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Judgment
Anil Kumar, J.—This is a petition u/s 11(6) of the Arbitration & Conciliation Act, 1996 by the petitioner for appointment of an arbitrator.
The petitioner has contended that he is a non resident Indian presently residing at 584, Urban Estate, Phase-II, Jalandhar, Punjab, India. According to him the respondent had published a tender notice on 15th October, 2004 and 16th October, 2004 for sale of 550 Marlas of free hold land, factory building, covered sheds, worker quarters etc and plant and machinery, spares and store under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 belonging to M/s.Prabhat General Agencies.
In the tender notice it was mentioned that the property is free from all encumbrances and is put on sale on "as is where is and whatever there is" basis. Believing the statement made in the tender that the property is free of any encumbrance, the petitioner applied to the respondent No. 1 and made the offer of Rs. 451 lakhs and deposited a sum of Rs. 28 lakhs at New Delhi. The tender was opened in the office of respondent No. 1 and the petitioner was declared as highest bidder. The bid amount of Rs. 451 lakhs was later on enhanced to Rs. 460 lakhs subject to the condition that the respondent shall be responsible for selling the property free from all encumbrances like Income Tax, Excise duty and workmen dues etc. as was represented in the tender dated 15- 16/10/2001. The petitioner had communicated this offer by his letter dated 18th November, 2004 which was accepted by the respondent No. 3 by reply dated 2nd December, 2004, but without accepting any liability of tax.
The petitioner protested to the contents of the letter dated 2nd December, 2004 stipulating that the respondent does not undertake any responsibility to procure any permission/license etc. in respect of the property offered for sale nor for any dues like outstanding water/service charges, transfer fees, electricity dues, dues of the Municipal Corporation/local authority/CHS or other dues, taxes in respect of the property and relying on the tender document contended that it was specifically stipulated that the property is free from any encumbrances which means that there was no charge on the property and the respondents had a right to transfer the title of the property and give possession to the petitioner without any encumbrances, by his letter dated 4th December, 2001.
The petitioner has alleged that he made various representations to various authorities such as Reserve Bank of India, Police, Ministry of Finance, State of Jammu & Kashmir about the illegal acts of the respondent of giving a wrong and misleading tender notice as he came to know that M/s.Prabhat General Agencies has a huge dues of approximately 700 crores on the property which was tried to be sold by the respondent as free from any encumbrances.
The respondents instead of handing over the possession of the property free from all encumbrances as had been represented in the tender notice, threatened to forfeit the amount of Rs. 28 lakhs deposited by the petitioner by letter dated 5th January, 2005. Consequently, the petitioner got issued a legal notice dated 28th January, 2005 seeking refund of Rs. 28 lakhs along with interest at 24% and damages from the respondent.
The petitioner asserted that instead of refunding the earnest money with interest the respondent sent another letter dated 13th June, 2005 cancelling the deal and claiming that the earnest money of Rs. 28 lakh deposited by the petitioner has been forfeited.
The petitioner has contended that the tender document as well as the letter dated 2nd December, 2004 contained an arbitration Clause. The Arbitration Clause 15 in the tender document is as under:
Dispute, if any, shall be referred to an Arbitrator mutually appointed by the parties. The Clause pertaining to the Arbitration in the letter dated 2nd December, 2004 is as under:
h. Dispute, if any, shall be referred to an arbitrator to be mutually appointed by the bank and you, and his decision shall be final and binding.
The petitioner therefore, invoked the arbitration agreement and sent a legal notice dated 9th June, 2008 and after failure of the respondent to appoint an arbitrator filed the present petition on 15th July, 2008.
The notice of the petition was given to the respondent and a reply dated 29th September, 2008 has been filed on behalf of the respondent opposing the appointment of an arbitrator on the ground that the petition is prima facie barred by law as the time to initiate any legal action for alleged recovery of tender deposit of Rs. 28 lakhs has already expired and consequently the claim of the petitioner is barred by time. It is contended that it is a well settled principle of law pursuant to a number of judgments passed by the Supreme Court and the High Courts that the wheel of arbitration cannot be given a push on appointment of an arbitrator, if the claim of the claimant is time barred. The respondents contended that the tender for purchase of immovable properties was floated on 15/16th October, 2004 pursuant to which a letter dated 18th November, 2004 was written by the petitioner intimating his willingness to purchase the property which was being liquidated under the provisions of Securitization Act. It is stated that the respondents by letter dated 2nd December, 2004 clearly intimated that the property is being liquidated and sold on "as is where is and whatever there is" basis and it was further made clear that if the transaction is not completed within 15 days from the letter dated 2nd December, 2004 then all the moneys including earnest money of Rs. 28 lakhs would be forfeited. In the circumstances, it is contended that the invocation of the arbitration agreement in July, 2008 is beyond the period of time stipulated under the Indian Limitation Act, 1968 and consequently the petitioner is not entitled to invoke the arbitration agreement nor an arbitrator can be appointed in view thereof. It is also contended that the petitioner had also accepted the offer of the bank in consonance with the contents thereof and, therefore, the petitioner cannot contend that the respondents are not entitled for forfeiture of Rs. 28 lakhs nor that the forfeiture is contrary to the terms and conditions of the contract.
The learned Counsel for the respondent has relied on 2002(1) Raj 594 (Del), Pandit Munshi Ram & Associates (Pvt) Ltd. v. Delhi Development Authority in support of his contention. The petitioner on the other hand has relied on AIR 2004 SC 3145, Milkfood Ltd. v. GMC Ice Cream (P) Ltd. to contend that the limitation for the purpose of Arbitration has to apply from the date of notice for appointment of arbitrator by one party to another and such a date is the relevant date for commencement of arbitral proceedings.
The petitioner has relied on the stipulation in the tender notice of the petition that the property which was proposed to be sold by the respondent was free from any encumbrances. The tender notice which is filed along with the petition as Annexure A which has not been denied by the respondents categorically stipulated that the property to the best of the knowledge of the respondents is free from any encumbrances. On the basis of the representations made by the respondent in the tender notice the petitioner offered to purchase the same and also agreed to enhance the amount of his bid from Rs. 451 lakhs, which was the highest bid to the tender, to Rs. 460 lakhs on the specific stipulation that the bank shall be responsible for selling the property free of any encumbrances like Income Tax, Excise Duty and workman dues etc.
If the offer of the petitioner dated 18th November, 2004 was that he will enhance the consideration from 451 lakhs to 460 lakhs provided he gets the property free from any encumbrance like Income Tax, Excise Duty and workmen dues, the respondent could not have accepted the same with the stipulation that the Bank shall not be liable for the dues of Municipal Corporation, electricity dues and other dues of the said property. It appears that the parties were not at ad idem in respect of the terms of the agreement as the petitioner had been claiming that the properties be given to him free from any encumbrance and the respondent had also represented, in their tender notice, that the property to the best of their knowledge is free from any encumbrance and the petitioner also raised his highest bid of Rs. 451 lakhs to Rs. 460 lakhs only subject to the respondent giving the property free from any encumbrance. Therefore, prima facie the amount could not have been forfeited in the facts and circumstances. In the circumstances, the respondent could not have demanded from the petitioner to pay the balance amount of Rs. 460 lakhs after deducting Rs. 28 lakhs which was paid as earnest money by letter dated 5th January, 2005. The proposed agreement between the parties was cancelled by the respondents by letter dated 30th June, 2005.
On cancellation of the proposed agreement and alleged forfeiture of the earnest money given by the petitioner to the respondent, the arbitration agreement was invoked by the petitioner by notice dated 9th June, 2008. Apparently the Arbitration Agreement had been invoked by the petitioner prior to the expiry of three years. The Supreme Court in Milkfood Ltd. (Supra) had held that the provision contained in Section 21 of 1996 Act as also the common parlance meaning given to the expression "commencement of an arbitration" stipulates about the commencement of the Arbitration by seeking invocation of arbitration by giving a notice. It was held that issuance of request for appointment of an arbitrator in terms of the arbitration agreement must be held to be determinative of the commencement of the arbitral proceedings. Consequently, in the present case the arbitral proceedings shall be deemed to have commenced from 9th June, 2008 when the notice was given by the petitioner on the basis of the arbitration agreement between the parties. The respondents had cancelled the alleged agreement between the parties by communication dated 13th June, 2005, therefore, the dispute for recovery of an amount of Rs. 28 lakhs and damages invoked on 9th June, 2008 shall be within time, prima facie, and on this ground the respondent cannot contest the appointment of an arbitrator in the facts and circumstances.
The precedent relied on by the respondents is apparently distinguishable as in Pt. Munshi Ram (Supra) the petition for appointment of an arbitrator was to be made before expiry of 90 days from the date of appointment of final bill. It was held that the acceptance of correctness of the bill by itself does not imply that the bill had been paid and the dispute shall remain until the bill is finally paid.
The petitioner had given the notice dated 9th June, 2008 seeking appointment of the arbitrator. Before filing of the petition on 15th July, 2008, the respondents have not appointed the arbitrator and, therefore, they have lost the right to appoint an arbitrator of their choice. In any case a sole arbitrator has to be appointed under the arbitration agreement and since the parties have not agreed for a mutually agreeable arbitrator, it will be just and appropriate to appoint an arbitrator by this Court.
Consequently, Mr. B.L. Garg, Advocate (retired Additional District Judge), R/o 8/9 Ganpati Apartments, Civil Lines, Rajpur Road, Delhi- 110054 (Mobile: 9810827815) is appointed as an Arbitrator to adjudicate all the disputes between the parties. The Arbitrator shall be entitled to devise his procedure for conducting the arbitration proceedings. The fees of the Arbitrator shall be Rs. 10,000/- per hearing which shall be shared equally by the parties. The maximum fees of the Arbitrator shall be Rs. 1,50,000/-. The Arbitrator shall also be entitled for secretarial expenses which shall also be shared by the parties.
Parties are directed to appear before the Arbitrator on 2nd April, 2009 at 4.00 p.m.
A copy of this order be sent to the Arbitrator forthwith and copies of this order be also given dasti to learned Counsel for the parties. With these directions, the petition is disposed of.