M.P.Housing Board vs Progressive Writers & Publishers

On February 18, 1975 the M.P. Housing Board (for short `the Board') and Progressive Writers and Publishers, New Delhi (hereinafter called as the `depositor') entered into an agreement whereunder the Board agreed to construct a building called the 2 `Hitavada Press Complex' on the land admeasuring 33932 sq. ft. situated at T.T.Nagar, Bhopal. The terms of agreement, inter-alia, provided that the Board would execute the construction of Hitavada Press Complex and charge 5% supervision charges of the actual expenditure on the project. The cost of construction was to be borne by the depositor. The depositor was required to place funds including supervision charges at the disposal of the Board in advance as agreed upon. The work was expected to be completed within 18-24 months. The possession of the land was handed over to the Board for the purposes of construction of building. In case of overrun of expenditure and funds, the revised estimates were to be submitted and the administrative approval of the depositor was required to be obtained. In the event of any dispute, the matter was required to be referred to the Secretary, Government of Madhya Pradesh for decision. 3

2. The cost of construction of the building was estimated at Rs. 28 lakhs out of which the depositor was required to deposit an amount of Rs. 14 lakhs at the outset and the balance thereafter. The initial amount of Rs.14 lakhs was accordingly deposited by the depositor with the Board. However, the depositor failed to deposit the balance amount. In the meanwhile, the Board had paid the amounts from its own funds in order to complete the construction of the building. The depositor expressed its desire to retain only that portion of the building where the printing press was located including mezzanine floor along with two adjacent halls on the first floor and accordingly made a representation to the Board. The Board in its turn agreed to the suggestion and thereafter parties entered into the second building agreement dated May 4, 1977; under which it was expressly agreed between the parties that the depositor would transfer the total area of the land and building which was 33932 sq. ft. 4 and the Board would in turn re-transfer 7437 sq.ft. of land along with hall having Press portion constructed thereon for which the depositor would pay Rs. 3.50 lakhs to the Board in 15 equal yearly installments. The Board agreed to grant a loan of Rs. 3.50 lakhs repayable with interest against an equitable mortgage of the Press building and the portion of the land thereon. Out of the said amount, Rs. 50,000/- was to be paid by the Board to Punjab and Sind Bank as per the instructions of the depositor. It was also agreed between the parties that the Board in order to acquire full ownership of the entire complex shall return the amount of Rs. 14 lakhs and for that purpose the original documents pledged by the depositor with the Punjab and Sind Bank were to be redeemed by the Board upon payment of Rs.13.50 lakhs to the Bank. Upon fulfillment of the said conditions, the Board was entitled to complete the construction of the building in its possession and enjoy the same as the full owner. 5

3. The Board in terms of the second building agreement had paid the agreed sum to the Bank and obtained the original title deeds of the part of the plot admeasuring 19319 sq. ft only. However, the title deeds of the residual area were not handed over to the Board. The construction was completed by the Board.

4. For whatever be the reasons, the parties have entered into third building agreement on May 31, 1980. The recitals in the agreement disclose that certain complications and disputes arose between the parties after execution of the earlier two agreements resulting in litigation between the parties which were pending as on the date of third building agreement. In the third building agreement it is inter-alia stated that "on the request of the depositor vide their letter of May 1, 1980, expressing their desire to take the entire Complex building on the following terms and conditions and to end all litigation for all time to come, to which 6 the Board agrees......" Under the said agreement, the depositor agreed to pay to the Board the total amount of cost incurred by the Board for construction of Complex undertaken by it under the first agreement of February 18, 1975, estimated at Rs.73.50 lakhs including architectural fee, capitalised interest and supervision charges. The depositor was required to pay interest on the principal amount at the rate of 15% per annum from the date of completion of construction of the building (i.e. 01.01.1979) upto the date of payment. The depositor also agreed to repay the entire loan amount of Rs. 3.50 lakhs paid to it under the second agreement dated May 4, 1977 with interest at the rate of 10= % till the date of repayment.

5. The dispute centers around the interpretation of Clause 4 of the agreement and it may be just and necessary to notice the same in its entirety.

The agreement further provides that as soon as the aforesaid amounts are paid in full, the parties were required to take follow up action and withdraw all suits and appeals filed by the parties that were pending in courts and as well as before Property Administrator, M.P. Housing Board. The Board was required to hand over possession and the title deeds by duly declaring the depositor as the owner of the Complex. It was expressly provided that all such provisions of the previous two agreements which were inconsistent with the third agreement shall be deemed to be ineffective.

7. Since the parties failed in arriving at any agreed settlement, the Board filed Suit No.2A/87 before the court of IInd Additional Judge, Bhopal for permanent injunction seeking a restraint against the depositor from disturbing their possession of the land and building and also sought a further restraint order restraining the depositor from demolishing sheds constructed by the Board. The court granted a temporary injunction. The depositor filed Misc. First Appeal in the High Court challenging the order of temporary injunction granted by the trial court. The High Court vacated the temporary injunction order. 9 The Board thereafter filed a comprehensive Civil Suit bearing RCS No.8A/90 in the court of IInd Additional District Judge, Bhopal for declaration, Specific Performance of the Contract and Permanent Injunction. The learned trial court referred the disputes arising out of RCS No. 8A/90 (New No.63-A/94) and Regular Civil Suit No.2A/87 (New No. 16A/94) to the sole arbitrator Shri Justice K.K. Dubey (Retired) for determination of disputes. The said cases were registered before the arbitrator as Reference Case No.1/95 and Reference Case No.2/95. The arbitrator by his award dated September 23, 1998 granted the following reliefs :

27. In the light of the settled legal principle, we are of the opinion that the arbitrator was not bound to adopt 27 only the issues submitted by the parties but was well within his jurisdiction to frame such other issue or issues as may be just and necessary for the purpose of disposal of the reference made under Section 23 of the Act. We accordingly find no merit in the submissions made by the learned senior counsel that the arbitrator exceeded his jurisdiction and committed grave legal misconduct in framing said issue and determining the same.

33. The arbitrator accordingly passed the award declaring that the Board shall be entitled to a sum of Rs.37,70,309.85 and directed the depositor to pay half of the amount as soon as award is declared a Rule of the Court. The rest of the amount to be paid in monthly installments of 2.4 lakhs from the monthly rental income of the building. In case of any default the Board shall be entitled to interest @ 18% per annum capitalized quarterly. Relief granted by the arbitrator, in our considered view is fair and equitable one. The arbitrator awarded the amounts towards cost of construction plus supervision and other charges payable to the Board together with a hefty interest @ 35 15% compound from the date of expenditure by the Board till the date of payment.

34. In our considered opinion, there is nothing in the award requiring intervention by the courts. The courts below rightly refused to interfere with the award passed by the arbitrator. It is not a case which warrants our interference in exercise of jurisdiction under Article 136 of the Constitution of India.

35. Appeal fails and is accordingly dismissed with no order as to costs.

March 20, 2009