IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF AUGUST, 2019 BEFORE BETWEEN:
THE HON' BLE MR. JUSTICE B. VEERAPPA C.M.P. No.357/2018 SHAPOORJI PALLONJI & COMPANY PRIVATE LIMITED (PREVIOUSLY SHAPOORJI PALLONJI & COMPANY LIMITED) A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT NO.70 NAGINDAS MASTER ROAD FORT, MUMBAI-400 023.
AND HAVING ITS REGIONAL OFFICE AT NO.124 7TH FLOOR, SURYA CHAMBERS HAL OLD AIRPORT ROAD, MURGESHPALYA, BENGALURU-560 017.
REPRESENTED HEREIN BY ITS ADDL.GENERAL MANAGER MR. HARI MANIGANDLA.
(BY SRI A. ARUN KUMAR, SENIOR COUNSEL A/W SRI VIKAS MAHENDRA, ADVOCATE) AND:
LILY REALTY PRIVATE LIMITED., 3RD FLOOR, BENGAL CHEMICALS BLDG., 502, VEER SAVARKAR MARG PRABHADEVI, MUMBAI-400025.
REPRESENTED BY ITS AUTHORISED REPRESENTATIVE, ... PETITIONER (BY MS. PRIYANKA DAS, ADVOCATE FOR SRI N.K. DILIP, ADVOCATE) ... RESPONDENT THIS CMP IS FILED UNDER SECTION 11(6) OF THE ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO APPOINT AN ARBITRATOR ON BEHALF OF THE RESPONDENT SO AS TO ENABLE CONSTITUTION OF AN ARBITRAL TRIBUNAL TO ARBITRATE ALL DISPUTES BETWEEN THE PETITIONER AND RESPONDENT INCLUDING, IN PARTICULAR, THE CLAIM OF THE PETITIONER AGAINST THE RESPONDENT AS DETAILED IN THE PETITIONER'S LETTER DATED: 23 OCTOBER 2018 IN TERMS OF CL.15 OF GENERAL TERMS OF CONTRACT DATED: 02.04.2013 IN ANNEXURE-B.
THIS CMP COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER This Civil Miscellaneous Petition is filed under the provisions of Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint sole Arbitrator to adjudicate the dispute between the parties in terms of the acceptance letter dated 23.8.2013 and in terms of Clause (15) of the General Terms of Contract dated 2.4.2013, Annexure-B to the civil miscellaneous petition.
2. It is the case of the petitioner that it is a leading construction company in India providing services to the Corporations, Government and International Clients across various sectors. The present claim is duly filed for and on behalf of the Petitioner-Company Pvt. Ltd. The petitioner is being represented in this proceedings by its authorized representative Mr. Hari Manigandla. The respondent- Company is engaged in the development and construction of commercial and residential projects across the Country. The respondent and its Associate Companies viz., Pashmina Developers Pvt. Ltd and Ishani Reality Pvt. Ltd., are part of the ASK Group of Companies.
3. It is further stated that Ishani Realty invited tenders from pre-qualified builders for the development of 25,00,000 sq. ft of land located at K.R. Puram, Bangalore in respect of a project to be known as ‘Pashmina Waterfront’ . The petitioner was one among the many renowned developers, who submitted an offer in pursuance of the tender floated by Ishani Realty. It is the further case of the petitioner that after a fair and competitive bidding process, the petitioner emerged as the successful bidder to execute the works in relation to the project as stipulated in the tender. Accepting the petitioner’s offer bearing No.SP/BNG/OPRN/125/2012-
13 dated 31st August, 2012, the respondent issued a Letter of Acceptance dated 5th September, 2012 wherein the petitioner had been awarded a contract for Civil, Structural and Finishing Works for the project. Thereafter in terms of Clause-1 of the Letter of Acceptance, the parties have executed a Contract Agreement dated 2nd April, 2013 (Contract Agreement) for the Civil, Structural and Finishing Works for the proposed construction of the Project. The said instrument expressly records that the Tender, Drawings and Tender Addendums, General and Special Conditions of Contract, Scope of Works and Specifications, the Bill of Quantities, the offer submitted by the petitioner and the Letter of Acceptance dated 5th September, 2012 were to be read as part and parcel of the Contract Agreement.
4. It is the further case of the petitioner that it duly and diligently performed all its obligations under the contract and works expected of it with regard to the project. Upon completion of its work, it raised multiple bills on the respondent calling upon to make payment of the amounts owed to it. On 20th March, 2018 it raised Final Bill calling upon the respondent to pay a sum of Rs.1,13,19,63,974/-(Rupees One Hundred and Thirteen Crores Nineteen Lakhs Sixty Three Thousand Nine Hundred and Seventy Four Only) subsequent to which a joint inspection of works was conducted by its and respondent’s representatives and during the said joint inspection, the parties mutually agreed upon the quantities and various other claims. Accordingly, it issued an updated final bill dated 9th July, 2018 for an amount of Rs.1,12,65,99,544/- (Rupees One Hundred and Twelve Crores Sixty Five Lakhs Ninety Nine Thousand Five Hundred and Forty Four Only).
5. It is further case of the petitioner that on 28th September, 2018, it issued one more letter re- enclosing the revised final bill dated 9th July, 2018 clarifying that in addition to the sums mentioned in the revised Final Bill, the respondent was also liable to pay an amount of Rs.67,89,141/-(Rupees Sixty Seven Lakhs Eighty Nine Thousand One Hundred and Forty One only) towards Service Tax. Accordingly, the petitioner called upon the respondent to pay a sum of Rs.1,13,33,88,685/-(Rupees One Hundred and Thirteen Crores Thirty Three Lakhs Eighty Eight Thousand Six Hundred and Eighty Five only).
6. It is further case of the petitioner that the respondent continued to maintain a stoic silence on the amounts that it owed to the petitioner under the terms of the Contract and Final Bills raised thereon. The petitioner on various occasions prompted the respondent to settle the outstanding amount but was of no avail. It is further stated that in terms of Clause-15 of the General Conditions of Contract, the Agreement stipulates the settlement of disputes and Arbitration. Hence, it issued legal notice dated 23rd October, 2018 to the respondent demanding payment of outstanding amount owed to it under the Contract and the respondent received the said legal notice, but has not replied. Therefore, the petitioner is before this Court for the relief sought for.
7. The respondent filed statement of objections and raised various contentions including preliminary objection with regard to maintainability of this civil miscellaneous petition contending that issuance of notice of Arbitration dated 23.10.2018 by the petitioner to it is invalid as it is inconsistent with the provisions of the Contract Agreement dated 2.4.2013 because the said agreement does not contain any arbitration clause. It is further contended that there is no Arbitration Agreement specifically executed between the parties. Further the notice of arbitration dated 23.10.2018 also is disputed by the respondent. It is further contended that the Arbitration Agreement is executed between the petitioner and Ishani Realty Pvt. Ltd an entity which is not party to the Contract Agreement dated 2.4.2013. The said Entity is not a party to the dispute which is presently being adjudicated before this Court and the Ishani Realty Private Limited is also not arrayed as party to the dispute.
8. It is further contended by the respondent that the registered office of Ishani Realty Pvt. Ltd., is situated at Mumbai and therefore, the present miscellaneous petition before this Court is not maintainable and if at all the petitioner needs to file an application for reference, it is appropriate for it to file before the High Court of Mumbai.
9. The respondent has further contended that the documents so executed by the parties viz., the Contract Agreement dated 2.4.2013 and the Letter of Award dated 5.9.2012, the parties have intentionally and voluntarily agreed not to resolve their disputes through arbitration, but through the jurisdiction of the Civil Court. The Letter of Award was awarded by it to the Petitioner on 5.9.2019 and thereafter, they have entered into the Contract Agreement dated 2.4.2013 which do not contain any express provision for arbitration of disputes.
10. It is the contention of the respondent that the compensation due to the petitioner as per the Contract Agreement have been remitted to the tune of Rs.116,93,47,240/- (Rupees One Hundred and Sixteen Crores Ninety Three Lakhs Forty Seven Thousand and Two hundred and Forty only) which is in excess of the works completed by the petitioner and hence, there remains no ground for the petitioner to approach this Court.
11. It is further contended that the tender called for was by another group of company and not the respondent. It is also contended that the present civil miscellaneous petition is barred by limitation and the petitioner has not paid the stamp duty. Therefore the respondent sought for dismissal of the civil miscellaneous petition.
12. I have heard the learned Counsel for the parties to the lis.
13. Sri A. Arun Kumar, learned Senior Counsel along with Sri Vikas Mahendra, learned Counsel for the petitioner reiterating the averments made in the civil miscellaneous petition, contended that in pursuance of the letter of acceptance issued by the respondent, petitioner and respondent have entered into an agreement on 2.4.2013 wherein the contract stipulates that following documents shall be deemed to form and be read and construed as part of the agreement:
a) Tender b) The Drawings & Tender Addendums c) General & Special Conditions of Contract d) Scope of Works and Specifications e) The Bill of Quantities and f) The Letter of Acceptance dated 5th September, 2012.
He further contended that in terms of the said Letter of Acceptance and Contract Agreement, conditions and contract also came to be executed between the parties on 2.4.2013. Clause 15.1 of the terms of the Contract prescribes ‘Settlement of Disputes and Arbitration’ which is not in dispute. It is further contended that existence of contract and arbitration clause are not in dispute. He would further contend that the legal notice is issued by the petitioner under Section 7(5) of the Arbitration and Conciliation Act, 1996 to the respondent and no reply is filed by the respondent, Sole Arbitrator be appointed to adjudicate the dispute between the parties. Therefore, he sought to allow the civil miscellaneous petition.
14. Per Contra, Ms. Priyanka Das for Sri N.K. Dilip, learned Counsel for the respondent reiterating the averments made in the statement of objections, contended that there is no special condition in the contract entered into between the parties. She further contended that the petitioner has committed fraud on the respondent for a sum of Rs.113 Crores (Rupess One Hundred and Thirteen Crores only) and since no sufficient stamp duty is paid on the agreement, the said agreement cannot be entertained unless and until stamp duty is paid as per the provisions of Section 34 of the Karnataka Stamp Act. She would further submit that subsequently the stamp duty is paid that too after this civil miscellaneous petition is filed before this Court which cannot be entertained. Even the penalty paid is insufficient. She would also contend that the present civil miscellaneous petition is not maintainable for want of jurisdiction since the office of both petitioner and respondent are situated at Bombay and therefore, this Court has no jurisdiction to entertain the present civil miscellaneous petition and sought for dismissal of the civil miscellaneous petition.
15. In support of her contentions, learned Counsel for the respondent relied upon the judgment of the Hon’ble Supreme Court in the case of Duro Felguera, S.A. –vs- Gangavaram Port Limited reported in (2017) 9 SCC 729 with regard to general reference to another contract will not be sufficient to incorporate the arbitration clause from the referred contract into the contract under consideration. There should be a special reference indicating a mutual intention to incorporate the arbitration clause from another document into the contract. The exception to the requirement of special reference is where the referred document is not another contract, but a standard form of terms and conditions of trade associations or regulatory institutions which publish or circulate such standard terms and conditions for the benefit of the members or others who want to adopt the same.
16. The learned Counsel for the respondent further relied upon the judgment of the Hon’ble Supreme Court in the case of A.Ayyasamy –vs- A. Paramasivam and Others reported in (2016) 10 SCC 386 wherein it has been held that mere allegation of fraud simpliciter may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil Court on the appreciation of the voluminous evidence that needs to be produced, the court can sidetrack the agreement by dismissing the application under Section 8 and proceed with the suit on merits.
17. Having heard the learned Counsel for the parties, it is an undisputed fact that Ishani Realty invited tenders from pre-qualified builders for the development of 6,86,614 sq.ft. of the land located at K.R. Puram, Bangalore in respect of a project known as ‘Pashmina Waterfront’. It is also not in dispute that the petitioner participated in the tender process and it was declared as the successful bidder to execute the works in relation to the project as stipulated in the tender. It is also not in dispute that the present respondent issued a Letter of Acceptance dated 5th September, 2012 specifically stating that the petitioner and respondent had to execute a Contract Agreement for the Civil, Structural and Finishing Works for the proposed construction of the Project subject to the terms and conditions and the letter of award (LOA) is subject to execution of a definitive agreement/contract by you with Lily Realty Pvt. Ltd., and this LOA is subject to compliance with all applicable statutory laws. At the bottom of the said letter, it is specifically stated that the of contract that the following documents shall be deemed to form and be read and construed as part of this Agreement viz., Tender, Drawings and Tender Addendums, General and Special Conditions of Contract, Scope of Works and Specifications, Bill of Quantities and the Letter of Acceptance dated 5th September, 2012. At the bottom of the said letter which is a letter head, it is specifically stated as ‘Lily Realty Pvt. Ltd.’ . It is also not in dispute that in the Letter of Acceptance, it is stated at Clause 1.21 ‘Arbitration’ and the same is as per contract clause. It is an undisputed fact that subsequently the petitioner and the respondent entered into contract agreement on 2nd April, 2013 and at para-1 of the said agreement it is stated that in the Agreement words and expressions shall have the same meanings as are respectively assigned to them in the conditions of contract hereinafter referred to and the following documents shall be deemed to form and be read and construed as part of the agreement – a) The said Tender, b) The Drawings & Tender Addendums c) General & Special Conditions of Contract d) Scope of Works and Specifications e) The Bill of Quantities f) The Letter of Acceptance Ref.PBPL/SPC/LOA/ BANG/010 dated 5th September, 2012.
18. It is also not in dispute that on the very same day the condition agreement came into force. It is also not in dispute that the parties entered into condition of contract i.e., as per General Conditions of Contract mentioned in Part-I, Definitions and Interpretations are mentioned wherein ‘Contract’ means the Notice Of Tender, Instructions to Tenderers, Conditions of Contract, Specifications, Drawings, Priced Bill of Quantities, Schedule of Rates and Prices, if any, correspondence letters concerned to tender, Letters of Intent (LOI) and the Contract Agreement, when completed. Clause 15 of the said Agreement refers to Settlement of Disputes and Clause 15.1 refers to Settlement of Disputes and Arbitration which reads as under:
“15.1 Settlement of disputes and arbitration:
All disputes and difference arising out or in connection with the contract whether during the progress or work or after completion shall be referred to and settled by arbitration by two Arbitrators, one to be nominated by the contractor and one to be nominated by the Client. The two arbitrators shall, in turn appoint a neutral third party who shall also be an arbitrator. The decision of the Umpire shall, however, be final and binding on both the parties. For the purpose of this clause, the provisions of the Arbitration and Conciliation Act, 1996, with the relevant amendments and latest revisions shall be applicable.
The seat of arbitration shall be Bangalore and the arbitration shall be carried out in the English language.”
19. In view of the aforesaid clause, the contention of the learned Counsel for the respondent that the petition is not maintainable before this Court for want of jurisdiction cannot be accepted.
20. The contention of the learned Counsel for the respondent that there is no condition in separate agreement cannot be accepted, since the very respondent by a letter dated 5th September, 2012 addressed to the present petitioner accepted the revised tender offer by the petitioner with regard to Civil, Structural and Finishing Works for the said project and subsequently the very petitioner and respondent entered into an Agreement on 2nd April 2013, wherein General and Special Conditions of Contract have been specified. Therefore, the contention of the learned Counsel for the respondent that there was no condition of contract for Arbitration Clause in the said Agreement cannot be accepted. It is also not in dispute that the respondent has not disputed the existence of contract agreement dated 2nd April, 2013 between the parties and General and Special Conditions thereon and Arbitration Clause stated supra. It is also not in dispute that the petitioner issued legal notice on 23.10.2018 and admittedly, though the same was received by respondent, it did not reply.
21. The another contention raised by the learned Counsel for the respondent is that the tender was called for by another group of Company and not by the respondent. If that is so, what is the business of respondent to issue Letter of Acceptance to the petitioner on 5th September, 2012 and then to enter into an Agreement on 2nd April, 2013 which is not forthcoming. Therefore, the said contention raised by the respondent is nothing, but wasting public time which cannot be accepted.
22. In support of the contentions raised by the learned Counsel for the respondent that the claim is barred by limitation is concerned, it is an undisputed fact that final bill was raised on 20.3.2018, updated final bill on 9.7.2018, supplementary final bill on 28.9.2018, the legal notice was issued on 23.10.2018 and the present civil miscellaneous petition is filed on 29.11.2018, but the respondent has not shown under which provision, this civil miscellaneous petition is barred by limitation. Article 137 of the Limitation Act , 1963 stipulates that in application for which no period of limitation is provided elsewhere in the Limitation Act, the period of three years commences when the right to apply accrues. When the bill was raised for the time in the month of March, 2018 and last bill in the month of September, 2018, the legal notice issued on 23.10.2018 was well within the time stipulated and in accordance with law and therefore, the contention of the respondent that the civil miscellaneous petition is barred by limitation cannot be accepted.
23. In so far as the stamp duty and penalty is concerned, though at the time of filing the present petition, the petitioner has not paid the stamp duty on the contract agreement, subsequently, it has approached the Deputy Registrar of Stamps on 2nd July, 2019 and paid the stamp duty on the agreement dated 2nd April, 2013 before the jurisdictional District Registrar and Deputy Commissioner of Stamps, Shivajinagar, Bengaluru, who has issued the certificate dated 26.7.2019 stating that the petitioner has paid the Stamp duty of Rs.1,58,000/- (Rupees One Lakh Fifty Eight Thousand only) and Rs.60,000/- (Rupees Sixty Thousand only) towards penalty and in all it has paid a sum of Rs.2,18,000/-(Rupees Two Lakhs Eighteen Thousand only) including penalty through Demand Draft bearing No.114886 dated 27.6.2019 drawn on SCB, Koramangala, Bengaluru and accordingly, a certificate has been issued under the provisions of Section 39 of the Karnataka Stamps Act, 1957 certifying that the document is duly stamped. Therefore, the contention of the learned Counsel for the respondent that the petitioner has not paid sufficient stamp duty cannot be accepted and the endorsement issued by the District Registrar and Deputy Commissioner of Stamps has reached finality.
24. In so far as the reliance of the judgment of the Hon’ble Supreme Court by the learned Counsel for the respondent in the case of Duro Felguera S.A. –vs- Gangavaram Port Ltd., reported in (2017) 9 SCC 729 stated supra that a general reference to another contract will not be sufficient to incorporate the arbitration clause from the referred contract into the contract under consideration and there should be a special reference indicating a mutual intention to incorporate the arbitration clause from another document into the contract, admittedly in the present case, in response to the tender notification issued by the Ishani Realty, the petitioner was declared as a successful bidder and the present respondent through its letter head issued acceptance of bid to the petitioner. Subsequently the petitioner and respondent entered into the contract and conditions of contract in pursuance of the Agreement and therefore, there is no another separate contract between the parties. The contract, agreement and letter of acceptance are one and the same and same contract between the parties. Therefore, the said judgment has no application to the facts and circumstances of the present case.
25. In so far as the judgment of the Hon’ble Supreme Court relied upon by the learned Counsel for the respondent in the case of A. Ayyasamy –vs- A Paramasivam and Others reported in (2016) 10 SCC 386 wherein it has been held that in case of fraud, if there are any serious allegations of fraud, the application filed under Section 8 of the Arbitration and Conciliation Act, 1996 has to be dismissed and the matter – suit has to be decided on merits, this Court has no quarrel with the law laid down by the Hon’ble Apex Court. In the circumstances where applications are filed under Section 8 of the Arbitration and Conciliation Act and when there are very serious allegations of fraud, which make a virtual case of criminal offence or where allegations of fraud are so complication that it becomes absolutely essential that such complex issue can be decided only by the Civil Court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing the application under Section 8 of the Arbitration and Conciliation Act and proceed with the suit on merits. Admittedly in the present case, the application filed is under the provisions of Section 11 of the Arbitration and Conciliation Act. Hence, the said judgment has no application to the facts and circumstances of the present case. The said contention can be raised before the learned Arbitrator and it is for the learned Arbitrator to decide the same in accordance with law.
26. The material on record which clearly depicts the existence of dispute between the parties, Arbitration Clause, issuance of legal notice and respondent has not replied to the legal notice are not in dispute. Therefore the petitioner has made out a prima-facie case for appointment of Arbitrator as prayed for and there is no impediment to appoint the Sole Arbitrator to adjudicate the dispute between the parties.
27. At this stage, learned Counsel for the parties to the lis jointly agree for appointment of Hon’ble Mr. Justice Ashok B. Hinchigeri, Former Judge of this Court as the Sole Arbitrator to adjudicate the dispute between the parties.
28. For the reasons stated above, civil miscellaneous petition is allowed. In view of the aforesaid admitted facts and consent given by the learned Counsel for the parties, Hon’ble Mr. Justice Ashok B. Hinchigeri, Former Judge of this Court, is appointed as the sole Arbitrator to adjudicate the dispute between the parties in terms of Clause-15.1 of the Contract Agreement dated 2nd April, 2013 entered into between the parties and in accordance with law.
29. All the contentions raised by the parties are left open to be urged before the learned Arbitrator.
30. Registry is directed to send a copy of this order to – The Hon’ble Mr. Justice Ashok B. Hinchigeri, Former Judge of this Court as well as to the Arbitration Centre forthwith for reference.
Nsu/-
Sd/- Judge