Akshra Townships Private Limited vs L.Renuka

This application is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) to appoint an arbitrator to resolve the disputes and claims between the applicant and the respondents in terms of Clause 12 of the Development Agreement dated 01.01.2018 and Clause 13 of the Development Agreement dated 22.12.2018 entered into between the parties.

It is stated that the applicant is a company registered under the Companies Act and engaged in real estate business, having registered office at Warangal and branch offices in different areas. One of its branch offices is in Siricilla. The applicant executed several projects and completed ventures under the name and style of "Akshara Township Private Limited".

It is stated that the respondent Nos.1 to 3, having come to know about the successful projects of the applicant, approached the applicant and made a proposal to give the land admeasuring Ac.36.00 situated at Vemulavada for development to the applicant. It was represented by the respondents that the owners of the said land, Sri Govrineni Rajeshwar Rao and others and others, expressed their interest to give their land for development and the respondents No.1 to 3 had been dealing with the said owners. The respondent No.1 is the wife of respondent No.3 and the respondent No.3 had been dealing with the affairs of the respondent No.1.

It is stated that with the above understanding, the respondent No.2, at the first instance, with the oral consent of the respondents No.1 and 3, entered into Preliminary Agreement cum Memorandum of Understanding on 09.12.2017 with the applicant in respect of the land admeasuring Ac.36.00 situated at Vemulawada for its development i.e. conversion into house site plots. In furtherance of the above Memorandum of Understanding dated 09.12.2017, a separate document styled as "Preliminary Agreement for Development of Property" dated 01.01.2018 was executed between the respondents No.1 and 2 and the applicant to develop the land admeasuring Ac.35.32 guntas (land available on spot measurement) situated at Tippapur village, Vemulawada Urban Mandal, Rajanna Siricilla District Telangana. As per the terms of the Preliminary Agreement dated 01.01.2018, the respondents No.1 and 2 agreed to get the above mentioned property into registered in their names and later, to execute a registered Development Agreement with the applicant. The applicant and the respondents No.1 to 3 have also finalized the proposed Approved Layout Plan of the property.

It is submitted that the respondents No.1 to 3 informed the applicant that the pattedars i.e. Govrineni Rajeshwer Rao and others executed registered Sale Deed vide Document No.8056/2018 dated 01.11.2018 in respect of land to an extent of Ac.12.00 guntas in Sy.No.255/9, Sy.No.273/C/అ, Sy.No.273/C/ఆ, Sy.No.274/1/A, Sy.No.274/1/B1 and Sy.No.274/1/B2 situated at Tippapur Village, in favour of the respondents No.2 to 5. It was informed to the applicant that the pattedars would execute another registered sale deed in favour of the respondents in near future. That believing the representation of the respondents, the applicant sent a Draft Development Deed to the respondent No.3, which was approved, finalized and registered as Development agreement cum Irrevocable General Power of Attorney executed by the respondents No.2 to 5 vide document No.9323/2018 dated 22.12.2018 in respect of Ac.12.00 guntas at Vemulawada, in favour of the applicant.

It is submitted that as per the terms of the development agreement dated 22.12.2018, if the applicant fails to complete the work within the stipulated time, the respondents No.2 to 5 have to complete the work and the balance amount will be paid to the applicant by them. Further, it was mentioned in page No.7 at para No.4 of the development agreement dated 22.12.2018 that the respondents No.2 to 5 shall provide road access to the schedule property covered therein from out of the remaining land admeasuring Ac.23-22 guntas to enable the applicant to complete the project. It was made clear that unless and until the respondents No.2 to 5 carve out a road, the applicant cannot complete its project as envisaged in development agreement dated 22.12.2018.

It is submitted that the applicant has been ready and willing to perform its obligations covered under Preliminary Agreement dated 01.01.2018 and development agreement dated 22.12.2018. But the respondents No.1 to 5, on one pretext or the other, have failed to perform their obligations in providing road access to the schedule property covered under development agreement dated 22.12.2018. The applicant issued several e-mails to the respondent No.3 to provide road access but there is no response from the respondent No.3.

It is submitted that while the matter stood thus, the applicant came to know that the original pattedars/owners have executed different sale deeds to an extent Ac.23.22 guntas in the following manner:

A. The Registered Sale Deed vide Document No. 2906/2019 dated : 29-03-2019 to an extent of Ac 8.00 guntas situated at Vemulawada, in which the respondents No 3 and respondent No 5 are shown as the purchasers.

B. The Registered Sale Deed vide document number 7110/2019 dated : 03-08-2019 to an extent of Ac 3.33 guntas situated at Vemulawada, in which the respondents No 3 and Respondent No. 9 are shown as the purchasers.

C. The Registered Sale Deed vide document number 7111/2019 dated : 03-08-2019 to an extent of Ac 11.39 guntas situated at Vemulawada, in which the respondents No 3,Respondent No.6 to 8 were shown as the purchasers.

It is stated that thereafter, the respondents No.3, 5, 7 and 8 have executed a registered Development Agreement cum General Power of Attorney to M/s NRR Infra i.e. respondents No.5 and 10 for development of land to an extent of Ac.19.32 guntas vide document No.7766/2019 dated 23.08.2019, which is breach of development agreement dated 01.01.2018 and 22-12-2018. The execution of the development agreement in favour of the respondents No.5 and 10 would hamper the project of development of land i.e. conversion to house sites for total extent of Ac 35.32 guntas.

It is stated that the respondents No.2 to 5 have issued a notice to the applicant on 14.12.2019 alleging non-completion of the project and invoked clause 13 of agreement dated 22.12.2018 and sought consent for appointment of sole arbitrator. On 05.02.2020, the applicant sent a reply to the respondents No.2 to 5 by not accepting the name suggested by the respondents No. 2 to 5 and suggested the name of another person to act as sole arbitrator to resolve dispute and differences. Later, on 04.12.2020, the applicant sent a notice to the respondents seeking consent of named Arbitrator invoking the arbitration clause to resolve disputes and other differences between the applicant and the respondents. The applicant had also invoked Section 9 of Act for interim relief as the respondents did not come forward to appoint an arbitrator. In the circumstances, the instant application is filed for appointment of arbitrator as per clause 12 of the development agreement dated 01.01.2018 and clause 13 of the development agreement dated 22.12.2018.

In the counter filed by the respondents No.1 to 3, inter alia, it is stated that the agreement dated 01.01.2018 had no nexus with the preliminary agreement dated 09.02.2017. It was denied that the respondents No.1 to 3 introduced themselves and proposed for development of land claiming that its owners, Govrineni Rajeshwer Rao and others, intended to develop the same and the respondent No.3 is dealing with the said owners. As per clause 19 of the development agreement dated 22.12.2018, the said agreement supersedes all other agreements and understandings between the parties or any of them, as such, the parties to the preliminary agreement, more particularly, the applicant was conscious of the fact that the preliminary agreement dated 01.01.2018 was superseded by development agreement dated 22.12.2018 and consequently, the preliminary agreement would no longer be valid. As such, invocation of arbitration clause under the superseded preliminary agreement is invalid. The applicant did not initiate any steps for developing the schedule property. The agreement of sale dated 22.10.2017 entered into between the owners of the land and the respondents No.1 and 2 could not be fructified for certain unforeseen circumstances.

It is admitted that respondents No.2 to 5 have issued notices dated 14.12.2019 invoking clause 13 of the development agreement dated 22.12.2018 requesting the applicant to give consent to the name suggested by them to be appointed as an arbitrator to adjudicate the disputes between the parties and that and that the applicant gave reply on 05.02.2020 refusing to give consent and in turn, proposed to appoint one Md. Habeeb Ali, Advocate, as an arbitrator. It is submitted that the present application filed seeking appointment of arbitrator under two different agreements, which are unconnected, is liable to be rejected.

The respondent No.2 adopted the counter of respondents No.1 and 3. In the counter filed by the respondents No.4 and 5, it is stated that they are not parties to the agreement dated 01.01.2018 and there was no breach on the part of the respondents No.4 and 5 in performing the terms of the agreement dated 22.12.2018. In the counter filed by the respondents No.6, 8 and 9, it is stated that they are unnecessarily arraigned as respondents in the instant application and they are not aware of the purported agreements dated 01.01.2018 and 22.12.2018. In the counter of respondents No.7 and 10, it is stated that they are not parties to the agreements dated 01.01.2018 and 22.12.2018 and they are not binding on them.

Mr. Alladi Ravinder, learned senior counsel appearing for the applicant, submitted that the preliminary agreement dated 1.01.2018 and development agreement dated 22.12.2018 are binding on the respondents. The respondents No.2 to 5 are parties to the development agreement dated 22.12.2018 and a refundable deposit of Rs.1.5 crores was deposited at the time of preliminary agreement dated 01.01.2018. The preliminary agreement was entered in favour of the applicant in respect of Ac.32.35 guntas of land with an understanding that the respondents No.1 and 2 would complete the sale transactions and executed development agreements in favour of the applicant from time to time. As sale deed was finalized for an extent of Ac.12.00 guntas, the development agreement dated 22.12.2018 was entered into for Ac.12.00 guntas by the respondents No.2 and 3. The respondent No.3 is the husband of the respondent No.1 and had been dealing on her behalf.

Mr. M. Srinivas Reddy, learned counsel appearing for the respondents No.1 and 3, submitted that the respondent No.3 is not a party to the agreement dated 01.01.2018 and it was entered into only by the respondents No.1 and 2. The development agreement dated 22.12.2018 was signed by four parties (respondents No.2 to 5) and the respondent No.2 is common to the two agreements. However, the remaining parties are not signatories in two agreements. As per clause 19 of the development agreement dated 22.12.2018, the agreement dated 01.01.2018 stood novated.

Learned counsel for the respondents No.4 and 5, while reiterating the submissions made by the respondents No.1 and 3, submitted that the respondents No.4 and 5 are not parties to the agreement dated 01.01.2018. The respondents No.7 and 10 are subsequent purchasers and developers of different extents of land. Further, the respondents No.6, 8 and 9 are not parties to both the agreements.

In reply to the arguments of the learned counsel for the respondents, learned senior counsel for the petitioner submitted that the agreement dated 01.01.2018 is the main agreement. The development agreement dated 22.12.2018 is made in pursuance of the agreement dated 01.01.2018. Both the agreements are interconnected. By applying the doctrine of group companies, both the agreements are binding on the respondents. The respondents No.4 and 5 consented for appointment of arbitrator and consented for initiating the arbitration proceedings.

Heard learned senior counsel for the petitioner and learned counsel for the respondents. Perused the material on record.

Clause 12 of the preliminary agreement dated 01.01.2018 provides for arbitration in case of dispute on differences arising between the parties. The respondents No.1 and 2 have entered into preliminary agreement dated 01.01.2018 with the applicant in respect of an extent of Ac.32.35 guntas of land situated in Sy.No.251 (Ac.7.31 guntas), Sy.No.253 (Ac.8.22 guntas), Sy.No.254 (Ac.6.28 guntas), Sy.No.255 (Ac.2.23 guntas), Sy.No.273 (Ac.4.16 guntas) and Sy.No.274 (Ac.5.32 guntas) of Tippapur Village, Vemulawada Urban Mandal, Rajanna Sircilla District. As per Clause B of the said agreement, the respondents No.1 and 2 represented that they are going to get the sale deeds registered in their favour from the site owners of the schedule property. It is not in dispute that in furtherance of the preliminary agreement dated 01.01.2018, the development agreement dated 22.12.2018 was entered into for an extent of Ac.12.00 guntas, which forms part of Ac.32.35 guntas covered under preliminary agreement dated 01.01.2018. The development agreement dated 22.12.2018 also contains arbitration at Clause 13 wherein the parties have agreed to refer the matter to a sole arbitrator in the event of disputes or difference arisen between them.

The contention of the learned counsel appearing for the respondents is that novation of the agreement dated 01.01.2018 in terms of the clause 19 of the development agreement dated 22.12.2018 cannot be decided in the instant application filed under Section 11(6) of the Act. Whether there is novation of earlier agreement dated 01.02.2018 or not, is a matter to be adjudicated by the arbitrator. In the instant application, for appointment of an arbitrator, this Court would be only concerned with prima facie claims of the parties and would see whether there is a valid agreement containing arbitrator clause and if disputes have arisen between the parties, which need to be referred to an arbitrator. Though respondents No.6 to 10 are not parties to the agreement dated 01.01.2018, the said point would not fall for consideration in this application. The respondents No.6 to 10 claim interest in the subject property through the respondents No.1 to 5 and whether the agreement is binding on the respondents No.6 to 10 is a matter to be looked into by the arbitrator.

The judgment of the Supreme Court in YOUNG ACHIEVERS v. IMS LEARNING RESOURCES PRIVATE LIMITED (2013) 10 SCC 535, relied upon by the learned counsel for the respondents No.1 and 3, is not applicable to the facts of the present case. In the said case, it was held that new agreement dated 01.02.2011 was entered into, which does not contain arbitration clause. The Supreme Court held that the agreements dated 01.04.2007 and 01.04.2010 containing arbitration clauses could not survive as they have been superseded by the new agreement dated 01.02.2011. The facts of the present case are totally different and the transaction between the parties is relating to immovable property. The first agreement was entered into on 01.01.2018 and followed by development agreement dated 22.12.2018 and both the agreements are interconnected and both the agreements contain arbitration clauses. Thus, the contention of the learned counsel for the respondents that the arbitration clauses in both the agreements are not binding on the respondents is not sustainable.

In view of the above, the arbitration application is allowed. Sir Justice G.V. Seethapathy, Former Judge of the erstwhile High Court of Andhra Pradesh, is appointed as arbitrator to adjudicate the claims and disputes between the parties and to pass an award in accordance with law. The parties are at liberty to raise all factual and legal grounds in support of their respective claims.

The learned Arbitrator is entitled to fees as per the rates specified in the Fourth Schedule to the Act of 1996, inserted by Act 3 of 2016 with effect from 23.10.2015, which shall be borne by both parties in equal shares.

The miscellaneous petitions pending, if any, shall stand closed. There shall be no order as to costs.