Peptech Housing Private Limited vs Sanjay Kumar Agrawal & Others

Subobh Abhyankar, J

The instant application has been filed under Section 11(6) of Arbitration and Conciliation Act, 1996 (for short “Act, 1996â€) by the applicant for

appointment of an arbitrator to adjudicate the dispute between the parties arising out of an agreement titled as Memorandum of Understanding (for

short “MOUâ€​) executed by and between the parties on 21.03.2007.

Shorn of details, the facts of the case are that the applicant herein is a company registered under the provisions of the Companies Act, 1956 and is

engaged in the business of construction and development of residential townships whereas the respondents are the landowners having their land ad-

measuring 26.52 acres situated at Village Chakbandi, Halka No.96, Circle Raigaon, Tahsil Reghurajnagar, District Satna, Madhya Pradesh. According

to the applicant, the respondents desired to develop a township project on the said land but as they did not possess the enough technical knowhow and

resources to implement the project, they approached the applicant for the development of the same, hence a MOU was executed by and between the

parties on 21.03.2007 on the terms and conditions contained therein for a period of six years with a provision for extension, if required. The aforesaid

MOU was also got registered in the office of Registrar Satna.

It is not disputed that the land owners had also executed a Registered General Power of Attorney (GPA) dated 21.03.2007 in favour of the

applicant in order to enable the applicant authorizing it to carry on all legal, administrative, technical, marketing and advertising matters related with the

development and construction of the township. As per Clause 5 of the MOU, the parties also agreed that the respondent/land owners will be entitled

to 32% of the total sales value of land and building whereas the applicant/developer will be entitled to 68% of the said sales revenue.As per Clause 6

of the MOU as well as Clause 4 of the GPA, it was agreed between the parties that while execution of the sale deed of land in favour of the buyer of

plot/house in the township, the applicant/developer will also sign the sale deed as a consenting party to the sale transaction.

The further case of the applicant is that it has already invested more than Rs.55 crores towards implementation of the project including material,

labour, construction and development cost, financing cost, administration, sales & marketing expenses etc. Applicant also invested a capital of Rs.2.39

crores in the form of equity shares, share premium and share application money and also availed a loan facility of Rs.6.80 crores from the State Bank

of India for the execution of the said project which was secured by stocks and fixed assets of the applicant and its guarantors. It is further the case of

the applicant the project was successfully completed by the applicant and a completion certified for the township was also issued by the Village

Panchayat Babupur, Tahsil Raghurajnagar on 12.10.2009. Pursuant to which by way of sales consideration the applicant has also paid a sum of

Rs.17.23 crores to the respondents during the financial years 2007-08 to 2014-15 against their share. According to the applicant, it had also received

booking advances from prospective buyers but the respondents/land owners never showed any interest or actively contributed in any activity

pertaining to sale, advertising, planning etc. of the project. However, on 30.06.2014 the MOU was extended by mutual consent of the parties. It is

further the case of the applicant that the respondents kept assuring the applicant upon its repeated demands to settle their accounts that the same shall

be done at the earliest, however, the respondents never had any intention to settle the applicant's dues and it was only a delay tactics on the part of the

respondents. It is further submitted that in the month of June, 2016 the applicant came to know that the land owners had been selling the open land

plots behind the back of the applicant and without seeking its consent. The respondents also received directly the sale consideration without informing

or disclosing the same to the applicant even while the registered MOU was still in force. Such sale deed dated 07.08.2016 has also been placed on

record by the applicant as Annexure A/7. Subsequently, the applicant again came to know that on 22.10.2018 and 22.11.2018 also certain sale deeds

have been executed by the respondents without the consent of the applicant. Similarly, in the year 2019 also three sale deeds have been executed by

the respondents without the applicant’s consent for which the applicant also filed a written objection in the office of the Registrar, Satna on

15.04.2019. The sale deeds executed in the year 2019 have also been placed on record by the applicant.

According to the applicant, since the dispute had arisen between the parties relating to the sales consideration and violation of the conditions/clauses

of MOU, hence an application under Section 9 of the Act, 1996 was filed by the applicant in the Court of District Judge, Satna which was registered

as MJC AV No.850/2019. The aforesaid application was partly allowed by the learned Judge vide its order dated 21.06.2019. In the meanwhile,

pending the aforesaid application, , the applicant also invoked the arbitration clause and got a notice dated 20.5.2019 issued to the respondents for

appointment of Arbitrator under Clause 20 of the MOU dated 21.3.2007. According to the applicant, the aforesaid notice was received by the

respondents on 28.5.2019 but no response to the aforesaid notice was received by the applicant from the respondents, hence after expiry of 30 days

from 28.5.2019 i.e. the date of delivery of notice on the respondents, the present application under Section 11(6) of the Act, 1996 has been filed by the

applicant for appointment of an arbitrator to adjudicate the dispute between the parties. Shri Verma,in support of his contention, has relied upon the

judgments of the Hon’ble Apex Court in the case of Duro Felguera, SA Vs. Gangavaram Port Limited, reported in (2017) 9 SCC 729 and in the

case of Mayavati Trading Pvt. Ltd. Vs. Pradyuat Deb Burman, reported in (2019) 8 SCC 714.

Today nobody has appeared on behalf of the respondents and since this Court vide order dated 23.11.2020 had already made it clear that no further

adjournment shall be granted and the matter shall be heard finally on the next date of hearing, the present application is heard in the absence of the

counsel for the respondents.

This Court also finds that the respondents have also filed their response to the present application for appointment of the arbitrator. arned counsel

for the applicant has in support of his contention has relied upon the judgments of the Hon’ble Apex Court in the case of Duro Felguera, SA Vs.

Gangavaram Port Limited, reported in (2017) 9 SCC 729 and in the case of Mayavati Trading Pvt. Ltd. Vs. Pradyuat Deb Burman, reported in (2019)

8 SCC 714.According to the respondents, admittedly the agreement was valid upto the period of 30.6.2014 and it was never extended thereafter by

either of the parties to the agreement and thus as the same has came to an end, it has lost its efficacy and is not binding on either of the parties and if

any monitory claim was to be made by either of the parties, it was to be made within the period of three years from the expiry of the agreement. It is

further stated that the original agreement on the basis of which the arbitration clause is being invoked is no more in existence and has lapsed, and since

the agreement itself has come to an end, the arbitration clause contained therein cannot be invoked for appointment of the arbitrator. It is further

stated that as per the Article 137 of the Limitation Act, 1963, the limitation period prescribed for money suit is three years and since the application

has been filed after a period of more than six years and no reasons have been disclosed in the application explaining the inordinate delay in filing the

present application even after amendment made in the year 2015, the Limitation Act will be applicable in the process of appointment of arbitrator.

In the return the respondents have also relied upon the decision of the Bombay High Court in the case of Deepdarshan Builders Pvt. Ltd. Vs. Saroj,

decided on 22.11.2018 in Commercial Arbitration Application No.107/2018, wherein it has been held that the Limitation Act is applicable in the

process of appointment of Arbitrator under Section 11(6) of the Act, 1996. The decisions of the Supreme Court rendered in the case of United India

Insurance Co. Ltd. Vs. Antique Art Exports Pvt. Ltd., reported in AIR 2019 SC 3137and in the case of M/s SBP & Co. Vs. M/s Patel Engineering

Ltd. and another, reported in AIR 2006 SC 450 have also been cited to submit that if the agreement is barred by time then it cannot be used for the

purpose of appointment of the arbitrator.

In rebuttal, Shri Shashank Verma, learned counsel for the applicant has submitted that so far as the objection regarding limitation is concerned, the

same is not applicable in the present case, as according to the various clauses contained in the MOU, the applicant has a continuing the cause of

action, as no time limit is provided to sell the developed plots and the time limit of six years provided in Clause 12 of the MOU is only in respect of

development of township. Shri Verma, while relying upon the two decisions of the Hon’ble Supreme Court in the case of United India Insurance

Co. Ltd. (supra) and in the case of M/s SBP & Co. (supra) has submitted that otherwise also as per the provisions of Section 11(6-A) of the Act,

1996, the only issue which is to be decided while appointing an arbitrator is the existence of arbitrator clause and since in the present case it is not

disputed that the arbitration clause exists between the parties this Court may appoint an arbitrator.

So far as the judgment of the Bombay High Court in the case of Deepdharshan Builders Pvt. Ltd. (supra) relied upon and filed along with the

reply, Shri Verma has submitted that the same is not applicable in the present case as there is no delay on the part of the applicant. It is further

submitted that in the said case before the Bombay High court, the application under Section 11 of the Act, 1996 was filed after almost five years of

issuance of notice invoking the arbitration and in these circumstances the Bombay High Court has held that the limitation would apply but in that case

also the delay was condoned and an arbitrator was appointed.

Heard Shri Shashank Verma, learned counsel for the applicant and perused the record as also the reply filed by the respondents.

From the record, it is apparent that the original MOU was executed between the parties on 21.3.2007, which was further extended by the parties

vide their memorandum dated 4.6.2013 whereby the life of the MOU was extended for a further period of one year up to 30.6.2014. A perusal of the

subsequent agreement extending the earlier MOU clearly reveals that in the aforesaid subsequent agreement the terms and conditions of the original

agreement have not been disturbed and being kept as it is. Thus it cannot be said that the original MOU has come to an end after execution of the

subsequent agreement between the parties extending the period of the project work relating to its development of the land.

Regarding the objection of the limitation which has been raised by the respondents in their reply that even the extended agreement came to an end

on 30.6.2014 and the application for appointment of an arbitrator has been filed after a period of three years, the aforesaid objection is liable to be

rejected on the ground that the original MOU and the subsequent agreement which contained the time limit of six years was in respect of the

development of the project and not for the sale of the developed plots/flats as contended by the learned counsel for the applicant and as alleged, even

in the year 2019 the respondents have sold the lands/ plots to third party without obtaining consent from the applicant, this Court is of the considered

opinion that the cause of action in respect of the sale of the aforesaid property sold by the respondents gives a continuous cause of action to the

applicant. The judgments cited by the respondents in their reply are not applicable in the facts and circumstances of the case, as this Court has found

that the application filed by the applicant is well within limitation from the date of cause of action which is continuous.

As a result, the present application stands allowed and Shri P.P. Naolekar, 1184 Naolekar Compound, Wright Town, Jabalpur is appointed as

provisional arbitrator to resolve the dispute between the parties. The Registry of this Court shall seek consent/ declaration from the learned provisional

arbitrator as per sub-section (8) of Section 11 of the Arbitration and Conciliation Act, 1996 and place the matter before this Court on next date of

hearing.

List the case on 10.02.2021.