure - Scope and object of - Interim measure of protection contemplated under S.17 has to be a measure of protection i.e. with a view to preserve situation prevailing and to keep property available to answer final adjudication as and when final award is passed by the Arbitrator.
Perusal of Section 17 reveals that Arbitrator can pass order asking party to take any interim measure of protection. The interim measure of protection contemplated therein therefore has to be a measure of protection i. e. with a view to preserve situation prevailing and to keep property available to answer final adjudication as and when final award is passed by the Arbitrator. The direction issued by Arbitrator to Nagpur Improvement Trust to issue necessary no objection certificate to Contractor to enable him to fulfill and honour commercial arrangements with the prospective purchasers or then to enable him to mortgage the project to obtain financial assistance are not interim measures contemplated in Section 17 of the Arbitration Act. These steps cannot be viewed as interim measures of "protection". On the contrary, under the guise of those interim measures directions issued are to take steps to further specifically perform the alleged obligations of Nagpur Improvement Trust as per agreement dated 23.7.2002. Thus, on one hand, the parties are seeking modification in terms and conditions of agreement dated 23.7.2002 & are before Arbitrator for that purpose, & on the other hand Contractor is seeking specific enforcement thereof . The Arbitrator has to resolve that controversy on merits & without resolving it, the directions have been issued to take steps which in fact result in further execution of the agreement dated 23.7.2002. If no objection certificate as directed for is issued and lease with perspective customers or then a mortgage is allowed to take place, it is apparent that third party interests are created and situation becomes irreversible one. It can not be therefore to reversed at the stage of final adjudication by the Arbitrator without adversely affecting the third party interests resulting therefrom. Creation of such situation cannot be viewed as an interim measure at all. (1991)1 SCC 533 and (2007)6 SCC 798 - Ref. to. [Para 33]
(B) Arbitration and Conciliation Act (1996) Ss.17, 34 - Arbitration proceedings - Disposal of - Huge investment by contractor - Public interest and public revenue involved in the matter - Held, expeditious disposal of arbitration proceedings by Arbitration is essential. (Para 37)
Chheda Housing Development Corporation Vs. Bibijan Shaikh Farid, 2007(3) ALL MR 780=2007(3) Mh.L.J. 402 [Para 11]
Arun B. Goradia Vs. Manish Jaisukhlal Shah, 2009(1) Mh.L.J. 611 [Para 11]
Wander Ltd. Vs. Anathu Anox India Pvt. Ltd., 1990(Supp.) SCC 727 [Para 14]
Dorab Cawasji Warden Vs. Coomi Sorab Warden, AIR 1990 SC 867 [Para 15]
Hindustan Petroleum Corporation Ltd. Vs. Sri Sriman Narayan, AIR 2002 SC 2598 [Para 15]
M. D. Army Welfare Housing Organisation Vs. Sumangal Services Pvt. Ltd., AIR 2004 SC 1344 [Para 15]
BPL Ltd. Vs. Morgan Securities and Credits Pvt. Ltd., 2008(1) Arb.LR 325 (Delhi) [Para 15]
Rajasthan Breweries Ltd. Vs. Stroh Brewery Company, AIR 2000 Delhi 450 [Para 16]
Indian Oil Corporation Ltd. Vs. Amritsar Gas Service, (1991)1 SCC 533 [Para 16]
Arvind Constructions Co. (P) Ltd. Vs. Kalinga Mining Corporation, (2007)6 SCC 798 [Para 16]
JUDGMENT :- Both these petitions are filed by respective rival parties and challenge is to judgment dated 29th March, 2010 delivered by the Principal District Judge, Nagpur in Misc. Civil Appeal No.319/2008. The said appeal was filed by Nagpur Improvement Trust and has been partly allowed. The Contractor has filed Writ Petition No.1859/2010 while Nagpur Improvement Trust has filed Writ Petition No.3473/2010 insofar as rejected of part of their appeal is concerned. The said appeal was under Section 37(2) of Arbitration and Conciliation Act, 1996 (Arbitration Act, hereafter) and challenge was to the order of respondent No.2 Arbitrator dated 20th August, 2008 directing certain measures under Section 17 thereof. The relevant facts are not much in dispute at least at this stage.
2. The financial bid for raising a commercial complex and multiplex - a cinema theater with three screens on land belonging to Nagpur Improvement Trust submitted by Contractor was accepted and an agreement dated 23/7/2002 has been entered into between parties for that purpose. The project is on BOT ie built,operate & transfer basis. After agreement a writ petition was filed before this Court by Cine Exhibitors Association vide Writ Petition No.2697/2002 and on 3.7.2003 Division Bench of this Court found that the project part relating to multiplex was in contravention of rules and regulations. Because of said order of Division Bench, the construction of multiplex was found not feasible and Contractor submitted revised plans on 17.11.2003. It appears that in the mean while, Nagpur Improvement Trust had filed Civil Appeal Nos.923 and 924 of 2004 before the Hon'ble Apex Court. As per revised plans, the area of multiplex was also to be used for commercial purposes as per Development Control Rules & in accordance with terms of agreement between parties. This revised plan was sanctioned by Nagpur Improvement Trust on 5.2.2004. Second revision therein was sought by Contractor and was sanctioned on 14.7.2005. The Contractor continued with his construction and some correspondence was also going on between parties. It appears that because of deletion of cinema theater ie multiplex from the project, Contractor had reserved his rights to claim suitable damages in the matter. Ultimately, on 6.2.2007 Nagpur Improvement Trust asked Contractor to stop construction activities immediately and contended that agreement dated 23.7.2002 needed suitable modifications in view of the above Court orders. After receipt of this communication, Contractor filed Misc. Civil Application No.294/2007 before the Principal District Judge, Nagpur and orders under Section 9 of Arbitration Act have been passed on it on 18th April, 2007. The application was allowed and Nagpur Improvement Trust and its officers were restrained from interfering or obstructing the construction activities of the Contractor. Relief was to remain in force for a period of two months from 18th April, 2007 and during that period Contractor was directed to move the High Court under Section 11 of the Arbitration Act for getting an Arbitrator appointed. In the event of his filing of such an application, interim relief was to continue till actual appointment of Arbitrator by the High Court, the relief was subject to condition that Contractor made payment of consideration as per schedule attached to agreement dated 23.7.2002.
3. On 6.6.2008 this Court in Misc. Civil Application (Arbitration) No.866/2007 appointed present respondent no.2 as an Arbitrator. Contractor then moved an application under Section 17 of Arbitration Act before the said Arbitrator some time in June, 2008. Nagpur Improvement Trust filed its reply and opposed that application. Respondent no.2 Arbitrator after hearing respective Advocates for Contractor and Nagpur Improvement Trust passed an order of interim measures on 20th August, 2008. He allowed that application and Nagpur Improvement Trust has been directed to execute lease deed of land as described and to issue necessary no objection certificate in favour of Contractor to enable him to fulfill and honour commercial agreement with prospective purchasers within 15 days from the date of order. Nagpur Improvement Trust is also directed to issue no objection certificate for mortgaging the project to obtain financial assistance within 15 days, subject to Contractor furnishing necessary guarantee of the amount equal to costs of land before execution of mortgage deed as per Clause 15.1 of the agreement dated 23.7.2002. Contractor is also directed to pay Rs.One crore and fifty lakhs being current dues of 2007-08 and 2008-09 by direct remittance within 45 days from the date of this order. Respondent, its officers, servants and representatives have been restrained from interfering or obstructing the construction activities of the Contractor.
4. This order came to be assailed by Nagpur Improvement Trust by filing Appeal under Section 37(2) (b) of Arbitration Act on the file of the Principal District Judge, Nagpur. This appeal came to be registered as Misc. Civil Appeal No.319/2008. The appeal was partly allowed by the Principal District Judge, Nagpur on 21st April, 2009 and direction to lease out & to issue no objection certificate for lease and mortgage purposes was quashed and set aside. The restraining order was maintained. The Contractor then approached this Court in Writ Petition No.2744/2009 and vide order dated 4th November, 2009 this Court (myself) found that the contentions being advanced were not looked into by the Principal District Judge. The said judgment was, therefore, set aside and the matter was remanded back for fresh consideration in accordance with law. The Principal District Judge was directed to decide it by 30th January, 2010. After remand the appeal has been again decided by impugned judgment dated 29th March, 2010. The impugned judgment again partly allowed that appeal. The Contractor has been directed to pay amount of Rs.One crore and fifty lakhs as per directions issued by Arbitrator and restraining order not to interfere with or obstruct construction activities has been maintained. The other directions to lease & to issue no objection certificate are quashed and set aside. Both sides have thereafter filed above mentioned writ petitions challenging the said judgment.
5. I have heard Senior Advocate Mr. S. P. Dharmadhikari with Advocate H. D. Dangre for Contractor and Advocate R. D. Chhabra for respondent no.1. Though appearance has been filed by an Advocate for respondent no.2, said learned Advocate has not remained present before this Court.
6. Contractor has contended that as per Clause 4.2 of the agreement dated 23.7.2002 read with its Clause 6 the possession of land has been handed over to him. Clause 6.1 thereof contemplates a lease of multiplex in his favour for period of 20 years and of other commercial areas for a period of 30 years. It is urged that though dispute arose between parties, the construction has been going on and most of the work of structure is now over. Attention has been invited to the observations in this respect as contained in the order of Arbitrator to show that construction of two basements, three upper floors, entire shopping area, lobby area and parking was complete in August, 2008 itself. The work with respect to air conditioning, escalator, fire fighting facility is also stated to be complete and learned Senior Advocate urged that as of today more than 80% of work of entire project is over and Contractor has invested amount approximately Rs. sixty crores therein. The attention is invited to various clauses of the agreement to show that after grant of NOC by Nagpur Improvement Trust, the Contractor can lease out the commercial areas to prospective lease holders and even in market to raise appropriate funds as permitted in it. Clause 9.2.12 and clause 14 are pointed to show how after expiry of lease period how the possession is to be handed over back to Nagpur Improvement Trust by Contractor. With the help of this material, contention is an interest in the land and project is irrevocably created in favour of Contractor.
7. Attention is invited to absence of any power with Nagpur Improvement Trust to terminate agreement. It is urged that as per Clause 12 termination is possible only for defaults and that too after giving opportunity to Contractor to make amends. Clause 12 is relied upon to demonstrate what constitutes default under the agreement. It is urged that admittedly, Nagpur Improvement Trust has not terminated the agreement dated 23.7.2002 and agreement, therefore, is still valid.
8. Contention that agreement which envisages construction and completion of project on B. O. T. basis is self-sufficient and self financing is sought to be justified by relying upon clauses like Clause 4.1, 6.1, 8.2 and 15.1 of the agreement. It is urged that in absence of construction of multiplex and ground floor the Contractor was expected to deposit amount of Rs.Two crores for soliciting NOC of Nagpur Improvement Trust to enable him of commence booking and to execute lease deed in favour of customers. However here as construction is much more than that is already over, the Contractor is not required to deposit the amount and is free to raise finance in mode and manner as stipulated in the agreement. Schedule of payment appended to the agreement is relied upon to show that as construction period agreed between the parties was of two years, for said period the small repayment has been agreed to. After expiry of that period as Contractor becomes entitled to raise funds by executing lease deeds or mortgaging, the quantum of amount payable each year has increased.
9. Provisions of Clause 12.2 are pressed into service to urge that though construction of multiplex was contingent, still user of that area for commercial purposes as per D. C.R. is agreed between parties. Attention is invited to Clause 18.2 to show how severance of agreement for this legal and valid user is agreed between parties. Clause 18.1 is also pressed into service to show that the agreement itself contemplates amendment thereto.
10. Thus, by relying upon various clauses in agreement, argument is that as per provisions of Sections 105 and 107 of Transfer of Property Act, it creates right and interest in favour of Contractor in land and hence the interim measures directed by Arbitrator to execute lease & to issue N.O.C. for enabling contractor to complete lease formalities with future customers as also N.O.C. to enable him to execute mortgage deed are within four corners of law and within the spirit and scheme of the agreement. However, during argument, it has been made clear that for the present contractor is pressing for grant of N.O.C. to enable him to execute lease agreement in favour of only prospective beneficiaries and to grant N.O.C. to execute mortgage deed in favour of financing agencies. The question of execution of lease deed of land in favour of Contractor is not pressed now and it is argued that it can be considered on merits by the Arbitrator.
11. It is also urged that even if it is presumed that agreement dated 23.7.2002 is only an agreement of building construction, still the same can be specifically enforced. Reliance is being placed upon the provisions of Section 14(3) of Specific Relief Act, 1963 for said purpose. The judgment of the Division Bench of this Court in the case of Chheda Housing Development Corporation Vs. Bibijan Shaikh Farid and others : 2007(3) Mh. L.J. 402 : [2007(3) ALL MR 780] and subsequent judgment reported at 2009(1) Mh. L.J. 611 (Arun P. Goradia Vs. Manish Jaisukhlal Shah and others) are relied upon to substantiate this contention. It is urged that recourse to Section 41 (e) of Specific Relief Act by learned P. D. J. in the impugned order is unwarranted.
12. The impugned order of learned Principal District Judge is assailed by attempting to point out that no material finding recorded by Arbitrator is found to be vitiated therein and the absence of any right in Nagpur Improvement Trust during contract period is also overlooked. The contention is finding that lease deed can be executed later on as recorded in the impugned order is clearly erroneous and is inconsistent with earlier observations that as per Clause 6 of the agreement Nagpur Improvement Trust is supposed to execute lease. It is further urged that as absence in right in Nagpur Improvement Trust during contract period has been overlooked, the finding about availability of rarest of rare case as reached is also perverse and erroneous.
13. The observation that Contractor can approach Nagpur Improvement Trust for getting tripartite agreement executed and objected necessary NOC for execution of lease run contrary to spirit of agreement and also overlooked the dispute between the parties.Learned counsel has urged that in spite of remand for specific purpose by this Court vide its order dated 4.11.2009, impugned order dated 29.3.2010 is replica of earlier order dated 21st April, 2009 with very minor changes.
14. The Judgment of Hon'ble Apex Court reported at 1990 (supp.) SCC 727 : Wander Ltd. Vs. Anathu Anox India Pvt. Ltd. is relied upon to show how the Appellate Court has to evaluate the interim orders passed by lower authorities. Contention is in absence of any material showing consideration by Arbitrator to be either erroneous or perverse, another view has been taken by learned Principal District Judge only because of such view is possible.
15. Advocate Chhabra for Nagpur Improvement Trust has urged that interlocutory mandatory injunction cannot be granted by Arbitrator under Section 17 of the Arbitration Act. He has relied upon judgments in the case of Dorab Cawasji Warden V. Coomi Sorab Warden :AIR 1990 SC 867 and Hindustan Petroleum Corporation Ltd. Vs. Sri Sriman Narayan and another : AIR 2002 SC 2598 to substantiate his contention. He has further pointed point out that when application under Section 17 of Arbitration Act was filed before respondent no.2 by Contractor, there was no statement of claim on record and hence the Arbitrator had no jurisdiction to take its cognizance. He has urged that there was no such statement of claim, aspects not covered by reference made to the Arbitrator are also looked into by him and orders have been passed in that respect. According to learned counsel, in agreement dated 23.7.2002 there is no scope for any interim measures and hence directions as issued are beyond the said agreement. Support is being taken from the case of M. D. Army Welfare Housing Organisation Vs. Sumangal Services Pvt. Ltd., AIR 2004 SC 1344 and BPL Limited Vs. Morgan Securities and Credits Pvt. Ltd and Ors. : 2008(1) Arb. LR 325 (Delhi).
16. Advocate Chhabra has relied upon various clauses in the agreement dated 23.7.2002 to urge that the agreement is terminable in nature and cannot be enforced. He has contended that reliance upon provisions of Section 41(e) of Specific Relief Act is in this background and cannot be said to be either erroneous or perverse. To substantiate his contention, he has relied upon AIR 2000 Delhi 450 : Rajasthan Breweries Limited Vs. Stroh Brewery Company, (1991)1 SCC 533 : Indian Oil Corporation Ltd. Vs. Amritsar Gas Service and others, (2007)6 SCC 798 : Arvind Constructions Co. (P) Ltd. Vs. Kalinga Mining Corporation and others.
17. He has invited attention to reply sent by Contractor to Nagpur Improvement Trust on 15th February, 2007 to urge that the said reply also highlights necessity to identify mutually agreeable modifications to the terms of agreement dated 23/7/2002. Reply filed by the Contractor in Writ Petition No.3473/2010 is also relied upon for said purpose. According to learned counsel, in such circumstances, there is no question of ordering any interim measures under Section 17 of Arbitration Act.
18. Lastly, learned counsel has pointed out that Contractor is defaulter as he has not honoured the payment schedule appended to the agreement. He has also pointed out that various orders passed in the matter require him to complete payment as per schedule and that payment has not been done. Attention has been invited to demand notices dated 7.12.2009 and 27.4.2010 to urge that in April, 2010 amount of Rs.3,77,50,000/- was outstanding and receivable from the Contractor.
19. In his brief reply, Senior Advocate has invited attention to Section 51 of Contract Act to show how reciprocal promises are required to be performed. He states that the consequential steps of issuing appropriate NOC to enable Contractor to raise funds have not been taken by Nagpur Improvement Trust and still, plea about Contractor being in arrears or being defaulter is being raised. After reiterating that in payment schedule for initial period of two years very less amount is made payable to Nagpur Improvement Trust, learned counsel also states that respondent no.2 Arbitrator has in his order dated 20th August 2008 again recognized, this position and has directed Nagpur Improvement Trust to issue NOC for lease purposes and for mortgage within 15 days of its orders. The direction to pay amount of Rs. One crore fifty lakhs is issued thereafter and time prescribed therefore is 45 days. Learned counsel thus argues that after realizing the scheme of the agreement, Arbitrator has also given period of 30 days to Contractor to raise that amount of Rs.One crore and fifty lakhs.
20. Attention has been invited to provisions of Section 21 of Arbitration Act to urge that arbitration proceedings commence on the date of service of notice for said purpose by Contractor upon Nagpur Improvement Trust. The proceedings thus commenced much earlier and the filing of application under Section 17 seeking interim measures is therefore within four corners of law. To show that the interim measures as ordered are covered by reference terms, the reference terms are again pointed out. It is urged that in notice issued by Contractor for this purpose on 17.4.2007 in paragraph 19 those terms are argued and last term is very wide as it includes any other dispute arising in facts and circumstances. Attention is also invited to orders of High Court dated 6th June, 2008 to show that Arbitrator has been appointed to decide the dispute by employing wide words like of subject matter. Contention is residuary clause of reference to arbitrator and order of the High Court are wide enough and objection that the interim measures are not covered by the subject matter of reference is, therefore, misconceived. The order passed by this Court on 4th November, 2009 in Writ Petition No.2744/99 is again point out with contention that said petition was filed by Contractor and remand order passed by this Court was to consider grievance made before it in Writ Petition. Learned Senior Advocate has contended that as interim order passed under Section 9 by Principal District Judge on 18th April, 2007 was not challenged by Nagpur Improvement Trust, direction not to interfere with or obstruct the construction activities of Contractor became final. On 21st April, 2009 appeal filed by Nagpur Improvement Trust was partly allowed by Principal District Judge but then that direction not to interfere or obstruct was maintained. This order dated 21st April, 2009 was not challenged by Nagpur Improvement Trust and hence direction to consider afresh issued by this Court on 4.11.2009 does not permit or re-open to scrutiny validity of that restraining order. According to learned counsel, Nagpur Improvement Trust has waived its rights to challenge that direction.
21. The inconsistent conduct on the part of Nagpur Improvement Trust is also pressed into service by pointing out that after quashing of multiplex part of project on 2.7.2003, Nagpur Improvement Trust called for revised plan from Contractor and granted approval to it on 5.2.2004 and thereafter on 14.7.2005. The construction activity was allowed to continue and there was no challenge to that interim direction issued under Section 9 or then after it was maintained in the appeal under Section 37(2) on 21.4.2009. Even arrears were worked out & demanded as per the agreement dated 23/7/2002. In view of this conduct, learned Advocate has contended that the present writ petition as filed is also not competent.
22. The agreement dated 23.7.2002 is again pressed into service to show that none of its clauses gives power to terminate to Nagpur Improvement Trust. It is further urged that Nagpur Improvement Trust never disclosed changes wanted by it in the agreement dated 23.7.2002 though it has sanctioned revised building plans submitted by Contractor on two occasions. The reply sent by Contractor on 15th February, 2007 is pointed out to show that Nagpur Improvement Trust has relied upon only part of it and it needs to be read in its entirety to understand the case of Contractor therein.
24. While considering the arguments advanced by both learned counsel, this Court cannot ignore the fact that main dispute referred to Arbitrator (respondent no.2) is still pending. The consideration is also circumscribed by terms of reference and the agreement dated 23.7.2002 between parties. The provisions of Section 17 are also material for this purpose.
"(I) Whether an agreement dated 23.7.2002 needs to be modified as is being insisted by Nagpur Improvement Trust because of the situation which has now arisen because of withdrawal of cinema theaters or whether for all practical purposes said agreement dated 23.7.2002 has been modified particularly because of sanction of revised maps or whether an agreement dated 23.7.2002 itself contained the stipulations which take care of change of situation as aforesaid.
(II) Whether we are not entitled to damages and what would be the quantum of damages on account of withdrawal of cinema from the project.
(III) Whether pending aforesaid issue or any other issue, Nagpur Improvement Trust has an authority under an agreement to ask us to stop the constructions activities and whether Nagpur Improvement Trust was justified in causing illegal obstructions, hindrances in the construction activities by us.
(IV) Any other disputes which arises in the facts and circumstances of the matter."
"17. Interim measures ordered by arbitral tribunal- (1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.
(2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1)."
The words "any interim measures or protection" used in its Sub-section (1) are important.
27. The background in which the dispute between parties arose or determination of party at fault is not relevant at this stage. The facts show that on 3.7.2003 it become clear to parties that multiplex (cinema theater) cannot be housed/constructed in said project. The provisions of agreement relevant in this respect are contained in clause 12.2. Said provision reads thus :
"In case of unforeseen and compelling circumstances of non issuance of letter of intent by the Government if it is not feasible to execute the project under this agreement, in that event the permissible user as per D. C. Rules for Nagpur city shall be allowed after sanction of revised building plans from NIT on the basic of mutually agree terms and condition."
28. The last part of Clause 12.2 obviously is "on the basis of mutually agreed terms and conditions". I have specifically heard learned Senior Advocate as also Advocate Chhabra about their interpretation of this clause in the light of clause 18.2 of the agreement. Both learned counsel have stated that mutually agreed terms and conditions contemplated in Clause 12.2 encompass the entire project. Learned Senior Advocate specifically stated that the payment schedule as envisaged in the agreement gets affected because of dropping of multiplex project. I am not recording any finding in this respect at this stage as I find that issue needs to be looked into by Arbitrator while finally deciding controversy. The correctness of demand of Contractor for damages because of dropping of said multiplex, his entitlement thereto in terms of agreement and also quantum or terms thereof are the matters which pertain to domain of final adjudication and no comments are necessary at this stage.
29. The application under Section 9 of Arbitration Act was required to be filed by Contractor because of communication dated 6th February, 2007 sent to him by Nagpur Improvement Trust. Nagpur Improvement Trust has stated therein that after deletion of multiplex from project, agreement dated 23.7.2002 needed modification as per clause 12.2 therein. The said modification was not done till then. In view of this position, it directed contractor to discontinue construction work forthwith. It is also urged that similar direction to discontinue the work was issued on 29th July, 2006. In his reply dated 15th February, 2007, Contractor has stated that communication dated 29.7.2006 was suitably replied by him on 29.8.2006. He has further stated that on 25.8.2003 Contractor had requested Nagpur Improvement Trust to take clear stand about withdrawal of multiplex from project and to consider it as commercial complex only. This communication was not replied to for very long time. Hence, on 17.11.2003 he informed Nagpur Improvement Trust that he was willing to honour the agreement by paying amount as stipulated therein but reserving his right to claim losses and damages occasioned by the situation obtained. It is further mentioned that on 18.11.2003 Contractor also submitted revised plan for being sanctioned. In this background, Contractor has stated that on 18th-19th November, 2003 it was communicated to Nagpur Improvement Trust that Contractor was agreeable to go ahead without proposal contained in communication dated 17.11.2003 and also were not aversed to any alternate proposal of Nagpur Improvement Trust by paying land value entirely. The land value to be determined at the time of floating of tender. It is urged that contractor also unequivocally showed preparedness to pay land value as assessed at that time and to undertake project independently as his own project, of course subject to his legal right to claim compensation for losses suffered. While concluding this communication, Contractor has mentioned that he was of considered opinion that matter was confined to identifying mutually agreed modifications to the terms of agreement which could be achieved if the parties sat across the table in right spirit with reasonable attitude. He has further stated that if still mutuality evaded the parties, arbitration clauses was available in agreement and Arbitrator would be competent to decide what should be reasonable modified form of the agreement. The executive feat to stop further construction is therefore stated to be unpalatable and illegal.
30. Writ Petition No.3473/2010 is filed by Nagpur Improvement Trust and in it Contractor has filed his reply. In that reply again the same stand has been reiterated. It is alleged that by dropping of multiplex part, the right of Contractor to carry out further construction is not affected. Later part of this reply deals with the grievance of Nagpur Improvement Trust about defaults.
31. The consideration above, therefore, clearly shows that need to modify agreement dated 23.7.2002 is felt both by Contractor as well as Nagpur Improvement Trust. It is admitted position that said modification and mutually agreeable terms and conditions in that respect are still not worked out by parties. In fact, first point of reference to Arbitrator is relating to this angle only. The question referred to is as to whether said agreement dated 23.7.2002 needs modification at all and in the alternative, it is also urged that for all practicable purposes said agreement dated 23.7.2002 has been modified particularly because of sanction of revised maps. Third alternative in this first point referred to is as to whether agreement dated 23.7.2002 itself takes care of such changes. In situation as aforesaid, as already observed above, these questions cannot be answered at this stage and it is for Arbitrator to consider and decide the same after giving necessary opportunity to rival parties.
32. Perusal of Clause 8.2 of the agreement dated 23.7.2002 shows that Contractor (referred to an agreement as entrepreneur) cannot create any third party interest in the complex without prior approval of Nagpur Improvement Trust. Lease agreements to be executed by him have need prior with approval of Nagpur Improvement Trust only. The lease and maintenance agreements are to be signed by all three parties i. e. Nagpur Improvement Trust, Contractor and prospective lessee. Perusal of clause 9.2.7 shows that after Contractor submitted bank guarantee worth Rs. two crores or completed ground floor, multiplex before creating any third party interest, Nagpur Improvement Trust has to give permission to execute lease agreement for commercial areas. As already noted above, multiplex now is out of picture and the Contractor is claiming damages for that deletion. Clause 15.1 which deals with Form of Financing again states that finance can be obtained from various sources and institutions mentioned therein with prior approval of Nagpur Improvement Trust, it stipulates that no third party interest be created on Nagpur Improvement Trust property without its prior sanction. The Contractor is permitted to raise finance by pledging the entire structure but then this is made subject to Contractor providing necessary financial and colateral securities equivalent to value of land to Nagpur Improvement Trust . Learned Senior Advocate has contended that word pledging used in clause 15.1 is misnomer and correct word is in fact "mortgagee". Respondent no.2 - Arbitrator has used the word mortgagee but then I do not find any adjudication by him in this respect. Again it is not necessary at this stage to comment upon the said argument either way.
33. The arrangement in the agreement clearly shows that third party interest either directly or indirectly can be created only with prior consent of Nagpur Improvement Trust. The multiplex part contemplated in Clause 9.2.7 is now not available. Both parties have urged that suitable modification to terms and conditions of the entire agreement dated 23.7.2002 is essential. In this circumstances, question as to whether the provisions of Clause 12.2 read with clause 18.1. in this respect can be ignored and interim measures as ordered are sustainable. Perusal of Section 17 reveals that Arbitrator can pass order asking party to take any interim measure of protection. The interim measure of protection contemplated therein therefore has to be a measure of protection i. e. with a view to preserve situation prevailing and to keep property available to answer final adjudication as and when final award is passed by the Arbitrator. The direction issued by Arbitrator to Nagpur Improvement Trust to issue necessary no objection certificate to Contractor to enable him to fulfill and honour commercial arrangements with the prospective purchasers or then to enable him to mortgage the project to obtain financial assistance are not interim measures contemplated in Section 17 of the Arbitration Act. These steps can not be viewed as interim measures of "protection". On the contrary, under the guise of those interim measures directions issued are to take steps to further specifically perform the alleged obligations of Nagpur Improvement Trust as per agreement dated 23.7.2002. Thus, on one hand, the parties are seeking modification in terms and conditions of agreement dated 23.7.2002 & are before Arbitrator for that purpose, & on the other hand Contractor is seeking specific enforcement thereof. The Arbitrator has to resolve that controversy on merits & without resolving it, the directions have been issued to take steps which in fact result in further execution of the agreement dated 23.7.2992. If no objection certificate as directed for is issued and lease with perspective customers or then a mortgage is allowed to take place, it is apparent that third party interests are created and situation becomes irreversible one. It can not be therefore to reversed at the stage of final adjudication by the Arbitrator without adversely affecting the third party interests resulting therefrom. Creation of such situation cannot be viewed as an interim measure at all. I, therefore, find that learned Principal District Judge has correctly appreciated, this situation though without referring to various clauses of the agreement or then without mentioning arguments advanced at length. It may also happen that after some time, the Contractor may not have any interest left in dispute before the Arbitrator. Directing Contractor to pay or continue to pay the amounts to Nagpur Improvement Trust as per schedule therefore not sufficient safeguard for Nagpur Improvement Trust as far as claim for damages is concerned. Question whether Contractor is or is not a defaulter, is also not very relevant & decisive at this stage.
35. I, therefore, do not find any substance in preliminary objection raised by learned Senior Advocate for Contractor on maintainability of Writ Petition No.2744/2009 filed by Nagpur Improvement Trust or about scope of challenge raised therein. Contractor was proceeding further with construction & dispute between parties was also going on. Effect of approval to revised building plans is also placed before Arbitrator for adjudication by the Contractor. Hence, mere effort made by the Nagpur Improvement Trust to recover amount in arrears as per agreement dated 23/7/2002 does not result in any waiver or relinquishment.
36. The contention that the agreement creates a right and interest in land in favour of the Contractor, that agreement is not terminable or then that Contractor is not a defaulter are not relevant for adjudication at interlocutory stage. I also do not find any substance in the argument that impugned order dated 29.3.2010 is replica of earlier order dated 21st April, 2009. Interim measures as ordered are found to be not covered by Section 17 of Arbitration Act. In the circumstances, the said interim measures as ordered by Arbitrator on 20th August, 2008 are hereby quashed and set aside. Needless to mention that as direction to execute lease deed of land as contained therein is not pressed into service by Contractor at this stage before this Court, the said direction is not set aside by this Court. However, it is made clear that Contractor has specifically disclosed before this Court that such direction can be issued and considered by the Arbitrator at the time of delivery of final award.
37. In this position, I find that interest of justice can be met with by directing the Arbitrator to decide the proceedings itself on merits as expeditiously as possible. Advocate Chhabra pointed out that Nagpur Improvement Trust has already initiated proceedings expressing lack of faith in Arbitrator & that application has been rejected. Nagpur Improvement Trust is free to take appropriate legal steps in the matter. But considering the huge investment by Contractor and also public interest and public revenue involved in the matter, the expeditious disposal of arbitration proceedings by Arbitrator is essential.
38. The Arbitrator shall attempt to decide the proceedings as early as possible and in any case within six months from the date of communication of this order to him. Needless to mention that this Court has only considered material necessary for adjudication of interlocutory issues and observations made are prima facie in nature and shall not influence the Arbitrator while considering the controversy finally.
39. In view of discussion above, application under Section 17 of the Arbitration Act by Contractor before Arbitrator is dismissed. The order passed by Principal District Judge on 29th March, 2010 are modified and M.C.A. No.319/2008 is allowed fully. With the result, Writ Petition No.1859/2010 is dismissed with no order as to costs and Writ Petition No.3473/2010 is allowed with no order as to costs.