Arbitration Case No.22 of 2008(O&M) [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Arbitration Case No.22 of 2008(O&M) Date of Decision: 29 - 05 - 2008 M/s New India City Developers Private Ltd. ....Petitioner through : Mr.Rajiv Atma Ram, Sr. Advocate with Mr.Sapan Dhir and Mr.Daman Dhir, Advocates v. Shri Mordhwaj Singh etc. ....Respondents through: Mr.Rakesh K. Khanna, Senior Advocate, with Mr.Aseem Mehrotra, Advocate Mr.Vikas Bishnoi, Advocate for Mr.R.N.Lohan, Advocate for respondent Mordhwaj Singh. CORAM: HON'BLE MR.JUSTICE VIJENDER JAIN, CHIEF JUSTICE *** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? *** Arbitration Case No.22 of 2008(O&M) [2] VIJENDER JAIN, CHIEF JUSTICE (ORAL) 1. Petition has been filed by the petitioner inter alia invoking the arbitration clause. 2. Briefly stating the facts, the petitioner as well as respondents entered into a development agreement on 3.3.2007. The case of the petitioner is that the respondents are owners of the land measuring 35.2026 acres (approximately) situated in village Behrampur, District Gurgaon. Out of this, land measuring 22.04 acres, which was part of Development Plan of Gurgaon-Manesar Urban Complex 2021 AD, has been approved as residential zone and 12.55 acres as industrial zone. It is the case of the petitioner- developer that the respondent-owners were desirous of developing the property and decided to entrust the development of the said land to the petitioner-developer. The petitioner paid to the respondent- land-owners a sum of Rs.3,52,05,000/- ( RupeesThree crore, fifty two lacs, five thousand) at the rate of Rs.10 lac per acre as non- refundable amount. A further amount of Rs.5,28,09,000/- (Rupees five crores, twenty eight lacs, nine thousand) was paid as refundable amount at the rate of Rs.15 lac per acre. The terms of the development agreement were that the respondent – land-owners were to be given 45 per cent share of the duly sanctioned FAR in case of group housing and further 45 per cent share of FAR in case of industrial (Cyber park/IT park) and the remaining 55 per cent share was to be of the petitioner-developer. It was also a condition Arbitration Case No.22 of 2008(O&M) [3] in the agreement that public area for schools, hospitals, clubs etc. and all obligations with regard private unit for economically weaker section were to be from the share of the developers. The petitioner- developer was liable for external and internal development charges. Fully developed areas were to be allocated to the respondent – land- owners. 3. Why I have reproduced these averments because these are necessary in the context of the arguments raised by learned counsel for the respondents with regard to maintainability of this petition which I will deal later. Suffice it to say that Clause 20 of the agreement entered into between the parties is necessary and the same is reproduced below:- “20. In the event of any dispute or difference between the parties relating to this agreement or any part thereof the parties have agreed and accepted to refer the same for arbitration of a single Arbitrator to be appointed by the parties hereto and the decision of the Arbitrator shall be final and binding on the parties. The Arbitration shall be held in accordance with the Arbitration and Conciliation Act, 1996.” 4. It is the case of Mr.Rajiv Atma Ram, learned senior counsel appearing for the petitioner-developer that the execution of the development agreement, Annexure P-2, two power of attorneys were executed by the respondent – land-owners in favour of the Arbitration Case No.22 of 2008(O&M) [4] petitioner-developer and its nominee M/s Today Homes and Infrastructure Pvt. Ltd. so as to enable it to apply for and obtain requisite permission/licence and for marketing, sale, disposal, joint venture or any other agreement with third party for the developers allocation (55 per cent) under the agreement. The said power of attorney was to be registered but according to the petitioner the same was not got registered by the respondent – land-owners. 5. The relevant clause which falls for consideration and will have bearing on this petition filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred as, `the Act'), is Clause 9.3 of the Development agreement which inter alia provided that upon the execution of the agreement, the respondent – land-owners shall hand over possession of the scheduled property to the petitioner-developer and pursuant to the said clause the respondent – land-owners at the time of execution of agreement and receipt of money, handed over the possession of the land to the petitioner-developer. It is the case, as put by the petitioner, that in spite of handing over possession on 3.3.2007 in terms of the agreement voluntarily, on 21.6.2007 the respondent -land-owners forcibly and illegally entered the property and started ploughing the land despite the fact that the Security Guard of the petitioner-developer tried to stop them. It was alleged that again on 23.6.2007, the respondent - land-owners repeated the incident. A complaint was made to the S.H.O. Police Station Badshahpur, Arbitration Case No.22 of 2008(O&M) [5] Gurgaon (Annexure P-3). On 3.7.2007, the respondents again entered the land and worked on the land. Again on 3.7.2007 a complaint was made to the S.H.O., Police Station Badshahpur. Again on 4.7.2008 the respondent -land-owners entered the property, slapped the Security Guard and threatened to kill him. It is further alleged by the petitioner that the respondents removed all the fencing done on the peri phery. It is the stand of the petitioner- developer that it sent a notice on 7.12.2007 to the respondent- land- owners by Regd. A.D. post for appointment of an Arbitrator to adjudicate upon the disputes and they appointed one lawyer from Delhi as an Arbitrator and sought the consent of the respondent – land-owners for his sole arbitration. The respondent – land-owners sent their reply on 27.12.2007 wherein while not denying the amount paid by the petitioner-developer to the respondent – land- owners, took a stand that possession of the land was to be given only after petitioner-developer obtained a licence and paid statutory dues to the Director, Town and Country Planning Department. The respondent -land-owners had denied that they dispossessed the petitioner-developer as alleged. They also declined to give consent for appointment of the lawyer who was appointed as an Arbitrator by the petitioner-developer. Under these circumstances, the petitioner-developer filed the present petition that disputes have arisen between the parties which have to be referred for arbitration. 6. Mr.Rakesh K. Khanna, learned senior counsel Arbitration Case No.22 of 2008(O&M) [6] appearing for the respondents has contended that there is no dispute as has been mentioned in the petition and in any case dispute with regard to possession of land will not be a dispute which could be referred for arbitration. He further contended that in terms of LC-4 a form which has to be submitted to the Director, Town and Country Planning, the operative words are that “owner has to be in possession of the land in question”. Learned counsel tried to emphasize on the basis of this form that the stand of the petitioner-developer that possession of the land was given to the petitioner-developer was not correct either in fact or in law. Mr.Khanna further stated that the power of attorney as well as special power of attorney were executed by the respondent – land- owners in favour of the petitioner-developer. 7. What has been contended by Mr.Khanna is that if the petitioner-developer was dispossessed in June, 2007, it should have filed an appropriate proceedings either under civil or criminal law and why the petitioner-developer waited for such a long period of six months to issue legal notice to the respondent -land-owners. 8. In view of the submission of learned counsel for the respondents, on the last date of hearing, after hearing the parties, I had directed the petitioner-developer to place on record the steps taken to obtain the licence after delivery of possession, as well as expenses incurred on putting up a fence around the land in question. Arbitration Case No.22 of 2008(O&M) [7] 9. Pursuant to said direction, an affidavit has been filed by the petitioner-developer inter alia stating that on 3.3.2007 after the execution of the agreement, the petitioner-developer immediately made an application on 5.3.2007 for grant of licence for setting up a Group Housing Colony in Sector 73, Gurgaon and for grant of licence for setting up an IT Park/Cyber Park, in Sector 74, Gurgaon before the Director, Town and Country Planning along with an amount of Rs.1,83,50,000/- (Rupees one crore eighty three lacs fifty thousand) qua the land in Sector 73, Gurgaon and an amount of Rs.19,55,000/- (Rupees Nineteen lacs fifty five thousand) qua land in question in Sector 74, Gurgaon (total Rs.2,03,05,000/-) (Rupees two crore, three lacs and five thouusand) besides annexing other requisite documents. 10. I have perused the said documents which throw some light prima facie on the issue involved in the controversy. A developer who has paid an amount of Rs.8.80 crores for the land in question, if possession of the land had not been given to him, why would he do, whatever is required to be done by him, why he will pay further money with the Director, Town and Country Planning Department by depositing the aforesaid amount as spelled out. Along with the Civil Misc. Application an additional affidavit along with photo copies of the application dated 5.3.2007 and the drafts so deposited have also been filed. The annexures filed with the application made on 5.3.2007 for grant of licence which are at pages Arbitration Case No.22 of 2008(O&M) [8] 14,15 and 16 bear the signatures of respondents Mordhwaj Singh, Vikram Singh, Bhim Singh and Ram Narayan Singh. Along with the said additional affidavit, statement of ledger of Murlei Deven, according to the petitioner-developer who has done the fencing along with the amount spent on fencing, has also been filed. 11. Mr.Rakesh K. Khanna, learned counsel for the respondent -land-owners contended that from the ledger of Murlei Deven filed as Annexure P-8, nothing would turn around as this is not in relation to the land in question but is in relation to some other land owned by the petitioner-developer. Learned counsel for the respondent -land-owners has vehemently contended that as per the agreement, the period of the agreement was for one year which was to expire on 2.3.2008. 12. As the interpretation of this clause has been questioned by the parties, therefore, it would be appropriate to reproduce the said clause which is as follows:- “4. Developer's Obligations and Covenants 4.1. That subject to execution of General Power of Attorney, Special Power of Attorney etc. and compliance with other obligations placed upon the Owners, the Developer shall be bound to obtain license within a period of 12 Months from the date of execution of this agreement. The Developer shall be further bound to complete the development work within 24 months from the date of grant of licence. In case the Developer fails to do so in that event it Arbitration Case No.22 of 2008(O&M) [9] shall be entitled to a grace period of 3 months. This grace period may be availed once by the Developer either for obtaining licence or for completing the development. In case the developer fails to carry out either of the obligations after the grace period, the Developer shall be liable to pay compensation @ Rs.2,50,000/- per month per acre for the undeveloped area. The Developer obligations are subject to the Owners fulfilling their part of the obligation in extending co-operation and making best of efforts in order to enable the Developer to fulfill its obligations.” On the basis of aforesaid clause, it has been contended by Mr.Khanna that for availing of the grace period of three months the petitioner-developer had to write or make a request to the respondent -land-owners, as availability of the grace period was not a matter of right. So far as the petitioner is concerned, there is nothing on the record to show that the petitioner-developer has either availed or had the intention to avail the grace period of three months. 13. On the other hand, it has been contended before me by Mr.Rajiv Atma Ram, learned counsel for the petitioner-developer that if the petitioner-developer failed to do the development work within 24 months or failed to obtain the licence within a period of 12 months, that grace period was available on the option of the petitioner-developer. Petitioner could have availed this period at the start of the development work i.e. for obtaining licence or could Arbitration Case No.22 of 2008(O&M) [10] have availed after the stipulated period of completion of development i.e. 24 months and this grace period is embodied in the terms of the contract, for which no application has to be made by the petitioner-developer. It has been further contended that if time was the essence of the agreement, then why in the agreement a stipulation was made that in case the developer fails to carry out the development work i.e. obtaining the licence or completion of the work after the grace period, the liability of the developer would be to pay Rs.2,50,000/- per month per acre as compensation for the undeveloped area. It has been further contended that from the totality of the reading of Clause 4.1, the argument of learned counsel for the respondent -land-owners that after 12 months period, the agreement will be ceased to be in operation, falls to the ground. 14. I have given my careful consideration to the arguments advanced by learned counsel for both the parties. Suffice it to say that this Court, at this juncture, need not to go into the merits and de-merits of the parties, but will have to adjudicate whether there is any live, subsisting agreement prima facie in existence or not? Whatever was to be done pursuant to the development agreement, was the responsibility of the developer. The respondent – land- owners were to be given 45 per cent share of the duly sanctioned FAR in case of group housing and further 45% in case of industrial (Cyber park/IT park). So much so 100 per cent of the area such as Arbitration Case No.22 of 2008(O&M) [11] schools, hospitals and clubs etc. and all obligations with regard to private unit for economically weaker sections were to be provided from the share of the petitioner-developer. The petitioner-developer was to pay for all demands on account of external development charges and internal development charges and only fully developed areas were to be allocated to the respondent-land-owners. What was the contribution of the respondent-land-owners? It was only the land which was owned by them. If the land is taken out from the agreement, the petitioner-developer will not be in a position to do any act in furtherance of implementation of that agreement. 15. Prima facie, an amount of Rs.8.80 crores having been paid to the respondent – land-owners, not denied by them, and on account of the fact that on 5.3.2007 further payment made to the Director, Town and Country Planning to the extent of Rs.1,83,50,000/- (Rupees one crore, eighty three lacs and fifty thusand) and Rs.19,55,000/- (Rupees Nineteen lacs and fifty five thousand) for grant of licence, is a pointer that in terms of the agreement, the land had been handed over to the petitioner- developer. Prima facie I feel that otherwise, no developer would start making the payments to the authorities in the absence of the possession of the land and that too when respondent – land-owners had to contribute nothing except the land. 16. I need not to go into other questions as to whether registration of a special power of attorney as well as general power Arbitration Case No.22 of 2008(O&M) [12] of attorney was important factor for carrying out the obligations by the petitioner under the agreement. I also need not to go into the question whether the factum of dispossession which has been alleged by the petitioner is correct or not. That should also not detain me in going into the controversy whether the statement given by the petitioner-developer with regard to the fencing whether it is of the land of the respondent – land-owners or its own land. I need not to go into these questions as anything said herein would amount to an expression of opinion which may prejudice the mind of the Arbitrator. 17. From the plain reading of Clause 4 of the development agreement which contains Developer's Obligations and Covenants, it can be said that the argument of learned counsel for the respondent – land-owners that the validity of the arbitration agreement was only for a period of one year is not correct. The following lines of the agreement “In case the developer fails to carry out either of the obligations after the grace period, the Developer shall be liable to pay compensation @ Rs.2,50,000/- per month per acre for the undeveloped area” creates a doubt about the submissions made by learned counsel for the respondent -land-owners to be correct. 18. Otherwise also this petition was filed by the petitioner on 28.1.2008 i.e. much before the period of expiration of the Arbitration Case No.22 of 2008(O&M) [13] agreement. If there was no dispute then why Annexure R-1 was filed by the respondents along with counter to the petition dated 11.3.2008. Annexure R-1, a letter dated nil adressed to the petitioner by the respondent himself, which according to the respondent was signed by real estate agent as well as one of the respondents Mordhwaj Singh is to the following effect:- “On behalf of the owners of Behrampur Project's Land it is my submission that the act you have taken to approach Hon'ble High Court to appoint an Arbitrator for such a petty cause is totally undesirable. We should develop mutual trust rather than to create differences between both the parties. The owners of the land or keenly interested in success of the project. The owners are ready to offer the possession of the land immediately after getting of license. The owner is morally, ethically & practically bound to follow each and every clause of the Development Agreement. Even than to make you confirm regarding possession of the land after L.O.I., the owner has consented to appoint and Arbitrator on mutual consensus basis for the sole purpose regarding giving possession of land after L.O.I. No objection from Mr.Mordhwaj Yadav an authorized person from owners' side has seeken. Further I assure you that all documents Arbitration Case No.22 of 2008(O&M) [14] pertaining to license will be get registered.” 19. This is contrary to the arguments of the respondents that there was no live, subsisting agreement between the parties. However, whether possession of the land was to be given after the licence was obtained by the petitioner, power of attorney or special power of attorney was to be got registered by the respondents after obtaining the licence or possession of the land was handed at the time of execution of agreement in terms of the agreement by the respondents to the petitioner? is a dispute, which is covered under the agreement between the parties. 20. From the letter reproducued above, it is manifestly clear that the respondent himself has also stated that the agreement is alive. However, the same shall be done after receiving L.O.I. Therefore, I hold that there subsists a live agreement and since the disputes and differences have arisen in view of what has been discussed above, same has to be referred for adjudication by an Arbitrator. Therefore, I appoint Justice Usha Mehra (a retired Judge of Delhi High Court) as the sole Arbitrator to adjudicate upon all the aforesaid disputes between the parties. The Arbitrator shall fix her own fee Intimation of appointment be sent to the Arbitrator. Parties to appear before the Arbitrator on 15.7.2008 at 4.00 P.M. Petition stands disposed of. Arbitration Case No.22 of 2008(O&M) [15] 21. However, it is made clear that any expression of opinion given by me hereinabove shall not affect the decision of the Arbitrator. ( VIJENDER JAIN ) May 29, 2008 CHIEF JUSTICE RC