1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.619 OF 2008 Acme Housing India Private Limited ....Petitioner. V/s Madhukanta Dayalal Acharya & Ors. ..... Respondents. Mr. D.d. Madon, Sr. Counsel with Mr. H.N. Thakore with Mr. Rizvi Naser Ali i/b Thakore Jariwala & Associates for petitioner. Mr. Shekhar Shetye i/b K.R. Kompani for defendant Nos. 1 to 4. Mr. Meenaz Merchant for defendant No.5. CORAM: V.M. KANADE, J. DATE : 18TH AUGUST, 2009 P.C.: 1. Heard the learned Senior Counsel appearing on behalf of petitioners and the learned Counsel appearing on behalf of respondents. 2. This arbitration petition has been filed by petitioners under section 9 of the Arbitration & Conciliation Act, 1996 2 seeking the following reliefs:- “a) That mandatory orders be passed against the original Respondent Nos. 5 and 6 directing them to produce before this Hon’ble Court copy of the Agreement dated 29 th December 2005 signed between the Petitioners and Respondent Nos. 1 to 4 with appropriate directions that the same be made available to the Petitioners and also to Respondent Nos. 1 to 4 if so desired; b) That pending the hearing and final disposal of the present Petition and until such time that Arbitral Tribunal constituted and/or until such time that the Award is passed and/or until such time that the Award becomes a decree and executable in this Hon’ble Court, the Respondent Nos. 1 to 4 by themselves their servants and agents be restrained by an order and injunction of this Hon’ble Court from in any manner. 3 i. Committing breach of the Agreement dated 29 th December 2005; ii. Doing any act or thing inconsistent with the Petitioner’s rights under the Agreement dated 29 th December 2005; iii. Alienating and/or encumbering and/or disposing off and/or creating any third party rights and/or parting with possession of and/or entering into any Agreement for Sale with any third party in respect of the said property described in Exhibit ‘A-1’ and ‘A-2’ hereto, which is the subject matter of the Agreement dated 29 th December, 2005; c) that appropriate direction be passed against original Respondent No.5 to furnish details to both parties viz the Petitioner and Respondent No.1 of the account deposited with him in escrow under Agreement dated 29 th December 2005 and all accretion thereto. d) For Interim and ad-interim reliefs in 4 terms of prayer (a) and (b) above; e) Costs of this Petition be provided for and f) For such further and other reliefs as this Hon’ble Court may deem fit and proper.” 3. There was an understanding between the parties that status quo in respect of suit properties would be maintained. Thereafter, respondents herein informed the petitioners by letter dated 21/4/2009 that the understanding entered into by and between them should be treated as withdrawn. Interim order of status quo, however, was continued by this court by an order dated 22/7/2009. 4. Brief facts are that the petitioners are developers and respondent Nos. 1 to 4 are owners of the property in question and original respondent Nos. 5 and 6 are practicing advocates and solicitors and were holding documents executed between petitioners and respondent Nos. 1 to 4 in escrow. It is the case of petitioners that by an agreement dated 29/12/2005, respondent Nos. 1 to 4 agreed to sell the property to petitioners for consideration and upon terms and conditions contained 5 therein. The said agreement was signed in the presence of both advocates and solicitors and kept in escrow with original respondent Nos. 5 and 6. It is the case of petitioners herein that the said agreement was kept in escrow at the instance of respondent Nos. 1 to 4 since they were reluctant to open documents because of rivalry and competition in the market. According to petitioners, an obligations were cast on the respondents viz (i) to remove all illegal occupants and encroachers on the property and (ii) to make out clear and marketable title of the said property and seek permission from Government and Semi-Government Departments. However, in spite of this, the said obligations were not fulfilled by respondent Nos. 1 to 4. According to petitioners, there is an arbitration clause in the said agreement that in the event of dispute between the parties, matter should be resolved by arbitration and original respondent Nos. 5 and 6 should act as arbitrators in accordance with the said Act. It is the case of petitioners that they have paid total sum of Rs 55 lakhs to respondents and out of the said amount, an amount of Rs 30 lakhs has been paid to respondent Nos. 1 to 4 and an amount of Rs 25 lakhs has been deposited with the advocate of respondent Nos. 1 to 4. Since respondent Nos. 1 to 4 did not discharge their obligations and they were not co-operating in discharging their 6 obligations under the said agreement, petitioners sent an e-mail dated 13/7/2007 to original respondent No.6. However, original respondent No.6 by his letter dated 25/7/2007 informed the petitioners that the said document was in escrow and he could not assist the petitioners. Petitioners, therefore, by letter dated 31/8/2007 called upon respondent Nos. 1 to 4 to discharge their obligations and also invoked the arbitration clause and placed on record their willingness to refer the matter to arbitration of original respondent Nos. 5 and 6. Petitioners also by their letter dated 18/9/2007 called upon original respondent Nos. 5 and 6 to act as arbitrators and to convene a preliminary meeting for commencement of arbitration proceedings. However, no steps were taken by original respondent Nos. 5 and 6. Petitioners, therefore, have filed this Petition under section 9 of the said Act. 5. Mr. Madon the learned Senior Counsel appearing on behalf of petitioners submitted that so far as prayer clause (a) is concerned, the agreement which was in escrow has been tendered by original respondent No.6 in this court in a sealed envelope. He submitted that, therefore, this Court should permit both parties to take copies of the said agreement. Mr. Shetye, the learned Counsel appearing on behalf of respondent 7 Nos. 1 to 4 took a strong objection to the said prayer. He submitted that since the present Petition was filed under section 9 of the said Act, this Court could not give a direction to that effect since only directions in the form of interim reliefs could be passed in a Petition which is filed under section 9. Mr. Madon, the learned Senior Counsel appearing on behalf of petitioners, therefore, submitted that he would take out an appropriate application before the arbitral tribunal and he would not press for second part of the relief claimed in prayer clause (a) viz. of giving copies of the agreement to the respective parties but would make that request before the appropriate forum. He, however, submitted that the agreement which was tendered in a sealed envelope by original respondent No.6 may be retained by this Court subject to further orders that may be passed by the appropriate authority. 6. In my view, since the second part of the relief claimed in prayer clause (a) is not pressed by the Counsel for petitioners, the agreement which is tendered by original respondent No.6 may be retained by Office in a sealed envelope and the said envelope may be handed over to the arbitral tribunal upon orders being passed by the appropriate authority on the appropriate application being filed by petitioners herein. 8 7. Mr. Madon, the learned Senior Counsel appearing on behalf of petitioners then submitted that though the said document was put in escrow, upon conditions being fulfilled it was open for the parties to seek interim relief pending reference of the dispute to arbitral tribunal. He invited my attention to the judgment of the learned Single Judge in the case of Jewel Touch (India) Pvt. Ltd. vs. Naheed Hafeez Quraishi (Patrawala) reported in 2008(3) Mh.L.J. 54. He submitted that since the agreement was put in escrow at the instance of respondent Nos. 1 to 4 and there was no written condition precedent which had to be complied with and there was no dispute about existence of the arbitration agreement, petitioners have right to apply for interim reliefs pending reference of dispute to the arbitral tribunal. 8. Mr. Shetye, the learned Counsel appearing on behalf of respondents, on the other hand, submitted that no case was made out for grant of interim relief. He submitted that there was no agreement and there was only understanding and the conditions which were imposed and agreed between the parties had not been complied with by petitioners herein. He submitted that following conditions were to be fulfilled before the 9 document in escrow could be released:- a) The survey of the suit property was done. b) The boundaries marked. c) The title of the suit property was duly certified by respondents’ advocates. d) All encumbrances on the suit property were removed and/or settled. e) Several material terms and conditions including the price of the property, the instalments in which the said price was to be paid were agreed upon between the Petitioners and the respondents. He submitted that there was gross delay in filing this Petition under section 9 and, therefore, on that ground also petitioners are not entitled to get any reliefs under section 9 of the said Act. He relied upon the judgment of the Apex Court in Firm Ashok Traders and Anr. vs. Gurumukh Das Saluja and Ors reported in (2004) 3 SCC 155. He submitted that after August 2007, there 10 was no correspondence for more than a year and that two years had passed after invocation of arbitration clause by petitioners herein. He then submitted that since the agreement was put in escrow as long as the said agreement was released from escrow no agreement was in existence and, therefore, there was no question of referring the dispute to arbitral tribunal. In support of the said submissions, he relied upon the judgment of the learned Single Judge of this Court in Parasmal M. Lodha vs. Ranganath Somani & Ors reported in 2008(4) Bom. C.R. 211. He also relied upon the judgments of the Apex Court in Bhatia International vs. Bulk Trading S.A and Anr reported in (2002) 4 SCC 105 and in Siddhivinayak Realities (P) Ltd. vs. Tulip Hospitality Services Ltd and Others, reported in (2007) 4 SCC 612. He also relied upon the judgment of the Apex Court in Ranjit Thakur vs. Union of India and Others reported in (1987) 4 SCC 611 in support of the submission that one of the arbitrators viz. respondent No.6 was bias since he had tendered the agreement which was put in escrow before this Court. He also relied upon the judgment of the learned Single Judge of this Court in Anil Constructions, Aurangabad vs. Vidarbha Irrigation, Amravati and another reported in 2000(1) 11 Mh.L.J. 838. He submitted that there was clear case of bias on the part of original respondent No.6 since he had withdrawn his appearance and, secondly, he had submitted the agreement which was in escrow to this Court. He invited my attention to the order passed by this Court dated 6/3/2009 which had recorded this fact. 9. Mr. Madon, the learned Senior Counsel appearing on behalf of petitioners, on the other hand, in rejoinder, submitted that it could not be said that original respondent No.6 was bias, firstly because he had tendered the agreement in court in a sealed envelope and, secondly, he had withdrawn his appearance from the arbitration. He submitted that the said conduct of original respondent No.6 was a conduct which could be undertaken by any self-respected person. He, however, submitted that so far as original respondent No.5 was concerned, he had assisted respondent Nos. 1 to 4 and the learned Senior Counsel appearing on behalf of the petitioners further submitted that the appropriate application would be filed by them under section 12 of the said Act. 10. In the present case, there is no dispute that there is an arbitration clause in the agreement which was put in escrow. 12 The said agreement now has been filed in this Court. There is some dispute between the parties as to whether an order and direction was given by this Court to original respondent No.6 to tender the said agreement or whether it was tendered voluntarily by original respondent No.6 in this court. Be that as it may, the fact remains that the agreement now has been tendered in a sealed envelope in this court. The agreement, therefore, has now been released from escrow. Further, it is an admitted position that no conditions were imposed for release of the said document from escrow nor any escrow agent was appointed for the purpose of determining whether the conditions which were imposed for fulfilling the obligations by either parties had been complied with or not. In the absence of any written condition for releasing the document from escrow and in the absence of escrow agent being appointed for the purpose of determination of this aspect and since the said document has now been produced in this Court, the question whether conditions were imposed or not has become an academic issue. The arbitral tribunal, after it is constituted, would determine whether the said document should be released or not and pass further appropriate orders in respect of the objections raised by either parties. Under these circumstances, in my view, it is not necessary to refer to judgments on which reliance is placed by 13 the learned Counsel for petitioners and respondents since the ratio of the said judgments would not apply to the facts of the present case. I have referred only to those judgments which are necessary to determine the issue in this petition. 11. The short question, therefore, which has to be decided is: whether the petitioners are entitled to claim relief as prayed by them under section 9 of the said Act? Though it was vehemently argued by Mr. Shetye the learned Counsel appearing on behalf of respondent Nos. 1 to 4 that there was gross delay in filing this Petition and therefore petitioners are not entitled to claim these reliefs and secondly they are also not entitled to claim these reliefs because they had not taken any steps after petition was filed and order of status quo was passed by this Court in March, 2009 to appoint arbitrator, in my view the said submission cannot be accepted. In the present case, petitioners first sent an e-mail dated 13/7/2007 asking the original respondent No.6 to deliver the agreement which was kept in escrow. However, the original respondent No.6 informed the petitioners by letter dated 25/7/2007 that since the agreement was put in escrow, he was not in a position to hand over copy of the said agreement. Petitioners, therefore, by letter dated 31 st August 2007 invoked the arbitration clause and wrote 14 letters to both the arbitrators to commence the arbitration proceedings. Thereafter, however, there was no response either from respondent Nos. 1 to 4 or the arbitrators – original respondent Nos. 5 and 6 and, therefore, petitioners were constrained to file this Petition. Petitioners, therefore, having invoked the arbitration clause and after having asked the arbitrators who were named in the agreement viz original respondent Nos. 5 and 6 to commence arbitration proceedings in view of provisions of section 21 of the said Act, the arbitration proceedings had commenced at the instance of the petitioners herein. However, there was no response from respondent Nos. 1 to 4 or original respondent Nos. 5 and 6. It cannot be, therefore, said that there was delay on the part of petitioners herein in filing the Petition under section 9. An order of status quo was passed in March 2009 in view of the understanding which was reached between the parties. Thereafter, the matter was kept for hearing and final disposal and appeared on board from time to time. During this period also, parties were exploring the possibility of settlement. It, therefore, cannot be said that the petitioners were not vigilant in pursuing their remedy under section 9 of the said Act. The Apex Court in the case of Firm Ashok Traders and anr (supra) has essentially stated that the person who obtains an interim 15 relief under section 9 and, thereafter, does not take steps for the purpose of commencing arbitral proceedings, is not entitled for continuation of the said relief. The ratio of the said judgment, in my view, will not apply to the facts of the present case for the reasons indicated by me hereinabove. Under the circumstances, submissions made by the learned Counsel appearing on behalf of respondent Nos. 1 to 4 cannot be accepted. 12. Accordingly, interim order is passed in terms of prayer clause b)iii of the petition. So far as prayer clause (a) is concerned, petitioners may take out an appropriate application before the appropriate forum. Copy of the agreement dated 29/12/2005 which is deposited by original respondent No.6 to be retained by the Office until further orders are passed by the appropriate court. Petition is disposed of. 13. Counsel for petitioners makes a statement that petitioners are agreeable to go for arbitration before retired judge of this court as a sole arbitrator. 14. Stand over for one week for directions. (V.M. KANADE, J.) 16