THE HON'BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.48 of 2011 2nd December, 2011 Between :- M/s.AMR Malind Infra Pvt.Ltd., Having its registered Office at Plot No.88, Ground Floor, Sarikonda Mansion, Phase-III, Kamalapuri Colony, Hyderabad rep.by its Authorsed Signatory – B.V.Subba Rao .. Applicant and T.D.Srinivasan and another ,, Respondents THE HON'BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.48 of 2011 ORDER:- This application has been taken out under sub-sections (5) and (6) of Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an Arbitrator for resolution of the disputes between the applicant and the respondents relatable to Development Agreement- cum-General Power of Attorney, dated 24-8-2006. The respondents are the absolute owners and possessors of Ac.2.20 guntas of agricultural land comprising Sy.No.538 of Gundlapochampally village, Medchal Mandal, Ranga Reddy District, having purchased the same under sale deed dated 22-5-2006. They are also the owners and possessors of agricultural land to an extent of Ac.0.35 guntas in Sy.No.538 of Gundlapochampally village, Medchal Mandal, Ranga Reddy District, having purchased the same under sale deed dated 15-7-2006. The applicant is a Private Limited Company registered under the provisions of the Companies Act, 1956. A Development Agreement-cum-General Power of Attorney came to be executed between the applicant and the respondents on 25-8-2006. Various terms and conditions such as Sharing of the Built- up area and Transfer of Promoters Share have been detailed in the Development Agreement-cum-General Power of Attorney. In the event of disputes between the parties, the said disputes are required to be resolved by taking recourse to the provisions of the Arbitration and Conciliation Act, 19965. The respondents terminated the Development Agreement-cum-General Power of Attorney by notice dated 6-12-2009. Thereupon the applicant filed O.P.No.51 of 2010 on the file of the I-Additional District Judge, Ranga Reddy District, seeking interim reliefs pending reference of the matter to the Arbitrator. The said O.P. came to be allowed granting interim injunction restraining the respondents from alienating the petition schedule property in favour of 3rd parties. The respondents challenged the order dated 31-12-2010 passed in O.P.No.51 of 2010 by filing C.M.A.No.334 of 2011. A Division Bench of this Court allowed the C.M.A. by Judgment dated 20-9-2011. Relevant portion of the Judgment passed by the Division Bench in C.M.A.No.334 of 2011 needs to be noted and it is thus:- “In spite of cancellation of Development Agreement whether the developer is entitled to enforce the agreement by way of specific performance or not is a matter, which has to be decided by the Arbitrator. Mere permitting the developer to undertake developments in the abutting land also and in such an event the allocation of built up area to the owners should be in the first block/phase in that particular slot under Condition No.9.3 of the terms and conditions do not prima facie indicate the owners agreeing to provide necessary passage to the land purchased by the developer on the back side land agreed to be developed. What all the agreement provides is in case of such development the allocation of built up area to the owners would be in the first block/phase in that particular slot as the entire building complex is being constructed in block/phase wise manner and the owners will have an access to the common areas in the developed areas belonging to the developer also. It is nowhere stated that the developer had already obtained necessary permission or proceed with the construction and construction is in the half way and at that stage the Agreement was cancelled. Whether the plea taken by the developer-Company that payment of Rs.93.5 lakhs to N.Srinivasa Rao towards refundable advance is in tune with the Agreement or not have to be decided by the Arbitrator for grant of equitable relief of specific performance. But, we are of the prima facie view that Agreement does not provide for giving such security deposit by the developer for enabling the owner to meet the expenses, as contended in the counter, when the owners could not come up with the required expenditure needed to clear the site for construction, they have extended the financial support. Obviously, by taking the said plea the developer made the owners responsible to clear the property and bear the expenses; is contrary to the terms and conditions of the Agreement. The entire responsibility to clear the site to undertake construction and obtaining necessary permissions is on the developer. Further, all the amounts, which were said to be paid by way of cheques, are not alleged to be issued in the name of the owners. Though the developer took a plea that an amount of Rs.93.5 lakhs was paid to the owners through Srinivasa Rao, failed to establish the same. When the developer- Company approached the Court with false and untenable pleas contrary to the agreed terms they are not entitled to equitable relief of injunction in view of Section 41(1) of the Specific Relief Act, 1963. The lower Court without considering the above aspect erred in granting injunction restraining the owners, which cannot be sustainable. We also make it clear that the discussion and observations made by us are confirmed in the context of granting equitable relief of injunction pending initiation of arbitral proceedings, and cannot be understood the said observation/findings with regard to enforceability of agreement by way of specific performance which is left open to be decided by the Arbitrator.” Notices to respondents came to be ordered on 30-6-2011. Respondents entered appearance and filed counter. Various contentions have been advanced by the respondents in the counter. However, the respondents do not dispute the fact of existence of arbitration clause in the Development Agreement-cum-General Power of Attorney, dated 24-8-2006. Heard learned Counsel appearing for the parties. Learned Counsel appearing for the applicant submits that the disputes relatable to the Development Agreement-cum-General Power of Attorney, dated 24-8-2006 have been cropped up and therefore the applicant issued notice invoking the arbitration clause in the Development Agreement-cum-General Power of Attorney and nominating Sri Justice A.Venkatarami Reddy, a retired Judge of this Court as sole Arbitrator. A further submission has been made that the respondents instead of consenting for the name proposed by the applicant, issued reply notice disputing the claims of the applicant and making counter claim in which case the appointment of Arbitrator is essential. Learned Counsel appearing for the respondents submits that the contention of the applicant that they paid Rs.93.5 lakhs as an advance has been negatived by the Division Bench of this Court and therefore the said amount cannot be the subject matter of the arbitration. I do not see any substance in the contention advanced by the learned Counsel for the respondent since the Division Bench of this Court had categorically held that it is for the Arbitrator to consider whether Rs.93.5 lakhs has been paid as an advance. It can be said without any contradiction that disputes have been cropped up between the applicant and the respondent relatable to the Development Agreement-cum-General Power of Attorney. As per clause 18 of the agreement the disputes are required to be resolved by way of taking recourse to the provisions of the Arbitration and Conciliation Act, 1996. The Supreme Court in S.B.P.& Co., V. Patel Engineering Limited[1] and in National Insurance Co.Ltd., v. Boghara Polyfab Pvt.Ltd.[2] had held that when application is filed under Section 11, the Chief Justice or his designate is required to decide only two issues, that is whether the party making the application approached the appropriate Court and whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to the agreement. Both the conditions have been satisfied in the case on hand. Therefore, I find that the applicant has made out a valid ground for appointment of an Arbitrator for resolution of the disputes between the parties relatable to the Development Agreement- cum-General Power of Attorney, dated 24-8-2006. Accordingly, the Arbitration Application is allowed appointing Sri Justice G.Bikshapathy, a retired High Court Judge, is appointed as Arbitrator for resolution of the disputes between the parties relatable to the Development Agreement-cum-General Power of Attorney, dated 24-8-2006. He shall fix his own fee. No order as to costs. _________________________ B.Seshasayana Reddy, J 2nd December, 2011 smr [1] (2005) 8 SCC 618 [2] (2009) 1 SCC 267