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Judgment
S.J. Vazifdar,J
This is an application u/s 11 for the appointment of an Arbitrator in respect of the disputes and differences between the parties arising in respect of a joint venture agreement dated 6.1.1999. The execution of the joint venture agreement dated 6.1.1999 is admitted. That it contains Clause 16 which pertains to the Arbitration is also admitted. Clause 16 reads as under :
Any intervening hurdles in the joint venture that may arise between the COMPANY and the COMUNIDADE shall be sorted out by mutual discussions. If any disputes arise between the COMPANY and the COMUNIDADE the same shall be referred to arbitration as contemplated under the provisions of the Arbitration and Conciliation Act, 1996.
Under the joint venture agreement (JVC ) the parties had to set up a hotel on the property admeasuring 90,000 square metres. The authorised, subscribed and paid up share capital of the JVC is Rs.2,00,00,000 ( Rupees Two Crores Only ) divided into 2,00,000 equity shares of Rs.100/-each. The contribution of the Respondent to the JVC by way of the said land in consideration whereof the Respondent was to be allotted fully paid up equity shares which constituted 25% of the equity capital.
The Applicants had to subscribe to the remaining 75% of the equity shares namely 1,50,000 equity shares of the aggregate value of Rs.1,50,00,000/-.
Under Clause 8 the profits of the JVC are to be shared between the Respondent and the Applicants to the extent of 25% and 75% respectively but the losses are to be borne solely by the Applicants. Under Clause 11 the President of the Respondent shall, ex-officio be appointed as a Director of the JVC and shall not be liable to retire by rotation or removed from office so long as the Respondent holds 25% of the equity capital of the company. Clauses 6 and 7 of the agreement read as under :
It is agreed as per Clause 3 of the letter dated 2.6.1994 that the land referred to above and subject matter of the grant will perpetually remain with the COMUNIDADE.
The grant of the land made in favour of the COMPANY will be for the erecting of Hillock Cottage type Hotel accommodation and beneficial enlovment of the land by the COMPANY to that effect, but the vesting of the land shall always be with the COMUNIDADE.
The Writ Petition No.51/99 was filed as a Public Interest Litigation challenging inter-alia the JVC. I am informed that an interim order was passed in this Writ Petition which had the effect of restraining the implementation of the JVC.
A General Body Meeting of the Respondent was convened on 1.10.2006 inter-alia to discuss the JVC. The General Body unanimously resolved to approve the JVC subject however to certain modification viz. that the shares of the Respondent be held as Irredeemable Non-cumulative preference shares instead of equity shares and that the original agreement be modified in terms of the draft addendum placed before the meeting for its approval. The Applicant who had filed Writ Petition No.51/99 was also present at the meeting.
Pursuant to the above resolution an addendum was executed between the parties on 3.10.2006.
It does appear prima facie atleast that the Respondent stood nothing to gain and in fact everything to lose by the modification/amendment. The amendment converts the equity shares for Irredeemable Non-cumulative preference shares which does not even contain a guaranteed rate of return. The question of the guaranteed/fixed rate of return being guaranteed therefore does not even arise. The provision not making the Respondent director liable to retire by rotation is also thereby negated.
It is difficult to understand the logical basis for the Respondent having sought the modification. This however is a matter which ultimately must be left to the Arbitrator to decide including while deciding about the validity of the JVC itself and whether the same ought to be specifically performed or not.
No disputes were raised by the Respondent itself till the year 2008 when the constitution of the Managing Committee changed pursuant to an election held on 6.4.2008. Thereafter there were disputes and differences between the parties. The Extra Ordinary General Body Meeting of the Respondent was held on 3.8.2008. By a unanimous resolution the JVC was revoked. It is also resolved that the Managing Committee should recover the cost incurred in processing as well as defending any Court matters in that regard. In view of the contentions raised by the Respondent, it is necessary to set out the agenda in this regard. It reads as under :
Agenda No.4. The President placed item No.4 of the Agenda "i.e. to discuss and give final opinion on the revocation on the land of 90,000 square metres in Lote No.525 (Part) of Planta No.8245 at present under survey No.206/1A due to the land reserved for Cattle Grazing Grounds (Reservados para Pastagem) and other irregularities.
The President asked the Attorney to give the necessary information to the members. The Attorney informed that he has gone through the records of the Comunidade and found the land in question is a reserved lote of Comunidade and earmarked for grazing of cattle. The then Managing Committee called a General Body Meeting on 1st October, 2006 to grant the Agreement but at that time the General Body was not informed that this particular area of land was reserved for cattle grazing ground and they used the present survey records which do not disclose the record maintained as per the Books of the Comunidade. As per the Code of Comunidade Article 325(2) that such grants for any purpose is prohibited. Besides there is no provision under the Code of Comunidade to enter into any common Joint Venture because Comunidades are ancient bodies which only provide rights over their land for the purpose of cultivation/agriculture and only if such land cannot be put for agriculture use by all methods, then only such marginal lands not more than 300 square metres can be provided to an individual for housing purpose only. In this case Mr. Teodorio Nunes is a Gaunkar ( Jonoeiro) of Comunidade of Anjuna and cannot be said to be ignorant of the laws of his own Comunidade.
In this case the then Managing Committee have played a fraud in collusion with Shri Justino Souza (Ex-President ) Shri Cajetan D''Souza (Ex-Attorney) and Shri Gurudas Porobo (Ex-Treasurer) by mis-representing the true legal facts and more so they have taken advantage of those who were not present and those who did not know the Portuguese language to read the provision of the code and till date there is no legally translated contents of the Code of Comunidade.
The Attorney also brought to the attention of the members and showed the forgery of the manipulated minutes of the meeting of 4th July, 1993 which was submitted by Shri Teoderio Nunes to all Government Departments for clearances and even to the High Court of Bombay. This particular true copy of the minutes of 4/7/1993 has been signed by Shri Justino Souza who was the then President and the same is dated 27th July, 1993. This certified manipulated minutes concerning the General Body meeting held on 4th July, 1993 has shown total disrespect to the General body. Shri Teoderio has also deleted the name of Comunidade of Anjuna by false methods and has inserted Anjuna Hotels limited in form I & XIV in survey No.206/1A for 90,000 square metres.
In these circumstances the General Body found that they have been cheated by false representation and when there is no provision in the law as per Article 325(2) such a grant to Teodorio E.V. Nunes be revoked and the members unanimously agreed to the decision to revoke the land of 90,000 square metres and Joint Venture Agreement.
The members also resolved that the present Managing Committee should also recover the cost incurred by Comunidade of Anjuna in processing as well as defending any Court matter besides the cost of litigation involving the matter concerned to the Agenda................
The Writ Petition No.51/99 was disposed off by an order and judgment dated 19.8.2008. In view of the resolution revoking the JVC the Division Bench held that the grievance of the Petitioners therein stood redressed. All the rights and contentions of the parties were kept open.
The Applicants filed an appeal being Appeal No.ACN2/Anjuna/2 of 2008 before the Administrator of Communidades of North Zone, Mapusa, under Article 397 of the Code of Communidade. Mr. Pereira, the learned Senior Counsel appearing on behalf of the Applicants however stated that the same would be withdrawn unconditionally. The undertaking in this regard is accepted. In view of the undertaking in any event the appeal shall be deemed to have been dismissed as withdrawn by force of this order itself. However any interim order or the statement made on behalf of the Respondent in the appeal shall continue for a period of 16 weeks from today to enable the Applicants to make an application for interim relief before the learned Arbitrator to be appointed by this orde r.
In view of the above disputes the Applicants served upon the Respondent a notice dated 4.11.2008 settling out the disputes and suggesting the name of an advocate of this Court to be the sole Arbitrator.
The Respondent replied to the same by a letter dated 2.04.2009 raising various contentions and refusing to have the disputes decided by arbitration.
It was contended on behalf of the Respondent that allegations of fraud have been made by the Respondent and that therefore the Arbitration is not permissible.
The nature of fraud pleaded does not persuade me to permit the parties to avoid the arbitration agreement. It is pertinent to note that prima facie atleast the procedure appears to have been followed. For instance even the sanction of the Government of Goa was accorded to the transaction by a letter dated 22.7.1994. This is not the nature of fraud which an Arbitrator would not be able to deal with. I have no doubt that the allegations of fraud in the present case can be adequately dealt with in arbitral proceedings.
The provisions of the Code of Communidade were relied upon and in particular Articles 30, 31, 325, 326, 334 and 334-A.
Article 30 deals with powers of the Communidades. Clause 4 (J) thereof authorises the Respondent generally to perform the extra ordinary acts which are not foreseen in the budget or this Code as well as all other matters about which it may be consulted. Article 31 provides that the implementation of any decision in exercise of this power must be only after the sanction of the Governor General. Article 325 provides that no leases can be given inter-alia of the land indispensable for cattle grazing. Article 326 provides that which land can be given for cultivation and construction of houses.
These are provisions of law which require to be construed. For instance whether the JVC was constituted for the purpose of a lease or not as contemplated in Article 325 requires to be considered. It was contended that although termed a lease the nature of the transaction contained in the JVC amounts to a lease. I see no reason why the Arbitrator cannot or ought not to construe the JVC. Similarly whether the sanction from the Government of Goa is adequate compliance of Article 31 or not can and must be decided by the Arbitrator. For the same reason the Arbitrator can and must also decide whether the JVC has violated Articles 326, 334 and 334-A.
The above Articles of the Code of Communidade are not provisions which in the facts of the present case clearly or conclusively lead to a conclusion that the JVC as amended/modified is void. The provisions of the JVC and Code of Communidade would require to be construed/interpreted. In view of the judgments of the Hon''ble Supreme Court in Sunder Kukreja and Others Vs. Mohan Lal Kukreja and Another, and another, Shree Ram Mills Ltd. Vs. Utility Premises (P) Ltd., , and AIR 2009 (SCW) 1712 in the case of Everest Holding Ltd. V/s Shyam Kumar Shrivastava and others, these matters can be left to be decided in Arbitration as they certainly are line disputes.
The Applicants are agreed that the counter claim, if any of the Respondent shall also stand referred to the learned Arbitrator. It is so ordered. All the contentions of the parties are kept open before the Arbitrator. This order does not affect the rights of the parties to adopt any other proceedings in accordance with law. In the circumstances, the application is allowed as prayed. While the Respondents oppose the application for the appointment of an arbitrator Mr. Lawande states that they have no objection to Mr. R. G. Ramani as such if the matter is to be decided by arbitration. I therefore appoint Mr. R. G. Ramani, an advocate of this Court, as the arbitrator.