THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.102 of 2010 Date:13th July, 2011 Between: M/s.Prime Estate Developers and Buildings Pvt. Ltd. through its Managing Director, 1-2-217/3/A/2, Domalguda, Hyderabad – 29. …Applicant And 1. S.Bal Reddy & Ors. …Respondents *** THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.102 of 2010 ORDER: This Arbitration Application has been taken out by the applicant under sub-sections (4) and (6) of Section 11 of the Arbitration and Conciliation Act, 1996, (for short, ‘the Act’) r/w. Scheme for Appointment of Arbitrators, 1996, seeking appointment of an arbitrator for resolution of the disputes between the applicant and the respondents relatable to the development agreement-cum-general power of attorney, dated 03.12.2007. 2. The respondents and one S.Malla Reddy are owners of the land admeasuring Ac.2.2½ guntas comprising Survey Nos.178/AA, 179/AA, 180/AA, 181/AA, 182/AA situate at Upparpalli village, Rajendranagar Mandal, Chevella Revenue Division, Ranga Reddy District. S.Malla Reddy and 5th respondent-Ms.S.Soujanya Reddy entered into development agreement-cum-general power of attorney, with applicant company-M/s. Prime Estate Developers and Builders Private Limited. The respondents 1 to 5, S.Malla Reddy and the applicant figured as signatories to the development agreement-cum-general power of attorney, dated 03.12.2007. As per the terms of the development agreement-cum-general power of attorney, dated 03.12.2007, the applicant/builder shall obtain the construction permission from the GHMC/HUDA within a period of 8 months from the date of execution of the development agreement-cum-general power of attorney, and in the event of the builder failing to secure necessary permission within 8 months, the agreement stands canceled automatically without issuing any notice. It is the contention of the applicant that S.Malla Reddy promised to obtain either relinquishment deed from Smt.Sobha or to make her to a party to the development agreement-cum-general power of attorney by executing a fresh development agreement. However, S.Malla Reddy failed to secure the relinquishment deed from Smt.Sobha during his life time and he died on 25.09.2008. Various amounts have been paid to the respondents by way of cheques. The particulars of the amounts paid to the respondents have been detailed in para.9 of the affidavit filed in support of the application. Since, the respondents failed to secure relinquishment deed from Smt.Sobha, the applicant terminated the development agreement-cum-general power of attorney, dated 03.12.2007, and issued a notice, dated 15.04.2010, proposing the name of Sri Justice A.Gopal Rao, Retd. Judge of this High Court, as arbitrator for resolution of the disputes. There seems to be no reply by the respondents. Hence, this Arbitration Application seeking the prayer stated supra. For completion of narration of facts, I deem it appropriate to refer paras.11 and 12 of the affidavit filed in support of the application, which are thus: “11. The petitioner submits that at the time of receiving additional amounts of Rs.40.00 lakhs, all the respondents had promised to execute fresh development agreement-cum-GPA along with daughter of late S.Malla Reddy within a week. As aforesaid, the petitioner believing that necessary documents would be executed in time so as to enable them to proceed with the project at the earliest, paid additional amount of Rs.40.00 Lakhs. The petitioner submits because of the delay in executing a fresh document of Development agreement cum GPA along with the legal heir of late S.Malla Reddy, the petitioner had sustained huge loss both in form of loosing interest and because of idling of the resources for more than 8 to 9 months. Even though the petitioner sustained loss, they wanted to complete the project at the earliest and therefore, they were requesting the respondents to execute a fresh development agreement cum GPA along with other legal heirs of late S.Malla Reddy. 12. In view of the breach, fraud and cheating committed by the respondents, the petitioner were no longer interested in continuing with the project and they wanted to put an end to the development agreement cum G.P.A. dt.03.12.2007. The directors of the petitioner approached the respondents on 20.12.2009 and informed them that they are no longer interested in the project because of the breach committed by the respondents and after discussions the parties decided to put an end to the development agreement cum GPA dt.03.12.2007. After putting an end to the development agreement cum GPA, dt.3.12.2007, on 20.12.2009, the respondents informed that they would return the refundable security deposit of Rs.1.02 Cr. to the petitioner within a period of 2 months. The petitioner submits that they believed the assurances and promises of the respondents about the refund of the amount in 2 months and they were waiting to get the refund from the respondents.” 3. Notice to the respondent came to be ordered on 10.08.2010. The respondents filed counter-affidavit. 4. The 2nd respondent has sworn to the counter-affidavit filed on behalf of the respondents. It is stated in the counter-affidavit that the applicant Company committed various breaches of the terms of the development agreement-cum-general power of attorney, and failed to secure the necessary permission from the concerned authorities within the stipulated time and consequently, the development agreement- cum-general power of attorney, stood cancelled. Once the agreement is cancelled, the applicant Company is not entitled to take shelter under Clause 36 of the development agreement-cum-general power of attorney, for adjudication of the disputes that have arisen between the parties in respect of the development agreement-cum-general power of attorney. The respondents also filed additional counter-affidavit after obtaining permission from this Court on this day as per order passed in Application No.551 of 2011. It is stated in the additional counter- affidavit that the respondents in order to prove their bona fides are prepared to obtain relinquishment deed from Smt.Sobha, who is stated to be one of the legal heirs of S.Malla Reddy. 5. Heard learned counsel appearing for the applicant and learned counsel appearing for the respondents. 6. Learned counsel appearing for the applicant submits that the respondents having promised to secure relinquishment deed from Smt.Sobha, who is one of the legal heirs of S.Malla Reddy, failed to fulfill their promise and consequently, no further activities could be taken up by the applicant company. A further submission has been made that the plea taken by the respondents in the additional counter- affidavit is contrary to the plea taken by them in the counter-affidavit and therefore, willingness of the respondents to secure relinquishment deed from Smt.Sobha does not deserve any consideration. 7. Learned counsel appearing for the respondents submits that the applicant company committed breach of the terms of the development agreement-cum-general power of attorney, dated 03.12.2007 and failed to secure the permission within 8 months and consequently, development agreement-cum-general power of attorney, stood cancelled automatically and in which case, the applicant company cannot take shelter under any of the clauses of the development agreement-cum-general power of attorney. 8. Indisputably, the respondents received Rs.1,20,00,000/- under development agreement-cum-general power of attorney. According to the applicant, the respondents failed to secure relinquishment deed from Smt.Sobha, who is one of the legal heirs of S.Malla Reddy and thereby further activities could not be taken up as per the terms of the development agreement-cum-general power of attorney. Whereas, it is the contention of the respondents that the applicant failed to secure necessary permission from the concerned authorities within 8 months as stipulated in the development agreement-cum-general power of attorney, and consequently, the agreement stood cancelled. The question whether which of the parties to the agreement is a defaulting party has to be adjudicated by taking recourse to the provisions of the Act in view of Clause 36 of the development agreement-cum-general power of attorney. For better appreciation, I may refer clause 36 of the development agreement-cum-general power of attorney, dated 03.12.2007, which reads as hereunder: “36. In case of any disputes arises between the parties hereto touching these presents, the matter shall be refer to the arbitrators one chosen by each party and in case of any difference of opinion between such arbitrators, they shall nominate a common umpire and their award shall be final and binding on both the parties and the relevant provisions of the arbitration which shall be governed by the provisions of Arbitration & Conciliation Act, 1996.” 9. The applicant invoked Clause 36 of the development agreement- cum-general power of attorney, dated 03.12.2007, and issued a notice, dated 15.04.2010. The respondents having received the notice did not choose to respond to it. In that view of the matter, I find that the applicant has made out a valid ground for appointment of an arbitrator for resolution of the disputes that have arisen between the parties relatable to the development agreement-cum-general power of attorney, dated 03.12.2007. 10. Accordingly, the Arbitration Application is allowed. Sri Justice T.Ch.Surya Rao, Retd. Judge of this High Court, is appointed as sole arbitrator, for resolution of the disputes between the parties, relatable to the development agreement-cum-general power of attorney, dated 03.12.2007. He shall fix his own fee. No order as to costs. ______________________ B.SESHASAYANA REDDY, J. Date:13th July, 2011. cs THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.102 of 2010 Date:13th July, 2011