THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.3 of 2011 (Dated : 15-07-2011) Between: M/s. AXIS BUILDERS, Regd. No.106/2007, Rep. by its Managing Partner Smt. M.N.V.Malleshwari ..Applicant A n d G.V.Kranthi Kiran Ranga Reddy District and others …Respondents THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.3 of 2011 ORDER: This application has been taken out by M/s. Axis Builders, represented by its Managing Partner, Smt. M.N.V.Malleshwari under sub-sections 5 and 6 of Section 11 of the Arbitration & Conciliation Act, 1996 read with the Scheme for Appointment of Arbitrators to appoint an arbitrator to resolve the disputes between the parties arising out of the Memorandum of Understanding entered into on 20th September 2008. 2(a) The applicant is a registered partnership firm having its’ registered office at Meerpet village of Saroornagar Mandal, Ranga Reddy District and it is engaged in construction of individual residential houses for prospective purchasers. The applicant purchased part of Plot bearing No.70 (South part) admeasuring 143 square yards in Survey No.16 situated at Sai Krishna Enclave of Badangpet village, Saroornagar Mandal, Ranga Reddy District under an agreement of sale dated 15.9.2008 from respondents 2 to 6. 2(b) G.V.Kranthi Kiran-1st respondent approached the applicant on 20-9-2008 with a proposal for construction of a residential house on the schedule plot consisting of 971.72 square feet. An agreement of sale came to be executed between the vendors (respondents 2 to 6) and builder (applicant) and vendee (1st respondent ). Under the said agreement, the 1st respondent-vendee shall pay a sum of Rs.22,38,734/- to the applicant-builder towards sale consideration of the house. Various terms and conditions have been incorporated in the agreement of sale and construction dated 20th September 2008. The 1st respondent-vendee paid certain instalments and thereupon, the applicant-builder commenced the construction work. The 1st respondent-vendee requested the applicant-builder and respondents 2 to 6-owners to register the said plot in his name. As per the said request, the registered sale deed came to be executed in his favour on 25.2.2009 by the applicant-builder and the respondents 2 to 6- owners. The 1st respondent-vendee committed default in payment of part of the sale consideration and thereby, committed breach of agreement dated 20th September 2008. The applicant-builder issued a legal notice on 13.5.2010 to the 1st respondent-vendee demanding payment of Rs.5,43,797/-. The 1st respondent-vendee issued reply notice on 14.6.2010 and thereupon, the applicant-builder issued a rejoinder notice proposing settlement of disputes as per Clause (9) of the agreement of sale and construction dated 20-9-2008 by taking recourse to the provisions of Arbitration and Conciliation Act, 1996. 2(c ) The applicant-builder filed O.P.No.743 of 2010 under Section 9 of the Arbitration and Conciliation Act seeking certain interim reliefs and the same is pending on the file of II Additional District Judge, Ranga Reddy District at L.B.Nagar. The 1st respondent-vendee filed consumer complaint No.64 of 2010 before the A.P.State Consumer Disputes Redresal Commission, Hyderabad under Section 12 of the Consumer Protection Act, 1986 and the same is pending disposal. The applicant-builder also moved I.A.No.2061 of 2010 in Complaint No.64 of 2010 under Section 8(1) of the Act seeking direction to the parties to take recourse to the provisions of the Act and the said IA is pending. 2(d). Pending proceedings before the A.P.State Consumer Disputes Redressal Commission, the 1st respondent-vendee approached the applicant and expressed his readiness to pay the balance amount of Rs.5,43,797/-. Indeed the 1st respondent-vendee paid a sum of Rs.4,35,000/- through cheque bearing No.419110 dated 22.10.2010 drawn on ICICI Bank Limited, Khairathabad Branch, Hyderabad. Out of the said sum of Rs.4,35,000/-, Rs.3,50,000/- is towards principal, Rs.51,360/- is towards interest thereon and a sum of Rs.33,640/- is towards legal expenditure. He agreed to pay balance sum of Rs.1,93,797/- in future. The cheque issued by the 1st respondent-vendee came to be returned due to insufficient funds on 8.11.2010. Thereafter, the applicant-builder got issued a legal notice to the 1st respondent-vendee on 20.11.2010 under Section 138 of the Negotiable Instruments Act. Whereas the 1st respondent-vendee lodged a complaint before the police against the applicant-builder on 03.12.2010 before the Station House Officer, Humayun Nagar P.S. The applicant-builder filed Writ Petition No.30608 of 2010 and obtained a direction to the police not to interfere in the civil disputes between the parties. 3. As per the agreement of sale and construction dated 20th September 2008, the disputes between the parties are required to be settled amicably or with an interference of an Arbitrator agreed by both parties in accordance with the provisions of the Act. The applicant-builder issued a legal notice to the 1st respondent-vendee on 27.10.2010 under Section 11 of the Act to give consent for appointment of any retired District Judge as Arbitrator for adjudication of the disputes that have arisen between the parties relatable to the agreement of sale and construction dated 20th September 2008. But the 1st respondent failed to give his consent. Hence, this application seeking the prayer stated supra. 4. Notice to the respondents came to be ordered on 29.01.2011. The 1st respondent entered appearance through a counsel and filed counter. The counter, in brief, is:- Execution of the agreement of sale and construction dated 20th September 2008 is not disputed. The respondent claims that the actual cost of the house is Rs.21,98,734/-, pursuant to the agreement. The agreement stipulates six month’s time for completion of the construction and the said period of six months expired by 16th June 2009. Subsequently, another agreement came to be executed between the applicant-builder and this (1st) respondent-vendee on 16.12.2008. There is no arbitration clause in the subsequent agreement dated 16.12.2008. As per the agreement dated 16.12.2008, the applicant-builder has to complete the construction of the house within six months with a grace period of one month. The cost of the house is also indicated in the agreement as Rs.21,98,734/-. The entire cost of construction of the house, i.e., Rs.21,98,734/- is paid. In addition, a sum of Rs.30,000/- has been paid. Therefore, the question of this (1st ) respondent paying additional sum of Rs.5,43,797/- to the applicant-builder does not arise. The applicant- builder approached this Court by suppressing the facts of execution of subsequent agreement dated 16.12.2008. The applicant filed by the respondent-vendee before the A.P.State Consumer Disputes Redressal Commission is pending disposal and there is no clause in the agreement dated 16.12.2008 with regard to settlement of disputes by way of arbitration and therefore, the application filed by the applicant is not maintainable and accordingly, the same is liable to be dismissed. 5. The applicant filed a reply affidavit. It is stated in the reply affidavit that the agreement dated 16.12.2008 is in continuation of the earlier agreement dated 20th September 2008 and therefore, the clause in the earlier agreement with regard to settlement of disputes, by taking recourse to arbitration, subsists and hence the application is maintainable. 6. Heard learned counsel appearing for the applicant on 13.7.2011 and perused the material brought on record. 7. Learned counsel appearing for the applicant-builder submits that as per the agreement of sale and construction dated 20th September 2008, disputes between the parties are required to be settled amicably or with intervention of an arbitrator agreed by both the parties by taking recourse to the provisions of the Act. As the disputes between the parties are not settled amicably, the applicant issued notice to the 1st respondent-vendee on 22.10.2010 for securing his consent for appointment of a retired District Judge as an arbitrator for adjudication of the disputes. But the 1st respondent-vendee having received the notice, neither consented for appointment of an arbitrator nor issued any reply. Therefore, it necessitated the applicant to approach this Court seeking appointment of an arbitrator for resolution of the disputes between the parties that have arisen relatable to the agreement of sale and construction dated 20th September 2008. Learned counsel refers clause 9 of the agreement of sale and construction dated 20th September 2008, which reads as hereunder:- “9. That if at any time during the progress of the works or after completion or the alleged completion thereof and at any time during the continuance of this agreement any disputes or differences arise between the parties hereto in relation to or in connection with this agreement, the same shall be settled amicably or with an interference of an Arbitrator agreed by both parties and the provisions of the Indian Arbitration and Conciliation Act, 1996 shall apply. The decision so given shall be final and binding upon the parties”. 8. The argument advanced by the counsel appearing for the applicant appears to be impressive at the first blush, but on close scrutiny of the material placed on record, I do not detain myself long to reject the same. The agreement dated 20th September 2008 was between the land owners (respondents 2 to 6) and the applicant- builder on the one part and the 1st respondent and vendee on the other part. The said agreement of sale and construction contains an arbitration clause. Subsequently, the landowners-vendors- respondents 2 to 6 and the applicant styling themselves as vendors executed a registered sale deed on 25.2.2009 conveying the house construction up to basement level having plinth area of 900 sft. Whereas the applicant-builder and 1st respondent-vendee entered into agreement for construction of house on 16.12.2008 in respect of the house with plinth area of 972.72 sft for a total consideration of Rs.21,98,734/-. The payment schedule also has been indicated in para (2) of the agreement. The 1st respondent-vendee paid amounts to the applicant-builder, pursuant to the agreement dated 16.12.2008. 9. A reading of the terms of the agreement dated 16.12.2008 does not indicate that it is supplemental to the agreement of sale and construction dated 20th September 2008. The subsequent agreement is an independent agreement between the applicant- builder and the 1st respondent-vendee. There is no arbitration clause in the subsequent agreement. The applicant-builder and the 1st respondent-vendee are bound by the terms and conditions in the agreement dated 16.12.2008. Indeed payments were made to the applicant-builder, pursuant to the schedule indicated in the subsequent agreement dated 16.12.2008. It goes without saying that the original agreement between the three parties, i.e., landowners, vendors, builder and vendee has been superseded by subsequent agreement between the builder and the vendee. The subsequent agreement does not contain any arbitration clause. The applicant has suppressed the fact of execution of the subsequent agreement in his application. The entire contents of the application indicates as if the amounts are paid by the 1st respondent-vendee to the applicant- builder, pursuant to the agreement dated 20th September 2008. The omission regarding the execution of subsequent agreement in the application amounts to suppression of material facts. Since the subsequent agreement dated 16.12.2008 automatically supersedes the earlier agreement and as the subsequent agreement does not provide for an arbitration clause, the question of adjudication of the disputes between the parties by taking recourse to the provisions of Arbitration and Conciliation Act, does not arise. 10. The arbitration application is misconceived and accordingly, the same is hereby dismissed. No costs. _____________________ B.SESHASAYANA REDDY, J Dt.15-07-2011 RAR THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.3 of 2011 (Dated : 15-07-2011)