IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD FRIDAY, THE EIGHTH DAY OF OCTOBER TWO THOUSAND AND TEN HON’BLE SRI JUSTICE G. BHAVANI PRASAD Arbitration Application No.74 of 2009 Between: M/s. E-City Giant Screen (India) Pvt. Ltd., Represented by its Chief Officer (Business Development) and authorized signatory Vivek Agarwal ..Applicant AND The Andhra Pradesh Tourism Development Corporated Ltd, (APTDCL), represented by Its Chairman & Managing Director. .. Respondent ORDER: The Arbitration Application is for appointment of a sole Arbitrator to adjudicate the claims and disputes between the applicant and the respondent under the Development and Management Agreement dated 22-06-2002. The applicant claimed that in response to an advertisement issued by the respondent in June, 2001 inviting bids from private parties for construction and management of a Family Entertainment Centre at the site adjacent to Yatri Nivas, Secunderabad, the applicant submitted his bid and became the successful bidder on which the letter of intent was issued on 24- 04-2001. The parties entered into an agreement of licence in respect of the said construction on an extent of 4600 square yards on 22-06-2002 and on the same day, a Development and Management Agreement was also entered into incorporating the various terms and conditions. Clause-17 of the letter of intent states that any dispute shall be first subjected to mutual discussions for resolution amicably and in the event of not being able to arrive at any acceptable solution to the disputes within 30 days, the same shall be by arbitration in accordance with the procedure specified in Arbitration and Conciliation Act, 1996. Article-24 of the agreement also provides for dispute resolution and the period within which a solution has to be found through mutual discussions was specified to be 60 days in the said clause, failing which the dispute shall have to be referred to arbitration. The applicant claimed to have paid an advance licence fee of Rs.23,25,975/-, lease rents at 5% of the market value starting with Rs.46,51,950/- and additional development premium at Rs.81,00,000/-. The applicant however found that the subject land was earmarked for public and semi-public use, but not as a commercial zone and hence, the applicant made a request for change of land use on which the respondent addressed a letter to the Hyderabad Urban Development Authority. The applicant could not proceed further in the absence of any change of land use and the applicant has also applied for sanctions from other statutory authorities like Airport Authority, Fire Service Department and Municipal Corporation of Hyderabad. The Municipal Corporation informed on 02-07-2004 that unless there is a change in land use, the request of the applicant for sanction of permission cannot be considered. The applicant accordingly invoked the Force Majeure clause with effect from 01-10-2003 under the agreement and informed the respondent accordingly. However, as the respondent refused the same, the applicant paid the advance licence fee for the second year also. In the meanwhile, the Municipal Corporation of Hyderabad issued a letter on 09-04-2004 informing that road widening by 15 feet will take place at the site and fresh proposals/plans may be submitted in view of the same. The respondent asked the applicant to join a meeting to resolve the issue concerning road widening on 21-09-2004 and subsequently the applicant obtained all permissions from the respective departments except the change of land use from Hyderabad Urban Development Authority, which was the obligation of the respondent. The Hyderabad Urban Development Authority ultimately issued a letter on 15-12-2006 demanding the applicant to pay conversion charges of Rs.2,32,736/- and the respondent, when communicated the same, desired the applicant himself to pay the conversion charges. The applicant requested the respondent to waive the rent in view of the delay without any default on the part of the applicant, but there was no response. The Municipal Corporation of Hyderabad did not reconsider the approval of plans in view of the respondent not handing over the portion of the land for the purpose of road widening and conversion and hence, the applicant requested for appointment of an Arbitrator on 4-3-2009 and 01-04-2009 invoking the arbitration clause. The notice was issued on 01-04-2009 invoking clause-17 of the letter of intent and Article 24 of the Development and Management Agreement dated 22-06-2002 and the respondent informed by a letter dated 19-05-2009 stating that there was no arbitrable dispute. Hence, the application. The respondent contested the claim contending that while the agreement dated 22-06-2002 and the grant of licence to the applicant for the purpose of Development and Management of Multi-complex theatre are true, the site was taken over on paper on 22-10-2003, but it was physically handed over on 27-05-2003 itself. The project has to be implemented within 24 months from the appointed date 01-06-2003 and the respondent rendered every possible assistance to the applicant by addressing a series of letters to Municipal Corporation of Hyderabad and Hyderabad Urban Development Authority from 12-01-2002. The respondent also assisted during the meetings in this regard with the Hyderabad Municipal Corporation and Hyderabad Urban Development Authority and as the Promoter of the Company failed to commence the commercial operations as per the agreement, it was informed by a letter dated 15-11-2006 about such default. The Promoter obtained the conversion of land use through the letter from Hyderabad Urban Development Authority dated 08-02- 2007 and the applicant also requested to fix the appointed date as 08-02-2007 and to charge lease rents, additional development premium etc., from thereon, trying to place the responsibility on the respondent Corporation on the issue of conversion of the land use. The applicant requested by a letter dated 27-09-2007 to treat the earlier period as “no rent period” and to extend the lease period correspondently taking into account the period from ‘22-09-2007 to 08-02-2007’ as no rent period. On obtaining legal opinion on the question, it was found that the lessee is not entitled to request for any such waiver of lease rents and the rejection of plans was also found to be not due to non-conversion of land, but due to technical lapses in the plans submitted by the applicant. The applicant failed to pay the lease rents etc., and defaulted in payment of lease rents from November 2006 and ADP from June, 2004, apart from the failure to submit the bank guarantees and to pay interest as agreed. In respect of road widening, a meeting was held in the office of the respondent Corporation but not in the presence of the applicant as the issues relating to project implementation were not sorted out between the applicant and the respondent. The Municipal Corporation of Hyderabad also ultimately informed on 12-12-2008 that the plans submitted by the applicant were not complying with the procedures as the required parking places were not provided and there were major short comings in the plans. The Managing Director of the respondent, therefore, claimed that within the terms and conditions of the agreement, there was no arbitrable dispute. The respondent stated in its further counter affidavit that as on 26-07-2010, when there was a meeting held between the applicant and the respondent in the respondent’s office, the amount payable by the applicant to the respondent came to Rs.8,12,96,501/-. The applicant in possession of the property committed default in payment of rents and the applicant may be, therefore, directed to furnish bank guarantee to a tune of Rs.8,12,96,501/- and the respondent has no objection for resolving the issues between the applicant and the respondent through discussions and they can also consider the request of the applicant to proceed with the project including construction as per the agreement subject to furnishing of such bank guarantee and subject to further discussions regarding the other subjects. In the reply affidavit, the applicant has stated that after a meeting was held on 26-07-2010 between the parties, the failure of the applicant to put the property to use was in view of various reasons mentioned by the applicant and the inaction of the respondent in fulfilling its obligations. The applicant cannot, therefore, be burdened with furnishing any bank guarantee for the sum claimed by the respondent, more so, as the applicant would be investing money for the development of the project and after starting the project, it so far paid Rs.2,84,31,487/- without receiving back a single pie from the investment made. Hence, the applicant sought for allowing the application. Sri O. Manohar Reddy, learned counsel for the applicant and Sri A.K. Narasimha Rao, learned standing counsel for the respondent are heard. The point for consideration is whether the applicant is entitled to have an Arbitrator appointed as claimed? The agreement of licence entered into between the parties on 22-06-2002, in respect of the Development and Management of the Multi-complex theatre and other ancillary projects as set out in the said agreement, contains an arbitration agreement/clause under clause-17 of the said agreement. The said clause states that in the event of disputes, best efforts shall be made to resolve them by mutual discussions amicably and in the event of the parties not finding an acceptable solution to the dispute within 30 days, the same shall be subjected to arbitration in accordance with the procedure specified in Arbitration and Conciliation Act 1996. On the same day, the parties entered into the Development and Management Agreement also concerning the same project and clause 24 of the agreement contains an identical arbitration agreement/clause except with reference to the time to be awaited for resolution of the disputes through best efforts to be made through mutual discussions and the time span was fixed at 60 days, only after which recourse can be had to arbitration proceedings. Both the parties are in agreement about entering into these two agreements and the subject matter of the application and the counter affidavit about the disputes and differences between the parties being within the scope of the said arbitration agreement/ clause under the licence agreement and/or development and management agreement. However, the parties are in dispute as to whether best efforts for settlement of disputes through mutual discussions amicably were made and whether on failure of such efforts, the parties waited for the prescribed period of 30 days/60 days before the applicant approached the Court for referring the matter to arbitration. The learned counsel for the respondent stated that the pleadings of the applicant nowhere referred to compliance with the said conditions in clause-17 of the licence agreement and clause- 24 of the Development and Management Agreement. The learned counsel for the applicant referred to various letters and notices addressed by the applicant to the respondent in this regard, which evoked no positive response from the respondent. The application and its enclosures disclose that the applicant was approaching the respondent with requests for providing necessary materials to approach the Municipal Corporation of Hyderabad for necessary permissions since its letter dated 04-09-2002 and there was continuous correspondence between the parties since then till the letter dated 25-05-2009. While the respondent rejected to refer the dispute to an arbitrator claiming that there is no arbitrable dispute by letter dated 19-05- 2009, the earlier correspondence shows the claims raised by the applicant in this regard on various counts and the response of the respondents from time to time refusing to entertain such claims ending with a letter dated 21-04-2009 in which the respondent has informed that the Force Majeure clause does not apply to the Family Entertainment Centre and waiver of lease rents etc., does not arise. Without going further in great detail into the contents of the correspondence, it is, thus, clear that there was no meeting point between the claims made by the applicant from time to time and the responses by the respondent and there is absolutely no possibility of any scope for negotiated settlement of such disputes. The admitted correspondence between the parties and also the meetings held between the parties referred to in such correspondence amount to best efforts made by both parties to resolve the disputes between them amicably by mutual discussions and much more than 30 days or 60 days expired from the dates of such correspondence or dates of such meetings before the applicant approached this Court with this application for appointment of sole Arbitrator. When on the facts and circumstances, it can be concluded that the kind of communication exchanged and meetings held between the parties may be considered as signifying the efforts made between the parties to resolve the disputes between themselves and not through an Arbitrator, the precondition under clause-17 of the licence agreement or clause-24 of the Development and Management Agreement can be considered to be not prohibiting the approach of the applicant to the Court for the appointment of a sole Arbitrator invoking the arbitration agreement/arbitration clause. Coming to the merits of the rival contentions, no expression of opinion can be made herein about the causes that led to the present impasse or the quantification of any monetary claims, which either party claims as against the opposite party. They are matters to be gone into and decided during the arbitration and the very correspondence between the parties and the very pleadings before this Court indicate that there are arbitrable disputes between the parties to decide which a sole Arbitrator has to be appointed. In view of the above conclusions, the arbitration agreements/ clauses in the licence agreement and Development and Management Agreement have to be accordingly given effect. Therefore, Hon’ble Sri Justice B. Subhashan Reddy, Former Judge of this Court and Former Chief Justice of Tamil Nadu and Kerala High Courts and Former Chairman of the Andhra Pradesh State Human Rights Commission, H.No.3-6-69/B/27 & 28, Avanthi Nagar, Basheerbagh, Hyderabad, is appointed as sole Arbitrator to adjudicate and render a decision on the disputes/differences between the parties arising out of and in connection with the Licence Agreement dated 22-06-2002 and Development and Management Agreement dated 22-06-2002 and the learned Arbitrator shall render his award as expeditiously as possible in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The learned Arbitrator is at liberty to fix a reasonable remuneration/fee for the work done by him. The Arbitration Application is allowed accordingly without costs. _____________________ G. BHAVANI PRASAD, J Date: 08-10-2010 Ksn