AP No. 244 of 2010

IN THE HIGH COURT AT CALCUTTA

ORDINARY ORIGINAL CIVIL JURISDICTION

ORIGINAL SIDE

New Age Realty Pvt. Ltd.

Versus

M/s. Karthikeya Ancilaries Pvt Ltd. & Anr.

Before:

The Hon'ble Justice Sanjib Banerjee

Date: 7th July 2011

Appearance:

Mr. Jayanta Kr. Mitra, Sr. Adv.

Mr. Aniruddha Roy, Adv.

Mr. Sourav Kr. Mukherjee, Adv.

Mr. O. P. Jhunjhunwala, Adv.

Mr. Karthik Seshadri, Adv.

Mr. S. B. Saraf, Adv.

Mr. Rudraman Bhattacharya, Adv.

Mr. Ganesh N. Jajodia, Adv.

The Court: The present request for the constitution of an arbitral tribunal for reference of the disputes between the parties to arbitration in accordance with their arbitration agreement, throws up a number of issues. Of the various objections which have been taken by the first respondent, the primary one is that the petitioner herein, if it were to file a suit on the basis of the claims apparent, it would be a suit for land since the petitioner's claim is inextricably connected to the land in Coimbatore that the parties had agreed to develop.

2

A joint development agreement was entered into by the first and second respondents herein which envisaged that the second respondent developer would develop the property into a shopping mall-cum- commercial complex consisting of one or more buildings. Though some of the terms of the agreement may subsequently have been altered, the agreement of October 18, 2006 provided that the first respondent owner would be entitled to 50 per cent of the constructed space and the second respondent developer would be entitled to the balance 50 per cent. The agreement also envisaged some payment being made by the developer including a sum of Rs.11 crore by way of loan to help the owner discharge a mortgage liability. Clause XIV of the agreement of October 18, 2006 contains the arbitration agreement that the petitioner has sought to enforce:

"i. In the event of any doubt, difference or dispute in the interpretation or implementation of the agreement or the development or any matter concerning this agreement or the development, the same shall be referred to Sri. L. G. Ramamurthi and the decision of the sole arbitrator on all matters so referred shall be final and binding upon the parties."

As is evident, the petitioner herein was not a party to the joint development agreement of October 18, 2006. The petitioner herein came in 3

under an agreement entitled "JDA Assignment Agreement" executed on March 23, 2007 to which the parties herein were parties. The essence of such agreement is that the rights and obligations of the second respondent developer under the joint development agreement of October 18, 2006 stood assigned in favour of the petitioner herein. Clause 6.5 of the assignment provides that the petitioner herein would not commit breach of any of the terms of the agreement of October 18, 2006 and Clause 6.6 thereof stipulates that by virtue of the assignment, "it shall be deemed as if the JDA has been executed by the owner with the SPV (the petitioner herein) in place and stead of Presidium to the extent of remaining unperformed by the parties as of now."

It is the petitioner's contention herein that by virtue of, inter alia, Clause 6.6 of the assignment of March 27, 2007, the petitioner herein became entitled to the benefits and obligations of Presidium in the agreement of October 18, 2006. The petitioner suggests that the wide import of Clause 6.6 of the agreement of March 27, 2007 would take within its sweep the arbitration clause contained in the original agreement. It is not necessary, for the present purpose, to conclusively pronounce on such contention of the petitioner.

It is the first respondent's argument that the arrangement that was entered into, relating to the development of the land and the setting up of a shopping mall-cum-commercial complex thereat, also involved one Emami 4

Realty Pvt. Limited. The first respondent says that it is Emami which is in de facto control of the petitioner herein and the first respondent owner had entered into the second agreement of March 27, 2007 on the basis of the Emami's reputation and strength as a corporate entity. The first respondent suggests that any arbitration involving only the petitioner herein without Emami being roped in would be meaningless. Again, in the context of the present proceedings, no conclusive opinion need be expressed on such issue.

The primary grievance of the first respondent herein is that the Chief Justice of this Court or the Designate of the Chief Justice of this Court would not be entitled to receive any request under Section 11 of the Arbitration and Conciliation Act, 1996 relating to the arbitration agreement which has been, invoked by reason of Section 11(12) of the Act. Section 11(12) of the Act identifies that the appropriate Chief Justice before whom a request may be made for the constitution of an arbitral tribunal pursuant to an arbitration agreement. Clause (b) of the relevant sub- section mandates that the reference to "Chief Justice" in sub-Sections (4), (5), (6), (7), (8) and (10) of Section 11 shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal civil court referred to in Section 2(1)(e) is situate. Section 2(1)(e) of the 1996 Act defines the appropriate Court and stipulates that a Court within the meaning of the Act would mean a principal civil court of original 5

jurisdiction in a district and include a High Court in exercise of its ordinary original civil jurisdiction. The Court defined in Section 2(1)(e) is such Court as would have jurisdiction to decide the question forming the subject-matter of the arbitration if the same had been the subject-matter of a suit. There is, of course, a rider that the civil court referred to in the clause should not be of a grade inferior to a principal civil court. In other words, the first respondent contends, that if a claim by this petitioner by way of a suit could have been carried to any Court over which this High Court exercises superintendence or if such a claim could have been made to this Court on its Original Side, only then, would a request under Section 11 of the 1996 Act be permissible to be carried to the Chief Justice of this Court or his Delegate. The first respondent contends that the basis for assessing the territorial jurisdiction of a Court would be found in Sections 16 to 20 of the Civil Procedure Code or, in case of this Court in exercise of its original jurisdiction, under Clause 12 of the Letters Patent. The first respondent says that the nature of the agreement is such and the disputes that have arisen between the parties would per force make any claim that could be lodged by this petitioner a suit for land. It is necessary in this context to refer to the correspondence exchanged between the parties immediately before this request was carried to this Court.

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By a letter dated April 29, 2010 the first respondent herein made a request for constituting an arbitral tribunal to adjudicate upon the disputes that had arisen. The letter was addressed to the second respondent herein, to Emami Realty Private Limited and to the petitioner herein. The nature of the disputes was indicated in the notice and it was, inter alia, contended that the development project had not taken off and that no progress had been made in such regard. Paragraph 4(e) of the notice claimed that the first respondent owner had issued a notice terminating the development agreement, "as there does not seem to be any reasonable prospect of commencement of the project." The notice referred to the arbitration clause contained in the agreement of October 18, 2006 and suggested that in view of the death of arbitrator named therein, the noticees should accede to the first respondent's nominee as arbitrator to take up the reference. By a letter of May 21, 2010, the petitioner sought to refute the contentions of the first respondent as contained in the notice. The petitioner herein, however, did not agree to the person suggested by the first respondent to act as the sole arbitrator. The petitioner's letter signed off by claiming that the petitioner herein had been advised to make an application "before the Hon'ble Chief Justice for appointment of the sole arbitrator..." The letter did not specify which Chief Justice the petitioner would approach.

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There is another detail that needs to be noticed in the present context. The first respondent herein lodged a request under Section 11 of the 1996 Act before the Madras High Court on June 1, 2011. The petitioner herein contends that it was only much later that a regular member was assigned to such request and it is such later date which should be reckoned as the date of deposit of such request. The petitioner says that since the present petition was filed by or about May 21, 2010, this petition is earlier in point of time and in accordance with the rule embodied in Section 11 of the 1996 Act, if several requests for the same reference are made to several Chief Justices, the request made first would have primacy over the others, subject to its validity. Section 11(12)(b) of the 1996 Act read with Section 2(1)(e) thereof would imply that a request for constituting an arbitral tribunal for a reference may be made by a party to an arbitration agreement to a Chief Justice presiding over a High Court which would exercise superintendence over the civil court authorised to receive an action in respect of the claim. Section 2(1)(e) provides that a Court would be competent to receive an application under the 1996 Act if such Court were competent to receive a suit filed by the petitioner. Since the 1996 Act does not specify any further, it is the general law relating to the institution of suits that would govern the matter. A suit can be carried to a particular Court either on the 8

basis of the situs of the cause of action or on the basis of the situs of the defendants or any of them, unless it is a suit for land. If a suit is a suit for land, a part of the immovable property being the subject-matter of the suit has to be within the territorial jurisdiction of the Court for the Court to have any authority to receive the action. If a suit is regarded to be a suit for land, the situs of either the cause of action or the defendants to the action would be irrelevant for the purpose of territorial jurisdiction. The principle in Sections 16 to 20 of the Code of Civil Procedure is the same as reflected in the clause 12 of the Letters Patent, at least in such regard.

The difficulty in assessing which would be the appropriate Court that could have received the plaint had a claim been filed by way of a suit rather than being carried by an arbitration petition is that upon a suit being filed, the assessment of whether the Court is the proper Court to have received the action would be based on the plaint relating to the suit; but in an arbitration petition the substance of the claim may not be apparent to Court. That would be the situation both in a pre-reference application under Section 9 of the 1996 Act, which is most common form of an arbitration petition, and even in a request under Section 11 of the 1996 Act.

The matter is even more compounded by the 1996 Act carrying Section 5 therein which limits the ambit of judicial interference in matters 9

pertaining to arbitration. Unlike the 1940 Act which required the disputes between the parties to be enumerated, the 1996 Act does not call for the enumeration of the disputes, though in certain cases without the enumeration of the disputes no meaningful assessment can be made. Since there is no claim to go by at the present moment, the assessment as to whether the claim of the petitioner herein could have been filed before any Court in this State, has to be made primarily on the basis of the correspondence between the parties immediately preceding the present request. It would appear from the letter dated April 29, 2010 and the petitioner's response thereto of May 20, 2010, that the disputes between the parties concern a piece of land which is in Coimbatore. The petitioner claims that the petitioner is in possession of the land and that there is no dispute in such regard. The petitioner suggests that the petitioner's challenge to first respondent's termination of the development agreement would not make the petitioner's claim a suit for land. The petitioner says that the petitioner does not question the first respondent's title to the Coimbatore land and asserts that the possession of the land has been made over by the first respondent to the petitioner. The petitioner insists that merely because some work has to be performed on the land and construction work has to be undertaken thereat, it would not imply that the petitioner's claim relating to the joint development agreement as assigned under the subsequent agreement would entail an 10

adjudication on any right, title and interest relating to the land or any dispute as to the possession thereof.

In support of such contention, the petitioner has relied upon a Division Bench judgment reported at AIR 1960 Cal 626. The matter pertained to a suit for specific performance for the sale of an immovable property where the main relief claimed was for execution of the deed of conveyance relating to the immovable property and there was no dispute as to the possession thereof.

Paragraphs 13, 23 and 24 of the report limit the application of the dictum in that case and the principle may not extend beyond a suit for specific performance of an immovable property where the claim is made for execution of the conveyance, whether by the defendant or by the Registrar of this Court on behalf of the defendant.

The petitioner has also referred to a judgment reported at AIR 1982 SC 525. Paragraph 16 of the report has been placed for the proposition that a suit for specific performance for sale of an immovable property may necessarily entail a claim for possession since no meaningful specific performance can be granted by the Court without directing possession. Again, the principles governing a suit for specific performance of an immovable property seeking execution of the conveyance thereof may not be relevant in the present context.

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Judgments reported in AIR 1989 SC 1239 and 2001 (7) SCC 698 have also been placed by the petitioner in support of the circumstances that would result in an action being regarded as a suit for land. Paragraph 15 of the earlier of these judgments deals with the situs of the cause of action, but such consideration is irrelevant when the assessment called for is as to whether the claim is a suit for land. In the later case, the Division Bench judgment in AIR 1960 Calcutta was referred to by the Supreme Court in connection with a suit for specific performance for sale an immovable property where the primary prayer was for execution of the deed of conveyance.

A development agreement, by its very nature, has to be inextricably connected to the land that it relates to. There is no dispute that it is a development agreement relating to Coimbatore property that the parties fight over. It may be true that the petitioner herein is in possession of the property, but such possession is not by virtue of any immediate right or title relating to the property; but only by virtue of development agreement itself and the obligation of the petitioner to perform in terms thereof. The possession of the Coimbatore land, if it has been made over at all to the petitioner, is only for the purpose of the petitioner constructing the shopping mall-cum-commercial complex thereat and not in any other capacity. In any event, the disputes between the parties, as evident from the correspondence exchanged between them immediately prior to the 12

present petition being filed, are such that they are completely rooted to the land and cannot be divorced therefrom.

The principle recognized in the 1960 Calcutta decision, as now accepted in the 2001 judgment of the Supreme Court cited by the petitioner, may not be apposite in the context since the disputes herein do not relate to the execution of a document but they require the performance of a contract that involves construction on a land which is outside jurisdiction. Further, upon the first respondent's termination of the development agreement, there are questions that arise as to the petitioner's right, title and interest in the land; the petitioner's right to obtain or remain in possession thereof; and, the petitioner's entitlement to a sizeable portion of the constructed space thereat. With the handicap that a Chief Justice's Designate has in considering the gamut of the claim merely on the basis of a request made under Section 11 of the 1996 Act, and without the benefit of the statement of claim since such statement would not be filed at such stage, it appears from the correspondence exchanged between the parties just before this petition was filed, that the disputes between the parties are so closely connected to the Coimbatore land that any claim in relation to the development agreement made by the petitioner would be a suit for land. It is made clear that only point decided here is that the claim that is likely to be made by the petitioner in the reference would necessarily be a 13

suit for land and, thus, would not be capable of being received by any Court in this State. As a consequence thereof, the Chief Justice of this Court would not have any authority to receive a request for constitution of the arbitral tribunal under the arbitration agreement at the behest of the petitioner. The other points canvassed by the parties are not necessary to be addressed in the light of the view expressed herein on the objection as to jurisdiction.

AP No. 244 of 2011 is dismissed without any order as to costs. Urgent certified photocopies of this order, if applied for, be supplied to parties upon compliance with all requisite formalities. (SANJIB BANERJEE, J.)

kc/snn.