1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR MISC. CIVIL APPLICATION NO. 1090 OF 2007 ( M/s. Hindustan Builders vs. Shri Mukundrao Poornachandrarao Buty & Ors. ) Office Notes, Office Memoranda of Coram, appearances, Court's orders Court's or Judge's orders or directions and Registrar's orders. CORAM : B.P. DHARMADHIKARI, J. AUGUST 28, 2008. Heard Shri B.B. Mehadia, Advocate for the applicant, Shri S.V. Manohar, Advocate for respondents No. 1 to 8 and Shri W.V. Charde, Advocate for respondent No.9. The facts admitted are that there was an Agreement for Development of certain properties between the applicant on one hand and Respondents No.1 to 8 on other hand on 25.3.2000 and 9.6.2002. That agreement contained an arbitration clause. The said agreement for development was cancelled by a Deed of Cancellation executed on 17.5.2005. This Deed of Cancellation is again an admitted agreement which does not contain any arbitration clause. As per this Deed of Cancellation, the applicant surrendered his rights under the agreement of developments and in consideration thereof and labour/ expenditure already incurred by 2 him, he was to be compensated as specified in the schedule appended to this Deed of Cancellation. There is also a tripartite memorandum of understanding signed by the applicant and Respondent No.9 on 18.6.2005. Respondents No. 1 to 8 did not sign it as they already had executed a Deed of Cancellation. As payment as per that Schedule has not been effected, it is the contention of Shri Mehadia that Deed of Cancellation itself has not come into force or is rendered immaterial and irrelevant. He argues that agreement of development dated 9.6.2002, therefore, still holds the field or automatically stands revived and dispute between the parties needs to be referred because of arbitration clause as contained in that agreement of development. He further states that whether this position is correct or not, i.e. whether such arbitration clause becomes available because of breach of Deed of Cancellation is a question which also needs to be decided by an Arbitrator alone and this Court cannot scrutinise that aspect. He places reliance upon the judgment of the Hon'ble Apex Court in the case of Shree Ram Mills Ltd. vs. Utility Premises (P) Ltd., reported at (2007) 4 SCC 599. Shri Manohar, Advocate for respondents 3 No. 1 to 8 deny such effect of breach of Deed of Cancellation. He states that even if such breach is presumed, the breach does not result in automatic restoration of agreement of development dated 9.6.2002. He invites attention to various clauses of Deed of Cancellation on which Shri Mehadia, Advocate has also placed reliance to state that in case of breach of Deed of Cancellation, the applicant is entitled to compensation as specified in schedule and nothing more. He, therefore, states that there is no arbitration clause between the parties. He further states that Deed of Cancellation has not been filed along with application under Section 11(6) before this Court and this effect of its alleged breach is also not pleaded in original application. He argues that if the restoration of cancelled Agreement of Development was to be pointed out, it ought to have been pleaded with necessary documents and letters. Shri Charde, Advocate for respondent No.9 states that they were not party to the agreement of development dated 9.6.2002 and as such there is no arbitration clause between Respondent No.9 and present applicant or Respondent No.9 and Respondents No. 1 to 8. It is further argued that there is separate deed of development/ understanding between Respondents 4 No. 1 to 8 and Respondent No.9 which is in pursuance of Deed of Cancellation between present applicant and Respondents No. 1 to 8 and in that separate agreement, again there is no arbitration clause. It is, therefore, argued that the dispute in which Respondent No.9 is involved, cannot be referred to Arbitrator in the absence of any such agreement for arbitration between the parties. Thus, the issue which falls for consideration of this Court is whether any breach of Deed of Cancellation dated 17.5.2005 has the effect of continuation or restoration of agreement dated 9.6.2002, thereby enabling the applicant to invoke arbitration clause as contained therein. The second question is whether such an issue can be gone into by this Court to find out existence of arbitration clause or then the issue must be left for consideration by an Arbitrator. The judgment of the Hon'ble Apex Court in the case of Shree Ram Mills Ltd. vs. Utility Premises (P) Ltd., (supra), on which Shri Mehadia, Advocate has placed reliance considers somewhat similar controversy. The facts are given by the Hon'ble Apex Court in para 6 onwards and the consideration on the basis of those facts is available in para 29. In later part of para 29 at p.610 of the 5 report, the Hon'ble Apex Court has recorded a finding that the facts before it did not suggest that there was a full and final settlement between the parties in respect of the issue regarding 1,20,000 sq. feet of FSI and subsequent memorandum of understanding wherein the respondent before the Hon'ble Apex Court and one Bhupendra Capital and Finance Ltd. were parties acknowledged that they were left with rights limited to 86,725 sq. feet of FSI. The Hon'ble Apex Court found that there was no reference whatsoever to any consideration as regards 1,20,000 sq. ft. of FSI much less to the figure of Rs. 1.20 Crores in the said Memorandum of Understanding. It is in this background that the Hon'ble Apex Court left it for determination of the Arbitrator and observed that “as to what would be the effect of this Memorandum of Understanding on the rights of the respondent herein would not be for us to go into but it is certain that the issue had not been settled completely”. Thus, the facts before the Hon'ble Apex Court were entirely different than the facts which are presented before me in the present case. The Deed of Cancellation dated 17.5.2005 does not in any way keep alive any issue arising out the Agreement of Development dated 9.6.2002. It does 6 not even contemplate revival of said agreement dated 9.6.2002. The important clauses are clause Nos. 1, 3, 4 & 8 on which Shri Mehadia, Advocate as also the other side has placed heavy reliance. The said clauses also nowhere contemplate that till or if compensation as per schedule appended to this Deed of Cancellation is not paid, the Deed of Cancellation itself shall not come into force or stand annulled and Agreement of Development dated 9.6.2002 shall stand revived. Clause 4 of this Deed of Cancellation reads as under: “It is hereby specifically agreed that the party No.2 shall not claim any compensation either from the party No.1 or from the New Developer except that mentioned in the Deed of Cancellation.” It clearly shows that party No.2 i.e. present applicant specifically agreed not to claim any compensation either from party No.1 or from New Developer except the one which is mentioned in the Deed of Cancellation. This clause, therefore, expressly restricts the entitlement of present applicant to the figure disclosed in schedule even in case of breach, otherwise there was no need to incorporate such clause in the Deed of Cancellation and or to even mention New Developer therein. It is 7 apparent that in the absence of such clause, no new developer would have entered into new agreement with Respondents No. 1 to 8. This intention can be gathered even from clauses 6 & 11 of tripartite agreement at Annexure R-(9)-3. Schedule of payment appended to Deed of Cancellation is also part of this memorandum of understanding. The arguments of Shri Charde, Advocate needs to be appreciated in this background. It is apparent that because of this Deed of Cancellation, it is not necessary to act on the basis of Agreement of Development dated 25.3.2000 or 9.6.2002 and in the absence of any arbitration clause in separate agreement entered into by parties with Respondent No.9, respondent No.9 cannot be tried in arbitration. It is, therefore, clear that the argument of Shri Mehadia, Advocate about continuation of development agreement till payment is effected or that breach of Deed of Cancellation results in restoration of agreement of developments cannot be accepted. The applicant is only entitled to recover compensation as per schedule appended to Deed of Cancellation. It is clear that the ratio of the judgment of the Hon'ble Apex Court is not applicable in the present facts. This Court has to find out whether there is arbitration agreement between the 8 parties or not. In the circumstances, I find the present Misc. Civil Application No.1090 of 2007 to be misconceived and the same is accordingly rejected. However, there shall be no order as to costs. JUDGE *GS.