The agreement for sale was executed on 25.07.1987 inter se the parties. The commercial Unit of the respondent was agreed to be sold to the petitioner on the terms and conditions specified in the agreement for sale. This culminated in the sale deed dated 15.06.1989.
2. As per clause 10 of the agreement of sale, extracted below, the effect of liabilities arising in respect of the business prior to the agreement of sale was elucidated:-
10(a) KICL shall continue to conduct, prosecute or defend any and all cases that are pending in Revenue, Civil, Criminal or Industrial Courts, Tribunals etc., in respect of which KICL was a party before the date of sale or in respect of cases that might arise out of transactions which had been concluded by KICL prior to the date of sale and SPIC shall not be concerned with or responsible for prosecution of such proceedings in any manner whatsoever.
(b) KICL shall undertake to reimburse any amount for which SPIC may become liable from any claims or damages that may arise out of any legal actions referred to above, whether they have been disclosed to SPIC or not on the date of sale.
(c) KICL shall be absolved of all the liabilities as on and from the date of sale of Chemical Unit to SPIC and from that date, SPIC and SPIC alone will be liable for all claims, actions, and proceedings arising out of or relating to the business after the date of sale. It appears that certain concessions which were admissible by the Tamil Nadu Electricity Board were sought to be withdrawn on 06.10.1988 based on the amendment of the Schedule in respect of the period from May, 1982 to November, 1983 on the basis that, from the balance sheet of the respondent for the year ended 30.06.1982, it was found that the respondent had earned a profit of Rs.337.81 lakhs. Reimbursement was thus sought from the respondent of Rs.88,77,622.88 in one lump sum.
3. The aforesaid withdrawal of the concession was challenged by the respondent vide W.P.No.12517 of 1988 before this High Court. The petitioner executed an undertaking in favour of the Tamil Nadu Electricity Board to ensure transfer of power quota. This litigation was carried on by both parties. But unfortunately, the Hon'ble Supreme Court, ultimately dismissed the Civil Appeals on 29.01.2016. The result is that the liability has arisen in respect of the commercial Unit.
4. The question sought to be raised by the petitioner is that this liability is to be borne by the respondent in terms of the agreement of sale, which is sought to be denied by the respondent.
5. The present petition has been filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to ''the said Act'') on account of Clause 12 of the agreement of sale, which reads as under:-
''12.Both parties agree that in regard to interpretation of the provisions of this agreement or in regard to implementation of the same, should there arise any dispute, the same would be resolved by Arbitration of Sole Arbitrator to be appinted by mutual consent whose decision shall be final and binding. The provisions of the Arbitration Act, 1940 shall be applicable to such proceedings.''
6. The petition is however resisted by the respondent, who claims that since the agreement of sale culminated in the sale deed and there is no arbitration clause in the sale deed, the dispute is not capable of arbitration. They also seek to raise the issue that the claim is hopelessly barred by time, as the cause of action arose in 1988 and the period of limitation has to be reckoned from the said date.
7. The learned counsel for the respondent has relied upon the judgment of the Calcutta High Court in A.P.No.731 of 2013, decided on 06.01.2014 (Prasanta Kumar Pahari v. Sri Goutam Ghosh), more specifically the last para, which reads as under:-
''The culmination of an agreement for sale of an immovable property in a deed of conveyance executed for the transfer thereof cannot be equated with the expiry of a matrix contract containing an arbitration clause where the arbitration clause would survive notwithstanding the expiry of the matrix contract. An agreement for sale of an immovable property, by its very nature and irrespective of whether it is specifically enforceable, is an agreement preparatory to the transfer of the property upon the execution of the deed of conveyance relating thereto. Once the deed of conveyance is executed, the agreement for sale is over in all respects. Since the very basis for arbitration is the consensus between the parties thereto, an arbitration clause contained in a previous agreement can scarcely be read into the subsequent agreement by any doctrine of incorporation unless it is specifically referred to and included in the subsequent agreement covering the same transaction. The doctrine of incorporation may extend to the commercial terms in the previous agreement that may not have been specially incorporated in the subsequent agreement, but it would not apply to an arbitration clause contained in the previous agreement unless the parties specially provide therefor.''
8. On the other hand, the learned Senior Counsel for the petitioner contends that the cause of action really arose when the Hon'ble Supreme Court gave a quietus to the issue, albeit against the parties on 29.1.2016, till which date, both the parties were making every legal endeavour to deny the rival claim. It is also submitted that the agreement of sale contained these obligations, which were apart from the obligations which arose for execution of the sale deed and thus, the execution of the sale deed would not obliterate these terms of the obligations.
9. On hearing the learned counsel for parties, I find that one would have to revert to the terms of the agreement of sale to determine the aforesaid question. It is not a case of simpliciter transfer of the property through the sale deed, where the sale deed having been executed, the rights and obligations stood fructified and concluded. The agreement for sale was of the Unit of the respondent which contains certain rights and obligations of the parties. The parties in their wisdom, apart from the aspect of the transfer of the Unit, provided for the issue of the liabilities of the authorities as well as the conduct of the legal proceedings. The proceedings against the Tamil Nadu Electricity Board were contested by both parties, but culminated in an adverse decision. It cannot be said that the consequence of the decision whether the obligations falls on the petitioner or the respondent would be superseded by the sale deed, and thus the dispute arising out of the agreement for sale has to be determined.
10. In so far as the question of limitation is concerned, mere raising of a demand by the Tamil Nadu Electricity Board would not give rise to the cause of action, as both parties jointly contested the demand by initiating the legal proceedings. It is only the culmination of those legal proceedings which imposed the liabilities arising from the agreement for sale. That would be the point for the cause of action. The view expressed in respect of the issue of limitation, of course, is based on the pleadings of the parties at present and may not preclude the respondent from raising the same before the Arbitrator.
11. The arbitration clause in the agreement for sale is not disputed, neither is the jurisdiction of this Court disputed. That the disputes have arisen is obvious and the same is the consequence of the decision rendered by the Hon'ble Supreme Court on 29.01.2016, dismissing Civil Appeal Nos.9748 to 9750 of 2003. Thus, the matter has to be referred to arbitration for adjudication.
12. In view of the aforesaid, I appoint, Mr.Justice F.M.Ibrahim Kalifulla, a retired Judge of the Supreme Court of India, as the Sole Arbitrator to enter upon the reference and adjudicate the disputes inter se the parties. The arbitration proceedings will be conducted under the aegis of the Madras High Court Arbitration Centre and the parties will be governed by the Rules of the Centre.
13. The original petition is, accordingly, allowed, leaving the parties to bear their own costs.
(S.K.K., CJ.) 06.01.2017 bbr Note: Mark a copy to
(i) The Addl. Registrar-Vigilance Madras High Court Arbitration Centre, Madras High Court Campus, Chennai.
(ii)The Arbitrator, as referred above.
The Hon'ble Chief Justice bbr O.P.No.833 of 2016 06.01.2017 http://www.judis.nic.in