M/S.Shree Ram Mills Ltd vs M/S.Utility Premises (P) Ltd

3. The said order is assailed mainly on two grounds, firstly, that there was no live issue in existence in between the parties and the learned Judge erred in holding that there was a live issue in between the parties and secondly that the claim had become barred by limitation between the parties. As against this the respondents M/s.Utility Premises (P) Ltd., supported the order and pointed out that in pursuance of the order passed not only had the Arbitrator been appointed but they had also chosen the third Arbitrator to preside over the Arbitral Tribunal and the Arbitral Tribunal had commenced its proceedings. Presently the proceedings before the Arbitral Tribunal are stayed.

5. Following undisputed facts would have to be borne in mind before approaching the questions raised.

6. The appellant is a company incorporated under the Companies Act, 1956, so also the respondent. The appellant company became a sick industrial unit sometime in the year 1987 under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the SICA"). It was ordered to be wound up in the year 1994 and on approaching the Board For Industrial and Financial Reconstruction (BIFR) a rehabilitation scheme was worked out whereby IDBI was appointed as an operating agency under the scheme. The Asset Sale Committee approved the sale of 1.20 lakh sq.ft. FSI owned by the appellant company to the respondent for a total sale consideration of Rs.21.60 crores and accordingly an agreement came to be executed in between the parties on 27.4.1994. This was a Joint Development Agreement between the parties in respect of the land owned by the appellant. By Clause 1 of the agreement, the area mentioned for development was between 86,000 sq.ft to 1.20 lakh sq.ft. Clause 15 of the said agreement provides that the land owner, the appellant herein, shall not create any encumbrance or third party rights. By Clause 19 the appellant had undertaken to add additional FSI. By Clause 22 the period was fixed for utilization of the full FSI covered under the agreement. Clause 24 was the Arbitration Clause to resolve the disputes, if any, between the parties. The property covered was described in the Third Schedule of the said agreement which mentions 1.20 lakh sq.ft. FSI.

7. After this agreement a second agreement came to be executed in between the parties on 18.7.1994. This was necessitated because the appellant herein could make available only 86,725 sq.ft. FSI. Under this second agreement it was agreed to by the appellant herein that the further land admeasuring 2500 sq.mtrs. would be allowed to be developed by the respondent. The said 2500 sq.mtrs. land was reserved by Bombay Municipal Corporation for Municipal Primary School and playground. However, the appellant herein undertook to shift the said reservation to some other property of the appellant at the cost of the respondent. There was an arbitration clause vide Clause No.10 in this agreement also.

8. On 9.11.1994 there was a Tripartite Agreement between the appellant and respondent herein along with one Bhupendra Capital and Finance Limited whereby 50% of the appellant's entire interest under the Agreement dated 27.4.1994 and 18.7.1994 was agreed to be transferred.

11. On 4.5.2001 the respondent herein had filed a petition under Section 9 of the Act seeking injunction and appointment of Receiver in respect of 2500 sq.mtrs. of land. However, that was dismissed by the High Court on the ground that the area was covered under the agreement dated 18.7.1994 and it was cancelled by an agreement dated 22.6.1996 and, therefore, the application was not maintainable. The appeal against this order also failed vide order dated 3.6.2002.

16. On 15.10.2004 the appellant company was released from SICA as it became viable.

17. At this juncture on 19.1.2005 a Memorandum of Understanding (MoU) was signed between the parties to settle all disputes between them which naturally included the issue regarding the transfer of 1.20 lakh sq.ft. of FSI. The respondent under the same agreed to accept 1.20 crores out of which a payment of Rs.10 lakhs was already made by the appellant to the respondent. The appellant also agreed to execute the necessary conveyance deed as per agreement dated 27.4.1994 and 22.6.1996 thereby seeking to confine the claim of the respondent to 86725 sq.ft. of FSI.

19. The respondent invoked the Arbitration Clause under the Agreements dated 27.4.1994 and 18.7.1994 by a notice dated 24.5.2005. The said notice was replied to by the appellant vide its reply dated 21.6.2005 denying its liability and as a result an Arbitration Petition under Section 11(6) of the Act was filed on 1.7.2005 for appointing Shri S.C. Agarwal as the Sole Arbitrator. It is this application which was disposed of by the learned Judge on 11.8.2006 which is the subject matter of the present proceedings before us at the instance of the appellant.

32. In view of the foregoing discussion we are of the clear opinion that the learned Designate Judge was right in appointing the Arbitrator under Section 11(6) of the Act, We, therefore, proceed to dismiss the Civil Appeal with no order as to costs.