Reserved Judgment IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Appeal from Order No. 203 of 2007. State Urban Development Agency (SUDA), 43/6, Mata Mandir Road, Dharampur, Dehradun, through its Director. …Appellant. Vs. M/s Bio Friends Society (A Society registered under the Societies Registration Act, 1860), Earlier Address at 61, Chakrata Road, Dehradun. Present Address: 232, Moti Mahal, 2, Rana Pratap Marg, Lucknow, Uttar Pradesh … Respondent. Mr.Kanwaljit Singh, Advocate learned counsel for the appellant. Mr. Siddhartha Singh, Advocate, learned counsel for the respondent. WITH Appeal from Order No. 202 of 2007. State Urban Development Agency (SUDA), 43/6, Mata Mandir Road, Dharampur, Dehradun, through its Director. …Appellant. Vs. M/s Manav Utthan Mahasamiti, 119/2, Rajpur Road, Jakhan, Dehradun, through its Secretary Shri Kamta Prasad, S/O Late Shri Satya Narayan, R/O 119/2, Rajpur Road, Dehradun … Respondent. Mr.Kanwaljit Singh, Advocate learned counsel for the appellant. Mr. Siddhartha Singh, Advocate, learned counsel for the respondent. Date April 22, 2011. Hon’ble B.S.Verma, J. Since the controversy involved in these two appeals is similar and as the order under these appeals is a common order, therefore, for the sake of convenience, both the appeals (A.O No. 203 of 2007 and A.O. No. 202 of 2007) are being decided by this common order. 2. Both the appeals are directed against the common order dated 26-3-2007 passed by the District Judge, Dehradun in Original Suit No. 2 of 2007 Manav Utthan Mahasamiti Vs. State Urban Development Authority (SUDA) and Original Suit No. 3 of 2007, Bio 2 Friends Society Vs. State Urban Development Authority (SUDA), whereby the petition under Section 9 of the Arbitration and Conciliation Act, 1996 (for short the Act) filed by the respondents herein were allowed and the appellant herein was restrained from recovering the amount from the respondents by coercive method till final decision of the petition moved by the respondents herein under Section 11 of the Act before the High Court. 3. Brief facts, giving rise to the present appeals are that the respondents herein moved petition under Section 9 of the Act before the District Judge Dehradun alleging therein that they have entered into separate agreement with the appellant SUDA for construction of certain low cost houses as well as conversion and construction of dry latrines in different district of the State of Uttarakhand and that in the agreement there is an arbitration clause in respect of the disputes between the parties. The funds for each unit were provided by the SUDA and under the agreement after construction of low cost houses, 50% of the cost amount was to be recovered by the respondents herein from the occupants of those houses and that in case of failure on the part of the respondents, that 50% amount was to be recovered by the appellant as arrears of land revenue. It is also alleged that as per the agreement, the respondents (petitioners before the court below) constructed several houses and latrines, obtained necessary completion report from different authorities. Those reports were forwarded to the appellant, but the appellant by engaging a chartered accountant obtained its report, which showed non-completion of the work in full under the agreement and partial completion of some houses and latrines etc. The chartered accountant also reported that certain houses and latrines, as the case may be, were not completed within the stipulated time and therefore, the appellant through a notice asked the respondents herein to refund the entire amount and also issued recovery certificates against them. The respondents refuted the report of chartered accountant etc. and sent a notice to the appellant calling upon it to refer the matter to the arbitrator as per arbitration clause of 3 the agreement. Ultimately, when nothing was heard from the appellant, the respondents moved separate petition under Section 9 of the Act and sought interim order in the nature of injunction against recovery of amount. 4. The opposite party-appellant resisted the application by filing written objections inter alia on the ground that in the agreement itself there is a clause which entitle the appellant to recover the amount from the respondents as land revenue and as the respondents failed to complete the work under agreement within the stipulated time and also furnished false completion report, the respondents are not entitled to any relief under Section 9 of the Act. 5. The learned District Judge after hearing both the parties came to the conclusion that there is an arbitration clause under the agreement and it is for the arbitrator to adjudicate whether the work assigned under the agreement was performed by the respondents and that too within the stipulated period or not. It was also found that the report of the chartered accountant is ex parte. The learned District Judge also observed that the measurement or evaluation of the work was not got done by any engineer. Consequently, the learned court below found a prima facie case in favour of the respondents. It was also held that if the relief sought is refused, the respondents would suffer irreparable loss and that the balance of convenience also tilted in favour of the respondents. Consequently, vide order dated 26-3-2007 the petition under Section 9 of the Act was allowed in each case and the appellant has been restrained from recovering the amount in question by coercive method till final decision of the petition under Section 11 of the Act by this Court and in the event of success of motion under Section 11 of the Act and the arbitration proceedings commenced, then this interim order shall continue till the Award is delivered by the Arbitrator. 6. Aggrieved by the said order, the appellant has preferred two separate appeals before this Court. 4 7. The main grounds of challenge raised in these appeals are that the trial court failed to appreciate that the petition under Section 9 of the Act was not maintainable and ought to have been dismissed in limine and that the report of the chartered accountant has been wrongly ignored by the trial court. 8. I have heard learned counsel for the parties and perused the entire material placed on record including the lower court record and the counter affidavits and rejoinder affidavits filed on behalf of the contesting parties. 9. The admitted case of the parties is that the appellant and the respondents executed a contract whereby the appellant admitted the respondents’ dedication and recognition in the field of social welfare. Admittedly in the contract agreement, there is an arbitration clause in case of disputes between the parties, the dispute shall be referred to an arbitrator appointed by the appellant. It is not disputed that the respondents sent a notice to the appellant thereby demanding that amount is due against the appellant in respect of the works executed by the respondents. In reply, the appellant has contended that the respondents have illegally retained some amount, which they are liable to pay to the appellant. It is also not disputed that the respondents have already filed an application under Section 11 of the Act for appointment of arbitrator before this Court, which have been registered as Arbitration Application No. 3 of 2007 and 4 of 2007. It appears from a perusal of the record that the report of the Chartered Accountant, who evaluated the work at the behest that the report of the chartered accountant, is an ex parte report. Admittedly, the appellant has issued recovery certificates against the respondents, which gave rise to the two suits filed by the respondents before the learned District Judge. 10. The case of the respondent-plaintiff in O.S. No. 3 of 2007 is that under the agreement executed between the parties the 5 respondent had already executed the work under the contract and an amount of Rs. 6,19,666/- is still due against the appellant, while the appellant claims that the work under the contract was not completed within the stipulated time and that respondent-plaintiff in Original Suit No. 3 of 2007 is liable to pay amount of Rs. 38,79,025/-. 11. The case of the plaintiff-respondent in Original Suit No. 2 of 2007 is that the respondent had executed the entire work under the contract worth Rs. 3,30,86,072-00, the appellant had only paid amount of Rs. 3,22,90,809-00 and the appellant has yet to pay amount of Rs. 7,95,263.00 to the respondent, while the appellant claims that the respondent had not executed the work completely under the contract within the stipulated period and that the respondent is liable to pay an amount of Rs. 2,75,21,506-00. 12. Before the learned District Judge, the respondents herein have sought interim relief of injunction against the appellant by making application under Section 9 of the Act. 13. For a just decision of the appeal, a reference to the agreement of contract between the parties is necessary. 14. In A.O. No. 203 of 2007 arising out of O.S. No. 3 of 2007, there is an agreement of contract executed between the parties. Clause No. 15 of the agreement refers to arbitration in case of dispute between the parties. Similarly, in A.O. No. 202 of 2007, arising out of O.S. No. 2 of 2007, there is also an arbitration clause no. 9 in the contract agreement in case of dispute between the parties. 15. Thus, from a perusal of the agreement of contract executed between the parties, there is an arbitration clause. The learned District Judge in paragraph no. 7 of the impugned judgment has inter alia observed as under:- 6 “7. In these two proceedings, as said earlier, petitioners have sought interim relief against recovery of certain amount by coercive method. Execution of agreement as alleged by the petitioners has not been disputed by the opposite party. It is also admitted between the parties that the agreement contains an arbitration clause. The arbitrator as agreed in between the parties would be a person, nominated by the Director of opposite party. The validity of agreement as well as arbitration clause has not been challenged before me and thereby it is admitted in between the parties that there is legal agreement containing an arbitration clause. Under the agreement the opposite party has to provide adequate amount to the petitioners and petitioners are required to construct low costs houses under ‘Ambedkar Yojna’ and further to convert dry latrines into flush latrines as well as to construct certain new flush latrines. It is admitted in between the parties that the opposite party released huge amount in favour of petitioners and petitioners executed the work assigned to them under contract. Even the Director of opposite party i.e. SUDA issued certificate in favour of petitioners certifying their good work.” 16. Learned court below has reproduced the certificate issued in favour of the respondents in the body of the judgment. 17. A perusal of the record further shows that after completion of the works under contract, the District Magistrate of the concerned districts had issued certificates thereby certifying the completion of work. The appellant appears to have initiated recovery of amount from the respondents on the basis of report of chartered accountant, which appears to be an ex parte report, the same being prepared at the back of the respondents. The respondents had requested the Director, SUDA to nominate the arbitrator to decide the dispute between the parties, but the Director concerned did not accept the said request. It also appears from a perusal of the material on record that the appellant has not got the work done by the respondents evaluated by any Engineer. 7 18. Learned counsel for the appellant has vehemently argued that the matter of dispute was not subject to arbitration and, therefore, the petition under Section 9 of the Act was not maintainable and the same should have been dismissed in limine by the learned District Judge. Learned counsel for the appellant in support of his contention has relied upon the Apex Court judgment in the case of N.Srinivasa Vs. Kuttukaran Machine Tools Limited [(2009) 5 Supreme Court Cases 182]. In that case, the Apex Court has observed in paragraph no. 31 as under:- “31. As noted hereinearlier, one of the main issues for the purpose of deciding the application for injunction was whether time was the essence of the contract or not. By the impugned order, the High Court had failed to appreciate that in the contract relating to immovable property, time cannot be the essence of the contract. In any even in such a case the arbitration clause would survive and the dispute would be required to be resolved. That being the position, pending disposal of the arbitration proceeding, interim measure to safeguard the interest was required to be taken.” 19. In the above case, the Apex Court set aside the order passed by the High Court and maintained the order of status quo passed by the trial court. This case law is of no avail to the appellant. 20. In reply, learned counsel for the respondents has contended that the appellant was not justified in issuing recovery certificate against the respondents as land revenue. Learned counsel has placed reliance upon the case of Iqbal Naseer Usmani Vs. Central Bank of India and others [2006 (100) RD 364](Supreme Court). In the case at hand the clause No. 12 of the agreement annexure no. A-2 provide for method of recovery agreed by parties as arrears of land revenue, therefore, the case law is of no avail to the respondents. 21. The learned District Judge on the basis of material placed before the court below has held that the dispute between the parties is a 8 live dispute and the same is not barred by time. Ultimately, the District Judge found a prima facie case in favour of the respondents. Admittedly the dispute between the parties is yet to be adjudicated by the Arbitrator. In the above facts and circumstances, I am of the considered view that the petition under Section 9 of the Act was fully maintainable and the learned District Judge has rightly observed that the services of a chartered accountant may have a bearing regarding financial regularity or otherwise. The learned District Judge has rightly held that the balance of convenience also titled in favour of the respondents and that if the interim protection is refused, the respondents would suffer irreparable loss. 22. For the reasons and discussion above, this Court is of the considered view that the dispute between the parties is yet to be adjudicated by the arbitrator and that learned District Judge has rightly passed the impugned order in favour of the respondents, which does not call for any interference in these appeals. The appeals being devoid of merit are liable to be dismissed outright. 23. Both the appeals are dismissed with no order as to costs. The judgment and order under appeal is upheld. (B.S.Verma,J.) RCP