ARBP1326-10 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.1326 OF 2010 ALONGWITH ARBITRATION PETITION NO.190 OF 2010 Ashok Kumar Singh .. Petitioner Versus M/s.Neha Propinvest Pvt Ltd .. Respondent Mr.A.A.Kumbhakoni i/by Akhilesh Singh for the petitioner. Mr.Sanjay Jain i/by N. Vora & Associates for the respondent. CORAM : S.C.DHARMADHIKARI, J. DATE : 24th January 2011. P.C.: . This is a petition under section 9 of the Arbitration and Conciliation Act, 1996, for short ‘the Act’. 2 The petitioner claims to be carrying on business as a Builder and Developer in the name and style of M/s.Ashoka Property Developers. The Respondent is a company incorporated under the Companies Act, 1956 having its registered office at the address mentioned hereinabove in the cause title. ARBP1326-10 2 3 It is the case of the petitioner that there was a deed of partnership dated 19th May 2006 signed and executed between the partners under which they decided to carry on construction business in or around the city of Bombay. 4 It is stated that this deed was modified by a supplementary deed of partnership dated 21st June 2006. 5 It is stated that the partnership was desirous of developing five properties under the Slum Rehabilitation Scheme. The efforts were to be undertaken jointly. It was stated that the petitioner made strenuous efforts to obtain various important documents pertaining to the five properties. The petitioner has obtained the original documents from the Society. In para 7 of the petition it is stated that as per the terms agreed between the parties the respondent will carry out the scheme and will spend the entire cost and he will give 10% share to the petitioner. It is stated that the petitioner had spent money and efforts in obtaining necessary and relevant permissions so also approvals. He has spent lot of money for the same. The respondent did not follow-up the matter and did nothing for four years. ARBP1326-10 3 6 In order to complete the work of construction at the five sites ultimately some financial arrangement had to be made and therefore Escrow Agreement was entered into wherein the petitioner and the respondent who had faith and confidence in M/s.S.Mahomedbhai & Co, Advocates and Solicitor, particularly, Mr.Mukul Taly, a partner thereof, appointed the said firm as Escrow Agent. In these circumstances, the agreement had been entered into. 7 It is submitted by Mr.Kumbhakoni, learned counsel appearing for the petitioner that Escrow Agreement envisages the retirement of the petitioner from the partnership business so also that of the respondent. However, the terms and conditions of the Escrow Agreement are not recorded as agreed between the parties and in any event there was oral agreed deviation of the same. It is submitted by Mr.Kumbhakoni that in pursuance of this Escrow Agreement the petitioner had forwarded the cheque of Rs.4 crores but inadvertently that was drawn in the name of M/s.Neha Properties Pvt Ltd instead of the Respondent. The petitioner had agreed to make necessary changes and that is how the correspondence with the Escrow Agent reads. 8 In all these circumstances, it cannot be assumed straightway that the petitioner has retired from the partnership business. There are disputes and ARBP1326-10 4 differences arising out of the partnership business and in such circumstances the Escrow Agreement should not be seen in isolation but together with the original agreement. The disputes and differences being agreed to be resolved by arbitration as per the partnership deeds, until and unless the partnership disputes are resolved through arbitration, it will not be fair, just and proper to allow the respondent to proceed and implement the Slum Rehabilitation Scheme in respect of five properties without protecting the interest of the petitioner. Mr. Kumbhakoni has invited my attention to the Escrow Agreement and the letters dated 26th July 2010 and 31st July 2010 addressed by the petitioner’s advocate so also the cheque, photocopy of which is at page 162 of the petition paper book. He also invited my attention to letter dated 2nd August 2010 from the Escrow Agent and particularly the portion where the Escrow Agent tends to interpret the agreement as if he has been conferred with such power that he extends the date of deposit of the agreed sum. For all these reasons it is submitted that in the interest of justice interim measures be granted. 9 On the other hand Mr.Jain appearing on behalf of the respondent submits that the Escrow Agreement is an independent document. There is nothing ARBP1326-10 5 therein which would demonstrate that the partnership between the parties subsists or even the supplementary deed survives. Infact, the Escrow Agreement proceeds on the basis that the petitioner has retired from the business and the retirement deeds are signed by both the petitioner and respondent. However, it is only to enable them to pay the dues and develop the properties thereafter on their own, that the Escrow Agreement has been executed. This Escrow Agreement does not provide for any arbitration. Therefore, the partnership deeds and the supplemental deed cannot be imported and read into this Escrow Agreement. Therefore, the conclusion that prima facie satisfaction with regard to the existence of an arbitration agreement between the parties has not been made out and that cannot be arrived at in the absence of clear arbitration agreement. 10 That apart on merits as well no prima facie case is made out because the partnership deed between the parties has been spelt out so also Escrow Agreement. The Escrow Agreement provides for the consequences on account of default in handing over the cheque of Rs.4 crores before 31st July 2010 and in any event before the extended date. If the consequences are that the petitioner has retired from the firm and thereafter all rights in the scheme so also in the property vest in the respondent, then, the contents of the letters ARBP1326-10 6 addressed to the Escrow Agent to the contrary, will not be of any assistance to the petitioner. More so, when serious allegations are made against the respondent in correspondence but those are not set out in the petition. The petitioner has not acted bonafide and therefore no assistance should be extended to him much less by granting interim measures under section 9 of the Act. The petition be, therefore, dismissed. 11 With the assistance of the learned counsel appearing for the parties, I have perused the petition and relevant documents. 12 There is much substance in the contentions of Mr.Jain to the effect that the Escrow Agreement provides for terminating the relationship between the parties. Prima facie, the Escrow Agreement read as a whole gives a brief background in para 5 and thereafter recites in para 5(e) that the parties, namely, the petitioner and the respondent have signed, executed and delivered to the Escrow Agent, deeds of retirement and that Form “E” had interalia provided for retirement of the petitioner and respondent-M/s.Neha Propinvest Pvt Ltd from the partnership business to meet the fact situation linked to the payment and demerger of the partnership business. However, Escrow Agent was appointed to work out this arrangement. That is how clause 6 sets out the ARBP1326-10 7 manner of termination and enforcement of the agency. It states that if the petitioner deposits with the Escrow Agent the sum of Rs.4 crores on or before 31st July 2010/ 5th August 2010, the Escrow Agent will hand over all original documents relating to four properties to the petitioner. If further sum of Rs.1 crore is handed over on or before 30th September 2010 so also sum of Rs.50 lakhs is paid before 31st December 2010, then, the petitioner would be entitled to the original documents relating to the fifth property at Ganesh Nagar. The retirement deeds and all documents were drafted by the Escrow Agent. 13 The consequence of not paying the first amount of Rs.4 crore would result in respondent getting all rights in respect of four properties so also the fifth property on payment of the monies as provided in clause 6(e). 14 The petitioner, prima facie, for the first time on 26th July 2010 sought certain clarifications vide para 2 of the letter at Exhibit H, page 158. All the contents of para 2 of this letter would show that this was never the agreement between the parties as recorded in the Escrow Agreement. Further, the contents of the letter dated 31st July 2010 would go to show that the petitioner desired certain clarifications before the cheque could be handed over. Therefore, it is stated that he came with a cheque to the office of the Escrow ARBP1326-10 8 Agent but finding out that he was not available, certain oral discussions took place and a photo copy of the cheque which was not in the name of the respondent had been handed over. The Escrow Agent has clarified all this by the letter dated 2nd August 2010. It is very clear from the letter that the Escrow Agent stated that deposit of the money by the petitioner was not conditional upon any meeting of the Committee members of the five societies and this issue was raised, in my opinion as an afterthought. That is how even letter dated 3rd August 2010 addressed by the petitioner’s advocate, copy of which is at page 166 of the petition paper book would demonstrate. There for the first time it was stated that a photo copy of the escrow letter was not even furnished and the escrow letter/agreement which was to be executed between the parties and as understood by the petitioner is not the one which is annexed to the petition. This dispute is raised for the first time after 6th May 2010. There is no explanation in this letter as to why despite the Escrow Agreement being not as understood by the petitioner, he still forwarded a cheque of Rs.4 crores. Thus, there is substance in the contentions of Mr.Jain that the petitioner was not ready and willing to abide by the terms and conditions of the Escrow Agent. The petitioner was never desirous of parting with the money and taking over the right, title and interest or the implementation of the schemes. Thus, the petitioner who claims to have 10% share in the partnership business was not ARBP1326-10 9 ready and willing to hand over any sums is the prima facie conclusion which can be drawn from the conduct of the petitioner and the contents of these letters. 15 If the properties were to be developed and the scheme was to be implemented, as always understood by the respondent, but, there was some disagreement and with a view to put an end to the same Escrow Agreement was executed, then, finding that the petitioner was not ready and willing to abide by the terms of the Escrow Agreement, would enable me to conclude that the petitioner has failed to make out a prima facie case. Therefore, even if the Escrow Agreement could be read as extension of the earlier document, yet, finding that the petitioner has failed to make out a prima facie case, the balance of convenience also not being in favour of the petitioner and irreparable loss will be caused to those who are part of Slum Rehabilitation Scheme, the request of the petitioner for grant of interim measures cannot be accepted. In the result, petition fails and is accordingly dismissed. No orders as to costs. (S.C.DHARMADHIKARI, J)