Smt.Pramila G. Shah v. M/s.Dakshin Shelters Private Ltd.

Order

This application has been taken out by the applicants, who are 5 in number, under Section 11(5) of the Arbitration and Conciliation Act, 1996, (for short, ‘the Act’) seeking appointment of an arbitrator for adjudication of disputes relatable to Development Agreement-cum- General Power of Attorney, dated 07.02.2006.

2. The applicants are the owners and possessors of Ac.18.22 guntas comprising Survey Nos.169, 244(P), 245(P) and 264(P) at Vattinagulapalli Village, Rajendranagar Mandal, Ranga Reddy District. They executed a Development Agreement-cum-General Power of Attorney, dated 07.02.2006, in favour of M/s.Dakshin Shelters Pvt. Ltd.-the respondent. The time stipulated for development of the land in the agreement was six months, extendable by another six months. The respondent has to obtain exemption from the purview of G.O.No.111 from the Government. The applicants finding no possibility of the respondent getting exemption of the land from the purview of G.O.No.111, cancelled the Development Agreement-cum- General Power of Attorney, dated 07.02.2006, under a registered cancellation deed, bearing No.2578/08, dated 06.08.2008. The disputes between the parties in respect of the Development Agreement-cum-General Power of Attorney, dated 07.02.2006, are required to be settled by way of arbitration. The applicants issued a notice, dated 10.12.2010, invoking the arbitration clause and

nominating Sri Justice P.L.N.Sarma, a Retd. Judge of High Court of A.P., on their behalf and calling upon the respondent to nominate an arbitrator on its behalf. The respondent issued reply, dated

10.01.2011, contending in view of cancellation of Development Agreement-cum-General Power of Attorney, dated

07.02.2006, by the applicants themselves, question of invoking the arbitration clause in the said agreement does not arise. For better appreciation, I may refer relevant portion of the reply notice, which reads as hereunder: “It is not out of place to mention that after exchange of notices between both of us, you have resorted to execution of unilateral cancellation of the Development Agreement cum GPA by executing the Registered Cancellation Deed. Aggrieved by your unwarranted action, we were constrained to institute the suit bearing O.S.No.1003 of 2009 on the file of Hon’ble VIII Additional Senior Civil Judge, R.R. District at L.B.Nagar, seeking the relief of declaration that the cancellation deed is a null and void document and not binding on us. You are represented by your counsel in the said suit and necessary pleadings were set up in the said suit on your behalf. The said suit is pending adjudication before the said Hon’ble Court. Further it is stated that you have also sought the rejection of the Plaint by filing Interlocutory Application in the said suit on the grounds which are repeated in the notice under reply such as the invocation of Arbitration Clause among other grounds. After full fledged enquiry, the Hon’ble VIII Senior Civil Judge, R.R. Distrcit at L.B.Nagar, was pleased to dismiss the said application. Hence, you are estopped from raising the same question of law again as the subject matter is hit by the law of res judicata. Moreover, it is advised to us that since you have not raised the issue of Arbitration before filing the first statement in the suit proceedings, you are not entitled to raise the issue of invocation of Arbitration clause even in terms of the provisions of Arbitration and Conciliation Act, 1986.” Hence, this application by the applicants seeking the relief stated supra.

3. Notice to the respondent came to be issued on 30.04.2011. The respondent entered appearance through a counsel and filed counter- affidavit.

4. The execution of the Development Agreement-cum-General Power of Attorney, dated 07.02.2006, between the parties is not disputed. The action of the applicants in cancelling the Development Agreement-cum-General Power of Attorney, dated 07.02.2006, by a deed of cancellation, dated 06.08.2008, is assailed by the respondent by filing a civil suit being O.S.No.1003 of 2009 on the file of VIII Additional Senior Civil Judge, Ranga Reddy District, at L.B.Nagar. Therefore, the deed of cancellation is now subject matter of the civil suit being O.S.No.1003 of 2009. Unless the deed of cancellation is set aside or declared void, the applicants herein cannot claim that the Development Agreement-cum-General Power of Attorney, dated

07.02.2006, is still in force and that they can invoke the arbitration clause in the said agreement.

5. Heard Sri Mohmood Ali, learned counsel appearing for the applicants and Sri Deepak Bhattacharjee, learned counsel appearing for the respondent.

6. Sri Mohmood Ali, learned counsel appearing for the applicants contends that the Development Agreement-cum-General Power of Attorney, dated 07.02.2006, came to be cancelled because of the laches on the part of the respondent and the disputes between the parties consequent on cancellation of the Development Agreement- cum-General Power of Attorney, dated 07.02.2006, are required to be settled by way of arbitration as per Clause 25 of the Development Agreement-cum-General Power of Attorney, dated 07.02.2006. Learned counsel laid much emphasis on Clause 25 of Development Agreement-cum-General Power of Attorney, dated

07.02.2006, which reads as hereunder: “25.Arbitration : relating this Agreement or 2 5 . 1 : Tribunal: Disputes interpretation shall be referred to the arbitration of an arbitral tribunal, consisting of three arbitrators (Tribunal), one each to be appointed by the Parties hereto and the third to be appointed by the two arbitrators so appointed. The award of the Tribunal shall be final and binding on the Parties. The arbitration proceedings will be held only in Secunderabad and the courts situated in the Ranga Reddy District alone shall have the territorial jurisdiction to entertain the dispute. The provisions of Arbitration and Conciliation Act shall comply to the arbitration procedures.

25.2: Powers of Tribunal: The Tribunal shall be at liberty to (1) proceed summarily (2) avoid all rules, procedures and/or evidences that can be lawfully avoided by the mutual consent and/or directions by the Parties and (3) award damages along with the final award against the Party not complying with any interim award or order passed by the Tribunal. The Tribunal shall: (a) Make the award in English and within four months from the date of appointment with the right to give extension of not more than one month at a time on emergent grounds but the total extensions shall not be more than four months. (b) Conduct the proceedings from day-to-day and for about 5 hours per day save for initial sittings. (c) Not grant to either of the Parties any extension of time and/or adjournment except on grounds beyond their control and only for such periods as be of the absolute minimum. (d) The Tribunal shall be entitled to pass interim award granting interim relief to the parties.

25.3 Mechanism And Procedure: The procedure to be followed shall be decided by the Tribunal. The directions/award of the Tribunal shall be final and binding on the Parties.”

7. Sri Deepak Bhattacharjee, learned counsel appearing for the respondent submits that it is the applicants who cancelled the Development Agreement-cum-General Power of Attorney, dated

07.02.2006, by executing a cancellation deed and the said cancellation deed is the subject matter of the civil suit and as the civil Court is ceased of the matter, question of appointing the arbitrator does not arise. It is also contended by the learned counsel that the suit filed by the respondent to declare the deed of cancellation is pending on the file of VIII Additional Senior Civil Judge, Ranga Reddy District, at L.B.Nagar, as O.S.No.1003 of 2009, and unless and until the Development Agreement-cum-General Power of Attorney, dated

07.02.2006 is revived, no clause therein can be given effect.

8. Execution of the Development Agreement-cum-General Power of Attorney, dated 07.02.2006, between the parties is not in dispute. It is the contention of the applicants that the said Development Agreement-cum-General Power of Attorney, dated 07.02.2006, came to be cancelled because of the laches on the part of the respondent. Be that as it may, disputes have arisen between the parties relatable to the Development Agreement-cum-General Power of Attorney, dated

07.02.2006. The said disputes are required to be resolved as per Clause 25 of the Development Agreement-cum-General Power of Attorney, dated 07.02.2006, by way of arbitration. The composition of the Tribunal also has been indicated in the said Clause. The applicants nominated Sri Justice P.L.N.Sarma, a Retd. Judge of High Court of A.P., as an arbitrator on their behalf. Since the respondent failed to nominate its arbitrator, despite notice dated 10.12.2010, the applicants have moved this application.

9. It is well settled that merely because the contract has come to an end by its termination due to breach, the arbitration clause does not perish nor is rendered inoperative, rather it survives for resolution of disputes arising ‘in respect of’ or ‘with regard to’ or ‘under’ the contract - vide the decision of the Supreme Court in Branch Manager, Magma Finance and Leasing Limited and Ors. v. P. Madhavi Latha & Anr. [(2009) 10 SCC 103].

10. Though the applicants is stated to have cancelled the Development Agreement-cum-General Power of Attorney, dated

07.02.2006, the arbitration clause therein still subsists to the extent of resolution of disputes between the parties. Hence, I find that the application deserves to be allowed.

11. Accordingly, the Arbitration Application is allowed. Sri D.V.Seetharama Murthy, Senior Advocate, R/o.8-2-693/PC/7, Mithila Nagar, Road No.12, Kaman, Banjara Hills, Hyderabad, is appointed as an arbitrator on behalf of the respondent for adjudication of disputes relatable to the Development Agreement-cum-General Power of Attorney, dated 07.02.2006. The arbitrator nominated by the applicants and the arbitrator appointed by this Court are required to appoint the third arbitrator before entering into reference. The arbitrator is at liberty to fix his own fee. No order as to costs. ______________________ B.SESHASAYANA REDDY, J. Date:09th September, 2011. THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.42 of 2011 Date:09th September, 2011