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Angle Infrastructure Pvt. Ltd. Vs.capital Builders & Ors. - Court Judgment

LegalCrystal Citation
CourtDelhi High Court
Decided On
AppellantAngle Infrastructure Pvt. Ltd.
RespondentCapital Builders & Ors.
Excerpt:
.....dra was executed between aipl and the... respondents on 5th june, 2012 in terms of which aipl as developer arb. p. no.30 of 2015 page 1 of 15 agreed to acquire from cbpl (the owner) exclusive development rights over a parcel of land admeasuring 14.468 acres in village fazilpur, jharsa, tehsil and district gurgaon, haryana along with other rights, easements etc. part of the development rights was to develop and construct the project i.e., the construction of a group housing colony for the central government employees‟ welfare housing organisation and to have all the benefits and entitlements of the development licence.3. one of the terms of the agreement was that in consideration of the grant/transfer/assignment of the development rights to aipl under the agreement, aipl.....
Judgment:

$~ * 1. + % IN THE HIGH COURT OF DELHI AT NEW DELHI ARB.P. 30/2015 ANGLE INFRASTRUCTURE PVT. LTD. ........ Petitioner

Through: Mr. Akhil Sibal and Ms. Bina Gupta, Advocates. versus M/S CAPITAL BUILDERS & ORS. ........ RESPONDENTS

Through: Mr. Sudhanshu Batra, Senior Advocate with Mr. Atul Sharma and Mr. Lakshay Khanna, Advocates for Respondent No.1. Mr. Ravinder Singh and Ms. Raveesha Gupta, Advocates for Respondent Nos. 2 and 3. CORAM: JUSTICE S. MURALIDHAR ORDER

1910.2016 1. Angle Infrastructure Pvt. Ltd. („AIPL‟) has filed this petition against M/s. Capital Builders („CB‟) (Respondent No.1), Capital Buildventures Pvt. Ltd. („CBPL‟) (Respondent No.2), Oasis Infra Developers Pvt. Ltd. („OIDPL‟) (Respondent No.3), J.

R. Modi Associates Ltd. („JRMAL‟) (Respondent No.4) under Section 11 of the Arbitration and Conciliation Act, 1996 („Act‟) seeking the appointment of an Arbitral Tribunal („AT‟) to adjudicate the disputes between the parties arising out of a Development Rights Agreement („DRA‟) dated 5th June, 2012.

2. The facts are that the aforementioned DRA was executed between AIPL and the... RESPONDENTS

on 5th June, 2012 in terms of which AIPL as Developer Arb. P. No.30 of 2015 Page 1 of 15 agreed to acquire from CBPL (the Owner) exclusive development rights over a parcel of land admeasuring 14.468 acres in village Fazilpur, Jharsa, Tehsil and District Gurgaon, Haryana along with other rights, easements etc. Part of the Development Rights was to develop and construct the project i.e., the construction of a group housing colony for the Central Government Employees‟ Welfare Housing Organisation and to have all the benefits and entitlements of the development licence.

3. One of the terms of the Agreement was that in consideration of the grant/transfer/assignment of the Development Rights to AIPL under the Agreement, AIPL agreed to pay a total consideration calculated at Rs.2,000 per sq.ft. for the entire floor space index („FSI‟) of the project land of approximately 8,97,000 sq. ft. AIPL was to pay an aggregate sum of Rs. 1 crore to the owner or such nominees and an additional sum of Rs. 4 crores on the date of execution of the Agreement. Further, Rs. 5 crores was to be paid by AIPL to the owner within 30 days; Rs.10 crores within 90 days and the balance consideration within 15 months from the date of the execution.

4. Clause 3.2 of the DRA inter alia provided that “in the event the monthly payments are delayed by more than three months, the Developer shall be entitled to retain the FSI of the Project in proportion to the amounts/ payments made by the Developer to the Owner till such date and the remaining FSI shall be returned in favour of the Owner. The amounts paid by the Developer beyond including taxes, interest, government payments/charges or other costs/expenses including any bank guarantee charges, development charges/costs and/or EDC/IDC payments, which are Arb. P. No.30 of 2015 Page 2 of 15 in excess of the Developer‟s entitled proportion of the FSI shall also be refunded to it by the Owner within three months from being notified by the Developer.” 5. The DRA contained a separate set of clauses as regards dispute resolution. Clause 13.2 envisages reference of the disputes to AT consisting of three Arbitrators, one to be appointed by the Owner, Respondent No.2 i.e., CB and Respondent Nos. 3 and 4 jointly, one to be appointed by AIPL, and the two arbitrators were to appoint the third Arbitrator.

6. It is not in dispute that disputes arose between AIPL on the one hand and CB on the other and these were sought to be resolved by both the said parties by entering into a „Full and Final Settlement Agreement‟ (SA) on 29th October, 2013 at New Delhi whereby AIPL agreed to pay CB a sum of Rs. 45 crores as under: (a) Rs. 25 crores was to be paid in the following manner: (i) Rs.1 crore by two cheques of Rs.50,00,000 each at the time of signing of the SA. (ii) Rs. 24 crores within 90 days of the SA with interest @ 15% p.a. from the date of the SA (on diminishing balance) which interest was to be paid separately upon completion of the payments. If the payments were made within 30 days, then no interest was payable. (b) The remaining sum of Rs. 20 crores was to be paid in four instalments of Rs. 4 crores each on 2nd April, 2nd July, 3rd October, 2014 and 2nd January, 2015 and a fifth instalment of Rs. 4 crores on 2nd March, 2015 subject to adjustments as mentioned thereafter. All these payments were to carry Arb. P. No.30 of 2015 Page 3 of 15 interest @ 18% p.a. on diminishing balance.

7. Clauses 2 and 3 of the SA are relevant for the purposes of the present petition and they read as under: that, subject “2. The payments at paragraph 1 above shall be in full and final settlement of all disputes between the Parties and of any & all amounts payable by the Developer to CB towards transfer of all rights, titles and interests in the Project Land in favour of the Developer. The Parties acknowledge to compliance of paragraph 1 above by the Developer, they shall have no claims or demands, of any nature whatsoever, against each other with respect to any outstanding amounts, dues etc. under the DRA. In case the Developer fails to comply with paragraph 1.1 (a) and (b) above, all rights and claims of the Parties shall revive.

3. Subject to above, neither Party shall have any obligations against the other under the DRA or any other agreement or arrangement pertaining to transfer of any rights, titles and interest in the Project Land in favour of the Developer.” 8. Even prior to the SA, OIDPL had filed OMP No.378 of 2013 and Ashok Manchanda on behalf of CB had filed OMP No.420 of 2013 against AIPL. Both the said petitions were disposed of by this Court on 6th November, 2013 by the following order: “Learned counsels for the parties submit that the disputes, which are subject matter of the captioned petitions, have been settled vide agreement dated 30.10.2013. The settlement has been arrived at under the aegis of the Delhi High Court, Mediation & Conciliation Centre.' Learned counsels submit that the captioned petitions be disposed of in terms of the settlement agreement. I have perused the terms of the settlement. The same are Arb. P. No.30 of 2015 Page 4 of 15 lawful. As prayed, the petitions are disposed of in terms of the settlement agreement dated 30.10.2013. Parties shall abide by the terms of the settlement. Accordingly, a decree is passed in terms of the settlement agreement. The petitions are, accordingly, disposed of.” 9. Even according to the... Petitioner

, while it made a payment of Rs.1 crore, it was unable to fulfil the other requirements of the SA “due to circumstances that were beyond the control of the... Petitioner

”. It is not in dispute that the... Petitioner

issued a series of cheques in favour of CB, all of which upon presentation were dishonoured. CB then instituted complaints against the... Petitioner

under Section 138 of the Negotiable Instruments Act, 1881, which resulted in the conviction of AIPL and its Directors. It is stated that the appeals against the said convictions are pending.

10. The case of AIPL is that the SA envisaged that if the... Petitioner

was unable to make the payment of the amounts that it was obliged to under the SA, then all the rights and claims of the parties under the DRA would revive. AIPL states that during the pendency of the criminal proceedings, CB called upon AIPL by a letter dated 16th August, 2014 to give it FSI in lieu of the payments owed by AIPL in terms of the SA dated 29th October, 2013. According to AIPL, after much deliberation its Directors acceded to the above offer and communicated it by a letter dated 4th October, 2014 addressed to CB. On 10th October, 2014, AIPL urged CB requesting it to consider moving a joint application before this Court to modify the SA dated 29th October, 2013 and the consequential order passed by the Court. Arb. P. No.30 of 2015 Page 5 of 15 However, on 15th October, 2014 CB denied having sought FSI in lieu of the remaining payments.

11. AIPL states that in exercise of its rights under clause 1.1 (a) and (b) read with clause 2 of the SA, it set aside 28 flats in Tower E of the project which was equivalent, according to AIPL, to the remaining amount agreed to be paid by it to CB under the SA. It called upon CB to take allotment of the said flats by its letter dated 14th November, 2014. However, by letter dated 19th November, 2014 CB declined to accept the offer.

12. In the meanwhile, CB filed Execution Petition No.405 of 2014 which stood disposed of by this Court by an order dated 14th November, 2014. The Court was of the view that the settlement had become an Award and, therefore, CB could resort to execution proceedings. However, since the immovable property was located in Gurgaon it was observed that CB could file an appropriate execution petition in the concerned Court.

13. It is stated that thereafter while admitting the execution petition, the Court of the learned Additional District Judge, Gurgaon (ADJ) passed an order on 30th March, 2015 attaching the properties of AIPL. This was followed by AIPL on 28th April, 2015 filing an objection petition seeking recall of the order and stay of the sale of the property pending the consideration of the objection.

14. Meanwhile, AIPL also filed OMP No.1493 of 2014 under Section 9 of the Act in this Court seeking a status quo interim order against CB. On 22nd December, 2014, OMP No.1493 of 2014 was disposed of by a detailed Arb. P. No.30 of 2015 Page 6 of 15 order by the learned Single Judge. The Court discussed Clause 2 of the SA and in particular the sentence which states “In case the developer fails to comply with paragraph 1.1 (a) and (b) above, all rights and claims of the parties shall revive...” The Court interpreted the above sentence as under: “10.1 A bare perusal of clause 2 would show that in case the petitioner (i.e., the developer) were to fail in making the payments, as prescribed in sub-clause 1.1(a) and (b), all ''rights" and ''claims" of entities/ party to the settlement agreement would revive. 10.2 Prima facie, in my opinion, with the execution of the settlement agreement, only the rights and claims of parties under the DRA would revive, and not the mechanism set out in the DRA for adjudication of disputes or differences which arose qua the DRA. This would be evident from the discussion encapsulated hereafter. 10.3. It is Mr Jain's contention that clause 2 of the settlement agreement would enable the petitioner to agitate or, in" other words, press home its rights under clause 3.2 of the DRA. For the sake of convenience, the relevant extract of clause 3.2 of the DRA, on which reliance was placed by Mr Jain, is extracted hereinafter:

"3.2.... In the event the Monthly Payments are delayed by more than a consecutive period of 3 (three) months, the Developer shall be entitled to retain the FSI of the Project in proportion to the amounts/ payments made by the Developer to the Owner till such date and the remaining FSI shall be returned in favour of the Owner. The amounts paid by the Developer including taxes, interest, government payments/ charges or other costs/expenses including any bank guarantee charges, development IDC payments, which are in excess of the Developer's proportion of the FSI shall be refunded by the Owner and/or EDC/ charges/costs Arb. P. No.30 of 2015 Page 7 of 15 within 3 (three) months from being notified by the Developer...."

(emphasis is mine) 10.4 A bare reading of the extract would show that it is neither a right nor a claim, but an obligation cast on the petitioner. The obligation cast on the petitioner is thus: in the event the petitioner, delayed, the making of monthly payments, as prescribed under the earlier part of clause 3.2, by more than three (3) consecutive months, it could only retain that part of the FSI of the project, qua which it had made payments to the owners (i.e., the respondents herein) with an attendant obligation to return the remaining FSI. In other words, the petitioner was duty bound to return the remaining FSI, after redacting the FSI qua which it had made payments to the owners (i.e., the respondents herein). 10.5 Even if I were to assume for the moment that the arbitration clause stood revived by treating the same as a right under the DRA, the petitioner cannot secure any mileage as, a plain reading of clause 3.2, would show that, it would have to transfer the remaining FSI of the project to the owners, which includes respondent No.l herein, after making an adjustment in the FSI, proportionate to the payments made under the DRA. 10.6 The submission of Mr Jain that the petitioner was willing to offer FSI in the form of constructed flats, in respect of outstanding payments under the settlement agreement, is clearly untenable. The supposed offer made by respondent no.l vide its communication dated 16.08.2014, was clearly in line with what is plainly stated in clause 3.2 of the DRA. 10.7 Therefore, the submission of Mr Jain that, acceptance by the petitioner of the offer vide its return communication dated 04.10.2014 resulted, in a sense, in the settlement agreement being modified, is misconceived. In my view, quite correctly, the advocates of respondent No.l, vide their communication dated 15.10.2014, indicated to the petitioner that the contents of Arb. P. No.30 of 2015 Page 8 of 15 its communication dated 16.08.2014 had been "twisted", or more appropriately put, misunderstood.

11. In view of the foregoing, quite clearly, the petitioner has failed to make out a prima facie case for grant of any of the reliefs prayed for in the instant petition. The balance of convenience, if at all, is clearly in favour of respondent no.l, in as much as even though a settlement agreement was executed nearly 14 months ago, it has received a mere sum of Rs. 1 crore. On the other hand, the petitioner, continues to enjoy rights in the property in issue. It is not disputed that the cheques furnished by the petitioner have been dishonoured, and that, this situation has come to pass in view of the lack of financial wherewithal of the petitioner. Therefore, any interim direction, if ordered, as sought for by the petitioner, may result in further injury to respondent no.1.” 15. AIPL was aggrieved by the above order to the extent that the learned Single Judge had held that the mechanism set out in the DRA for settlement of the disputes would not revive after the SA. AIPL‟s appeal being FAO (OS) No.56/2015 was heard and disposed of by a Division Bench of this Court. The relevant portions of the said order read as under: “5. The legal position is that an accord discharges the performance of obligations under the contract. A dispute pertaining to satisfaction furnishes a fresh and independent cause of action, until and unless it is provided that the performance of the satisfaction was a condition precedent for discharge under the contract. If promise is received in satisfaction, it is a good satisfaction, but if the performance and not the promise is intended to operate in satisfaction, then there will be no satisfaction without performance. Wherever there is an accord, obligations under the original contract would be discharged until and unless it is specifically provided that the Arb. P. No.30 of 2015 Page 9 of 15 performance of the satisfaction would discharge the obligations under the contract.

6. Learned counsel for the appellant states that the appellant does not wish to argue on the interim measure which appellant seeks, but since the impugned decision is likely to create a problem in the Arbitration Petition filed by the appellant invoking remedy under Section 11 of the Arbitration and Conciliation Act, 1996, the appeal may be disposed of declaring the inchoate observations in the impugned order which, though not conclusive opine, but are suggestive of a finding that as per the learned Single Judge the dispute has to be with reference to the settlement agreement which does not have an arbitration clause and thus the dispute is non-arbitrable notwithstanding the Developer‟s Right Agreement having an arbitration clause.

7. Observations in para 10.2 and para 10.4 of the impugned order are declared to be non-conclusive determination by the learned Single Judge on the subject whether the Settlement Agreement was an accord of the kind which contained a promise to satisfy the obligations under the original contract and thus any satisfaction of the accord with reference to the promise reflected in the Settlement Agreement resulted in a dispute giving birth to a fresh cause of action.

8. The learned Single Judge who is seized of the application filed by the appellant under Section 11 of the Arbitration and Conciliation Act, 1996 shall decide the same keeping in view the legal principle which we have enunciated in paragraph 5 above.

9. The appeal is disposed of in terms of the declaration in paragraph 7 above.

10. No costs.” 16. As is noted by the Division Bench in the above order, the present Arb. P. No.30 of 2015 Page 10 of 15 petition was already filed and was pending when the above order was passed by the DB.

17. Mr. Akhil Sibal, learned counsel appearing for the... Petitioner

refers to the decision in National Insurance Company Limited v. Boghara Polyfab Private Limited (2009) 1 SCC267and in particular paras 22.3 thereof where the Court has illustratively set out a category of cases which “the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal."

These are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration.” 18. According to Mr. Sibal, the mere fact that the parties entered into an SA did not mean that the arbitration clauses of the DRA came to an end. According to him, the disputes under the SA, particularly in light of clauses 2 and 3 thereof were disputes arising both under the DRA as well as the SA. According to him, the intention of the parties was not to completely obliterate the DRA. He says that clause 2 in fact makes it clear that where there is a failure to make payments in terms of the SA, then all the rights and liabilities under the DRA would revive. In any event, he submits that the question whether as a result of the SA the arbitration clauses of the DRA did not revive could be left to the decision of the AT as held by the Supreme Court in National Insurance Company Limited v. Boghara Polyfab Private Limited (supra). Arb. P. No.30 of 2015 Page 11 of 15 19. Mr Sibal also points out that the understanding of the CB itself as regards the revival of the rights and liabilities under the DRA supported the case of AIPL. He refers to the answers given by Mr. Ashok Manchanda of CB in his cross-examination in the criminal case instituted against AIPL and its Directors under Section 138 of the NI Act. In particular, attention is drawn to the following answers given by Mr. Manchanda: “It is correct that the full settlement agreement dated 29.10.2003 Ex. CW
was executed after certain dispute between the parties as regards the DRA dated 15.06. 2012, it was correct that it has been agreed between the parties that in case payment is not made in terms of Settlement Ex.CW
all the rights and liabilities of the parties under DRA shall revive.” 20. Opposing the above submissions, Mr. Sudhanshu Batra, learned Senior counsel appearing for the Respondent, CB, points out that the SA itself had become a decree of the Court as the order dated 6th November, 2013 was virtually a decree in terms of the said SA which was straightway executable. That order was never challenged by AIPL. It was, therefore, taken to its logical end by CB by filing the execution petition first in this Court and, thereafter, in the appropriate Court in Gurgaon. With AIPL having already filed its objections in the said Court, those proceedings would have to continue in accordance with law. There was no question of AIPL commencing another parallel proceeding by way of arbitration.

21. In the first place, the Court notes that for the purposes of a petition under Section 11 of the Act the scope of enquiry by the Court has got considerably narrowed after the amendment with effect from 23rd October, 2015. Sub- Arb. P. No.30 of 2015 Page 12 of 15 section 6A has been inserted which requires the Court to confine itself to the “examination of the existence of an arbitration agreement.” Therefore, although the Division Bench in its order dated 12th February, 2016 requires the Court to examine whether an arbitrable dispute has arisen in terms of para 5 of the said order, at the threshold even before that exercise is undertaken the Court will have to examine if the arbitration agreement, which forms part of the DRA between the parties survives. Although the order dated 12th February, 2016 does not expressly make a reference to Section 11(6A) of the Act, that is one aspect of the matter that is required to be satisfied by the... Petitioner

.

22. It was submitted by Mr. Sibal that the observations of the learned Single Judge in the order dated 22nd December, 2014 to the effect that the arbitration clause did not survive the SA was set aside by the Division Bench in the aforementioned order and, therefore, this Court cannot again come to that conclusion.

23. The Court finds that in the order dated 22nd December, 2014, while a reference was made to clause 2 of the SA there was no reference made to clause 3 thereof. Even the order of the Division Bench dated 12th February, 2016 does not appear to notice it. If clauses 2 and 3 of the SA are read together, it is plain that the intention of the parties was to not revert to the DRA. In the first place, the last line of para 2 does not expressly refer to the DRA when it states that all the rights and liabilities of the parties would revive. What para 2 of the SA states that once the payments in para 1 are made, there would be no other claims and payments of any nature Arb. P. No.30 of 2015 Page 13 of 15 whatsoever by one party against the other. The opening words of clause 3 viz., „subject to the above‟ are significant. They point to the fact that only to the limited extent mentioned in para 2 will any agreement between the parties including the DRA survive. It makes it clear that except to the extent as mentioned in para 2 “neither party would have any obligation against the other under the DRA or any other agreement or arrangement...” The Court is, therefore, satisfied that when clauses 2 and 3 of the SA are read together the intention of the parties is not to revert to the DRA or any other agreement for any purpose other than to the limited extent set out in para 2 of the SA.

24. The intention of the parties was to bring to an end any scope for further litigation which is understandable considering that the SA was arrived at in the circumstances where the obligations of the... Petitioner

remained unfulfilled under the main DRA. It is also for this reason that the SA was, by consent, made an order of the Court on 6th November, 2013 and significantly that order dated 6th November, 2013 was not challenged by the... Petitioner

. It was taken to its logical end by the CB filing the execution proceedings in the Gurgaon Court.

25. Consequently, the Court is unable to agree with the contention of AIPL that notwithstanding the order dated 6th November, 2013 making the SA into a decree having attained finality, there is still scope for the parties to take recourse to arbitration by invoking the arbitration clause in the DRA. Consequently, the Court is not satisfied that after the order dated 6th November, 2013 passed by the Court there is any scope for holding that an Arb. P. No.30 of 2015 Page 14 of 15 arbitration agreement subsists and can be invoked by the... Petitioner

seeking reference of the disputes it may have with the... RESPONDENTS

to arbitration. Whatever defences the... Petitioner

may have will have to be urged in the execution proceedings in accordance with law.

26. Consequently, the Court declines the prayer made in this petition and it is dismissed as such with no order as to costs. S. MURALIDHAR, J OCTOBER19 2016 dn Arb. P. No.30 of 2015 Page 15 of 15


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