IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION ARBITRATION ARBITRATION PETITION NO.267 OF 2008 PETITION NO.267 OF 2008 PETITION NO.267 OF 2008 Goldendreams Arcade Pvt.Ltd. .. Petitioner Versus M/s.Shiv Embroidery Manufacturing Company .. Respondent WITH WITH WITH ARBITRATION ARBITRATION ARBITRATION PETITION NO.406 OF 2008 PETITION NO.406 OF 2008 PETITION NO.406 OF 2008 Goldendreams Arcade Pvt.Ltd. .. Petitioner Versus M/s.Aarpeeshiv Laminating and Coating Pvt Ltd. .. Respondent --- Mr.P.K.Samdani, Sr.Counsel a/w Mr.Simil Purohit i/by Wadia Ghandhy & Co for the petitioner in both the petitions. Mr.D.D.Madon, Sr.Counsel a/w Chetan Kapadia with Mr.Chirag Mody i/by DSK Legal for the respondent in both the petitions. --- CORAM CORAM CORAM : A.S.OKA, J. A.S.OKA, J. A.S.OKA, J. DATE DATE DATE ON WHICH JUDGMENT ON WHICH JUDGMENT ON WHICH JUDGMENT IS IS IS RESERVED RESERVED RESERVED : 11th December 11th December 11th December 2008. 2008. 2008. DATE DATE DATE ON WHICH JUDGMENT ON WHICH JUDGMENT ON WHICH JUDGMENT IS IS IS PRONOUNCED PRONOUNCED PRONOUNCED : 30th January 2009. 30th January 2009. 30th January 2009. JUDGMENT: JUDGMENT: JUDGMENT: . These two petitions under section 9 of the Arbitration and Conciliation Act, 1996 (hereianfter referred to as the said Act of 1996) are placed on (2) board for final disposal. 2. Arbitration Petition No.267 of 2008 has been filed for an interim measure of protection pending the arbitral proceedings. The prayer is for appointment of the Court Receiver in respect of immovable property more particularly described in Exhibit A to the petition. According to the case of the petitioner, in December 2005 the respondent agreed to transfer and assign in favour of the petitioner leasehold rights in respect of the plots described in Exhibit A (hereinafter referred as "the said plots"). According to the petitioner the agreed consideration was Rs.2 crores 80 lacs. The case of the petitioner is that from December 2005 to May 2006 payments of Rs.02,00,000/-, Rs.03,00,000/-, Rs.05,00,000/-, Rs.30,00,000/-, Rs.30,00,000/- and Rs.20,00,000/- were made by the petitioner to the respondent. On 02nd August 2006, draft of the Agreement for Assignment of the lease was forwarded by the petitioner to the respondent by e-mail. On 15th September 2006, a total sum of RS.50,00,000/- was paid by the petitioner to the respondent. On 03rd October 2006, the respondent forwarded modified draft of the Agreement recording that the respondent had already received a sum of Rs.1.40 crores. on 07th August 2007, (3) further payment of Rs.25,00,000/- was made by the petitioner to the respondent. On 16th August 2007, the respondent executed the Agreement for Assignment of lease in respect of the said plots. However, the agreed consideration mentioned therein was Rs.3.40 crores instead of Rs.2.80 crores. According to the case of the petitioner, as per the terms and conditions of the Agreement, certain postdated cheques were issued by Mr.Sanjay Kalantri, a director of the petitioner from his personal account by way of security for balance amount payable under the said Agreement by the petitioner. On 25th September 2007 and 11th October 2007, amounts of Rs.50 lacs each were paid by the petitioner to the respondent. On 21st January 2008, a payment of Rs.25 lacs was made by the petitioner to the respondent by a demand draft alongwith a covering letter in which the petitioner stated that a sum of Rs.2.90 crores was already paid to the respondent. By the said letter petitioner called upon the respondent to return the post dated cheques. The respondent issued notice dated 15th February 2008 to the petitioner returning therewith the aforesaid demand draft in the sum of Rs.25 lacs send by the petitioner to the respondent. By the said notice, the respondent purported to terminate the said agreement and forfeit the amount paid by the (4) petitioner towards the consideration. Thereafter, there was an exchange of further correspondence between the advocates for the parties. The case of the petitioner is that arbitration clause contained in clause no.19 of the Agreement dated 16th August 2007 has been already invoked by the petitioner by advocate’s letter dated 19th March 2008 by way of reply to notice of termination dated 15th February 2008. As stated earlier, the first prayer for interim relief in this petition is for appointment of Receiver. The second prayer is for injunction restraining the respondent from alienating or creating any third party rights in respect of said plots. 3. In Arbitration Petition No.406 of 2008, the dispute relates to a plot alongwith structures therein which is more particularly described in Exhibit A annexed to the petition. In this petition the case of the petitioner is that in December 2004 the respondent agreed to transfer and assign in favour of the petitioner the leasehold rights of the respondent in the plot more particularly described in Exhibit A to the petition for aggregate consideration of Rs.3.20 crores (The said plot described in Exhibit A is hereinafter referred to as "the said plot"). According to the case (5) of the petitioner, an advance payment of Rs.10 lacs was made by the petitioner to the respondent by way of demand draft on 12th April 2006. In August 2006, the petitioner forwarded a draft of the Agreement for assignment of lease to the respondent. In October 2006 the petitioner received draft Agreement in respect of the plots which are subject matter of the Arbitration Petition No.267 of 2008 and the respondent informed the petitioner that the draft agreement in respect of the said plot will be on the same lines. On 16th August 2007, the parties executed the Agreement for Assignment in respect of the said plot. The total agreed consideration shown in the Agreement is Rs.6 crores. On 07th November 2007 and on 28th November 2007 payments of Rs.30 lacs and Rs.25 lacs respectively were made by the petitioner in favour of the respondent towards consideration. Even in this case, certain postdated cheques were issued by the petitioner’s Director Mr.Sanjay Kalantri in favour of the respondent from his personal account by way of security for the payment of the balance amount under the agreement. According to the case of the petitioner, the cheques issued by Director of the petitioner were deposited by the respondent for encashment on 29th December 2007. On 09th January 2008 the petitioner was made aware of the (6) dishonour of the cheques. On 18th January 2008 the petitioner purchased a demand draft in the sum of Rs.95 lacs favouring the respondent. According to the petitioner, the said amount covered the amount secured by the post dated cheques issued by way of security. A cheque in the sum of Rs.90 lacs was drawn by the petitioner in favour of the respondent. Two covering letters were prepared. The first one was dated 20th January 2008 alongwith which the demand draft in the sum of Rs.95 lacs was forwarded to the respondent. The second letter was dated 21st January 2008 alongwith which the cheque in the sum of Rs.90 lacs was forwarded to the respondent. The case of the petitioner is that both the said letters were sent together by speed post and the same were received by the respondent on or before 23rd January 2008. On 07th February 2008, a notice was issued by the advocate for respondent addressed to the petitioner pruportedly terminating the Agreement dated 16th August 2007. By the said notice, the respondent purported to forfeit the amounts paid by the petitioner under the agreement. Another letter dated 15th February 2008 was issued by the advocate for respondent to the petitioner. In the said letter it was stated that the demand draft in the sum of Rs.95 lacs was received by the respondent on 23rd January 2008. It (7) was pointed that the respondent redeposited the security cheque on 31st January 2008 as provided in the Agreement but the said cheque was dishonoured. By the said letter dated 15th February 2008 the advocate for respondent informed the petitioner that after termination of the Agreement by letter dated 07th February 2008, the petitioner surreptitiously and underhandedly deposited a cheque in the sum of Rs.90 lacs in the bank account of the respondent without the consent of the respondent. By the said letter dated 15th February 2008 the advocate for respondent reiterated that the said Agreement has been terminated. The advocate for respondent returned the demand draft in the sum of Rs.95 lacs sent by the petitioner. A cheque drawn by the respondent in favour of the petitioner in the sum of Rs.90 lacs was also forwarded alongwith the said letter. The said cheque was representing the amount surreptitiously deposited by the petitioner in the bank account of the respondent. The said letter was replied to by letter dated 25th March 2008 by the advocate for the petitioner. There is a rejoinder dated 17th April 2008 sent by the advocate for the respondent addressed to the advocate for the petitioner. There is a further communication dated 13th June 2008 issued by the advocate for petitioner to the respondent. In this petition, interim relief of (8) appointment of Court Receiver and injunction has been prayed for. 4. The learned senior counsel appearing for the petitioner in these petitions submitted that though the two petitions under section 9 of the said Act are being heard together, the same arise out of totally different transactions. He pointed out that even the respondents are different in these petitions. Inviting my attention to the Agreement dated 16th August 2007 which is subject matter of Arbitration Petition No.267 of 2008, he pointed out that a sum of Rs.01,65,00,000/- was admittedly paid as an advance. He pointed out that a sum of Rs.75 lacs was payable by the petitioner to the respondent by 31st August, 2007 and the third instalment of Rs.50 lacs was payable by 30th September 2007. He pointed out that the last instalment of Rs.50 lacs was payable by 30th April 2008. He pointed out that by way of security for the aforesaid instalments of Rs.75 lacs, Rs.50 lacs and Rs.50 lacs respectively, post dated cheques were handed over by the petitioner to the respondent. He pointed out that a sum of Rs.50 lacs was paid by the petitioner to the respondent on 25th September 2007 and further amounts of Rs.50 lacs and Rs.25 lacs were paid by the petitioner to the respondent (9) on 11th October 2007 and 21st January 2008 respectively. He pointed out that the said amounts were accepted by the respondent. He invited my attention to clause no.3 of the Agreement which provides that the respondent was entitled to deposit the post dated cheques payable in respect of last three instalments on the respective due dates. If the said cheques were dishonoured, the respondent was required to redeposit the same after a period of 15 days from the date of receipt of information of dishonour. He pointed out that if the cheques were dishonoured after the same were redeposited, then the agreement was to stand automatically terminated. He invited my attention to communication dated 21st January 2008 issued by the petitioner to the respondent in which a reference was made to the payments of Rs.50 lacs, Rs.50 lacs and Rs.25 lacs made by cheques dated 25th September 2007, 11th October 2007 and 18th January 2008 respectively. By the said letter, the petitioner called upon the respondent to return security cheques dated 31st August 2007 and 30th September 2007 in the amounts of Rs.75 lacs and Rs.50 lacs respectively. He pointed out that respondent purported to terminate the Agreement by advocate’s letter dated 15th February 2008. He submitted that as on that day there was no default by the petitioner and (10) hence the Agreement could not have been terminated. He pointed out that the post dated cheques were very much available to the respondent and without depositing and redepositing the cheques in terms of the Agreement there could not have been termination of the Agreement. He pointed out that cheques in the amounts of Rs.50 lacs each issued on 25th September 2007 and 11th October 2007 were accepted by the respondent without any protest and therefore the respondent was not entitled to now contend that the time provided in the Agreement for second, third and fourth instalments was the essence of the contract. He submitted that the termination of the Agreement by the respondent is illegal. He submitted that arbitration clause has been already invoked by the petitioner and this is a fit case for granting interim relief as prayed. 5. Turning to Arbitration Petition No.406 of 2008, he pointed out that ad-interim order dated 23rd October 2008 passed therein could not be complied with by the petitioner on account of recession in the market. He submitted that on 23rd January 2008 the respondent had received a demand draft of Rs.95 lacs and a cheque in the sum of Rs.90 lacs and therefore as on 31st January 2008 the respondent was not entitled to deposit the (11) cheques issued by way of security. He submitted that the amount payable under the security cheques was already paid by the petitioner by the aforesaid demand draft and cheque and therefore there was no question of respondent terminating the Agreement. He submitted that there was no default on the part of the petitioner. 6. The learned counsel appearing for the respondent has also made detailed submissions. He submitted that the conduct of the petitioner as reflected from the facts of the case in Arbitration Petition No.406 of 2008 will have to be considered while deciding the other petition. He invited my attention to the statement of the petitioner recorded in order dated 23rd October 2008. He pointed out that though the petitioner offered to deposit only a part of the balance amount being Rs.1.85 crores in this Court, even the said amount could not be deposited by the petitioner. He submitted that this reflects on the alleged readiness and willingness of the petitioner to pay the amounts as per the agreements which are subject matter of both the petitions. He pointed out that the Agreement dated 16th August 2007 which is the subject matter of Arbitration Petition No.406 of 2008 is the balance property more particularly described in the Agreement. He pointed out (12) that recital (f) in the said Agreement records that the respondent was desirous of assigning and disposing of the plot mentioned in the Ist Schedule to the Agreement which is Plot No.E-35 admeasuring 16200 sq mts or thereabout save and except a portion of the said plot admeasuring 3000 sq mts more particularly described in IInd Schedule to the said Agreement. He pointed out that the Agreement relates to the balance portion admeasuring 13200 sq mts or thereabout which is more particularly described in the IIIrd Schedule to the Agreement. He submitted that though Agreement relates to an area of 13200 sq mts, the petitioner has claimed relief in respect of the entire area of 16200 sq mts. He pointed out that this conduct itself disentitles the petitioner to any equitable relief. 7. He pointed out that the petitioner has come out with a false case in Arbitration Petition No.406 of 2008 regarding dispatch of a cheque in the sum of Rs.90,000/- alongwith letter dated 21st January 2008. He pointed out that in letter dated 07th February 2008 the advocate for respondent has referred to the fact that the Agreement stood terminated as a result of dishonour of the post dated cheque after its re-deposit. He pointed out that thereafter the petitioner has surreptitiously (13) and underhandedly deposited a cheque in the sum of Rs.90 lacs in the bank account of the respondent without the knowledge of the respondent. He submitted that the fact that the petitioner could not deposit the sum of Rs.1.85 crores in terms of order dated 23rd October 2008 shows that the petitioner was not ready and willing to perform terms and conditions incorporated in both the Agreements subject matter of these two petitions. He also invited my attention to the notice dated 15th February 2008 of termination of the Agreement subject matter of Arbitration Petition No.267 of 2008. He pointed out that termination is on the ground of continuing defaults by the petitioner as well as on the ground of the conduct of the petitioner of having deposited a cheque in the sum of Rs.90 lacs directly in the bank account of the respondent without knowledge and consent of the respondent. He pointed out that even according to the case of the petitioner there is a default in payment of amounts specified in sub clauses (ii) and (iii) of clause 2 of the Agreement subject matter of petition No.267 of 2008. He, therefore, submitted that no case is made out for grant of any relief in favour of the petitioner. 8. The learned counsel appearing for the petitioner (14) submitted that the agreements subject matter of these two petitions are independent and therefore the respondent cannot terminate the agreement subject matter of Arbitration Petition No.267 of 2008 on the ground of the alleged default on the part of the petitioner of the terms of the Agreement subject matter of Arbitration Petition No.406 of 2008. He submitted that till the conclusion of the arbitral proceedings, status-quo as regards the plots has to be maintained. 9. I have given careful consideration to the submissions. I have also considered the pleadings and documents on record. ARBITRATION PETITION NO.406 OF 2008 10. I am dealing with Arbitration Petition No.406 of 2008. It will be necessary to refer to the relevant terms and conditions of the Agreement dated 16th August 2007. The petitioner has been described in the Agreement as the assignee and the respondent has been described the assignor. The respondent is holding leasehold rights in respect of plot No.E-35 admeasuring 16200 sq mts in MIDC Industrial Area, Chikhalthana within the Revenue village limits of village Masanatpur, (15) Taluka and District Aurangabad. The Agreement relates to balance property described in the IIIrd Schedule to the said Agreement. The balance property is an area of 13200 sq mts forming part of plot No.E-35. The petitioner has claimed relief in the petition in respect of the plot described in Exhibit A to the petition. Perusal of the description of the plot in Exhibit A shows that relief has been claimed in respect of entire area of 16200 sq mts instead of area of 13200 sq mts to which the Agreement relates. This is one circumstance which will have to be considered while considering the prayer for grant of an equitable relief. 11. Clauses 2 and 3 of the said Agreement read thus: "2. The consideration amount of Rs.6,00,00,000/- (Rupees Six Crores Only) payable by the Assignee to the Assignor, is payable as under: (i) A sum of Rs.10,00,000/- (Rupees Ten Lacs Only) paid by the Assignee to the Assignor as advance before the execution of this Agreement; (16) (ii) A sum of Rs.50,00,000/- (Rupees Fifty Lacs only) payable by the Assignee to the Assignor by September 30th, 2007 as part payment; (iii) A sum of Rs.1,00,00,000/- (Rupees One Crore Only) paid by the Assignee to the Assignor by November 30th, 2007 as part payment; (iv) A sum of Rs.90,00,000/- (Rupees Ninety Lacs Only) payable by the Assignee to the Assignor by December 31st, 2007 as part payment; and (v) A balance sum of Rs.3,50,00,000/- (Rupees Three Crores Fifty Lacs Only) payable by the Assignee by April 30th, 2008. It is agreed between the parties that the time for payment of the aforesaid amounts, shall be the essence of the contract. Upon execution hereof, to secure payment of the amounts under (17) sub clauses (ii), (iii), (iv) and (v) above, the Assignee has handed over postdated cheques for the said amounts, details whereof are set out in Annexure "B". It is clarified that the Assignor shall hand over possession of the balance property to the Assignee upon the realization of the post dated cheque for the amount set out at sub clause (v)." 12. Admittedly, a sum of Rs.10 lacs out of the total consideration of Rs.6 crores was paid before the execution of the said Agreement. According to the case of the petitioner, on 07th November 2007 and on 28th November 2007 amounts of Rs.30 lacs and Rs.25 lacs were paid by the petitioner to the respondent towards the consideration. As per clause 2 of the Agreement, the petitioner was liable to pay a sum of Rs.50 lacs by 30th September 2007 and a further sum of Rs.1 crore by 30th November 2007. Thus, a total amount of Rs.1 crore 50 lacs was payable by the petitioner by end of November 2007. As a sum of Rs.50 lacs was not paid by 30th September 2007, the post dated cheque in the sum of Rs.50 lacs could have been immediately deposited by the respondent thereafter or even on 30th September 2007. (18) Similarly, postdated cheque in the sum of Rs.1 crore could have been deposited on 30th November 2007 or immediately thereafter. However, the cheques were deposited by the respondent in December 2007 which were dishonoured on 31st December 2007. As per clause (3) of the said Agreement, the respondent was entitled to re-deposit the two dishonoured cheques on expiry of period of 20 days from the date of receipt of intimation of dishonour. 13. The case of the petitioner is that a demand draft dated 18th January 2008 was purchased by the petitioner in the sum of Rs.95 lacs drawn in favour of the respondent which was forwarded by the petitioner to the respondent alongwith a covering letter dated 20th January 2008. Even according to the petitioner the said letter was received by the respondent on 23rd January 2008. In paragraph 6 of the said letter, the petitioner has mentioned that as per the Agreement, the respondent was supposed to deposit the cheque dated 30th November 2007 after 20 days of receiving intimation of dishonour. The petitioner stated that to avoid any complication, a demand draft of Rs.95 lacs was being forwarded alongwith the said letter. When the said demand draft was forwarded, the overdue amount payable on that day was (19) Rs.1.85 crores. Out of the instalment of Rs.1 crore payable by 30th November 2007, a sum of Rs.95 lacs was not paid and the fourth instalment of Rs.90 lacs payable on 31st December 2007 remained unpaid. In the letter dated 20th January 2008, the petitioner has not even offered to pay the said fourth instalment. Reliance is placed by the petitioner on another letter dated 21st January 2008 alongwith which a cheque in the sum of Rs.90 lacs drawn in favour of the respondent was allegedly forwarded by the petitioner. The case of the petitioner is that both the letters dated 20th January 2008 and 21st January 2008 were dispatched together. It must be stated here that for the amount payable in the sum of Rs.90 lacs by December 31st, 2007, a post dated cheque was already handed over to the respondent. If the petitioner really desired to avoid deposit of the post dated cheque, the petitioner was required to pay the amount of Rs.90 lacs by 31st December 2007. If there was any genuine desire on the part of the petitioner to pay the said amount of Rs.90 lacs, the petitioner could have issued the cheque on or before 31st December 2007. Assuming that there was a genuine desire on the part of the petitioner to pay the said amount of Rs.90 lacs, the petitioner could have paid the said amount by a demand draft. Assuming that the cheque (20) in the sum of Rs.90 lacs was forwarded by the petitioner alongwith letter dated 21st January 2008, under the clause 3 of the Agreement the respondent was entitled to deposit the post dated cheque in the sum of Rs.90 lacs on the failure of the petitioner to pay the said amount by December 31st, 2007. In the affidavit in reply of Mr.Binu Khanna, a Director of the respondent, the respondent has specifically denied