Tejpal Singh v. Surinder Kumar Dewan

9. The respondent, however, vide its reply dated 18.03.2018 opposed the appointment of an Arbitrator, whereafter, the petitioner filed the first petition under Section 11(6) of the Act, being ARB.P.744/2018.

10. The petitioner also challenged the order dated 09.08.2018 passed by this Court in OMP(COMM) 178/2018 by way of an appeal under Section 37 of the Act, being FAO(OS)(COMM) 8/2019. The said appeal has now been dismissed by the Division Bench of this Court vide its judgment dated 13.12.2022.

11. In the meantime, the respondent demolished the building constructed by the petitioner on the abovementioned plot of land.

12. The petitioner claiming that such demolition gave a fresh cause of action to the petitioner, again invoked the Arbitration Agreement vide notice dated 20.02.2022, and thereafter filed the second petition under Section 11 of the Act, being ARB.P.957/2022.

13. It is the case of the petitioner that the existence and validity of the Arbitration Agreement is not disputed by the respondent. The same having been properly invoked by the petitioner, this Court must proceed to appoint an Arbitrator.

14. The learned counsel for the petitioner further submits that the superstructure having been raised by the petitioner in terms of the Collaboration Agreement, the petitioner was entitled to the second floor along with the terrace in the same. Referring to the judgments of this Court in Ms.Sarla Mehra v. Mr.Praleen Chopra & Ors 2009 SCC OnLine Del 1025, and the order dated 18.01.2018 passed by this Court in Kunwar S Vishal v. Kohli Realtors Pvt. Ltd & Ors., CS(OS) 19/2010, he submits that the petitioner became the owner of the second floor and the roof, and the respondent having demolished the same, the petitioner is entitled to the claim of damages. He submits that such dispute falls within the ambit and scope of the Arbitration Agreement thereby entitling the petitioner to the appointment of an Arbitrator.

15. The learned counsel for the petitioner has further submitted that in the previous round of arbitration that resulted in the judgment dated 13.12.2022 passed in FAO(OS)(COMM) 8/2019, referred to hereinabove, the question of petitioner‟s entitlement over the superstructure was not an issue. He submits that, in fact, a fresh cause of action has arisen in favour of the petitioner on the demolition of the superstructure by the respondent. Placing reliance on the judgement dated 05.04.2022 of this Court in M/s Orissa Concrete and Allied Industries Ltd. v. Union of India & Ors., Neutral Citation No: 2022/DHC/001231, he submits that an arbitration proceeding on a fresh cause of action is maintainable.

16. On the other hand, the learned senior counsel for the respondent, placing reliance on the earlier Arbitral Award; the order of this Court in OMP(COMM) 178/2018; and the order of the Division Bench of this Court in FAO(OS)(COMM) 8/2019, submits that the present petitions are gross abuse of the process of the Court. He submits that the present petitions have been filed merely to harass the respondent, who is a senior citizen, and such a frivolous petition should be nipped in the bud.

17. I have considered the submissions made by the learned counsels for the parties.

18. As noted hereinabove, the claim of the petitioner arises out of the Collaboration Agreement. The same was terminated by the respondent vide notice dated 11.05.2007. Thereafter a Sole Arbitrator was appointed by this Court for adjudicating the disputes that had arisen between the parties in relation to the Collaboration Agreement. In the said arbitration proceedings, only the respondent raised his claims. The petitioner did not file any counter claim in spite of an opportunity granted by the learned Sole Arbitrator. This is so recorded by the learned Sole Arbitrator in the Award dated 29.12.2017, as under: “15.7.....In any case, if the claimant refused to execute sale deed, remedy available to the respondent was to file suit for specific performance of the agreement which remedy was never availed by him. 15.[8] Besides the testimony of claimant, there is admission on the part of respondent that building plan was sanctioned for construction of property upto second floor and approx 2000 square feet on each floor was to be constructed. However, in utter violation of sanctioned plan third floor was also constructed and construction of approx 2750 sqaure feet on each floor was raised with the result a show casue notice was issued by the MCD raising objection to the unauthorized construction. Since the respondent failed to remedy the breaches, officials of MCD demolished the third floor of the property during the period 23rd to 28th April, 2006. However, respondent again started construction of third floor, therefore, MCD sealed the entire property on 30.05.2006. Thereafter one FIR was registered against the claimant being no. 609/2006 u/s 188, 466(1) of the Delhi Municipal Corporation Act and S.188 and 457 of IPC. The claimant applied for anticipatory bail, however, in view of the information placed on record by the officials of MCD that unauthorized construction was still being raised, the application was rejected. Another application was moved before High Court on 3rd November 2006 and ultimately on 07.11.2006 High Court granted bail. For the purpose of getting property de-sealed, representation was made before MCD and property was de-sealed vide letter dated 22.01.2007 for a period of 7 days in order to remove unauthorized construction and submit relevant documents for regularization of property. However, instead of removing unauthorized construction, respondent again started raising construction on third floor. Therefore, property was again resealed by MCD. Respondent did not stop his nefarious designs and according to claimant, respondent trespassed into the property and took construction work at the said property. Therefore claimant was constrained to write to MCD not to entertain any request from the respondent with regard to sanctioning of plan etc. and claimant also terminated collaboration agreement vide legal notice dated 11.05.2007. There is no substance in the submission of the learned counsel for the respondent that claimant could not have unilaterally cancel the collaboration agreement and it was undeterminable in nature. Since the respondent was not remedying the breach by removing the unauthorized construction but was also bent upon raising construction upto third floor, there was no option left with the claimant but to cancel the collaboration agreement. Even otherwise, even if according to the respondent the collaboration agreement could not be terminated, a wrongful termination of contract could have been challenged by an independent claim which steps have not been taken by the respondent. xxx

15.10 According to the respondent, he invested approximately Rs. 1 Crore on raising construction. Despite granting sufficient number of opportunities he could not prove the same. Moreover, although, in reply to the claim petition, he stated that he will be filing a counter claim, no such counter claim was filed by him.

15.11 As regards the plea that collaboration agreement was in fact an agreement to sell and only a formal sale deed remained to be executed, the same is devoid of any force. Collaboration agreement prescribed certain terms and condition and on fulfilment of the same, the sale deed was to be executed. However, respondent failed to comply with those terms and conditions. In any case, if there was any breach of contract on the part of claimant, remedies were available to the respondent, which he has failed to take recourse.” (Emphasis supplied)

19. Though the petitioner challenged the said Award by filing a petition under Section 34 of the Act, even at that stage, no other challenge was laid to the Arbitral Award to claim that the termination of the Collaboration Agreement by the respondent was illegal or ineffective.

20. Even in the order dated 13.12.2022 dismissing the appeal of the appellant, the Division Bench of this Court has held that the petitioner was in breach of the Collaboration Agreement.

21. In view of the said findings, the petitioner cannot now be allowed to challenge the termination of the Collaboration Agreement. Such a challenge would be clearly barred by the law of limitation. The cause of action having arisen with the termination of the Collaboration Agreement by the respondent on 11.05.2007, while the arbitration agreement having been invoked for the first time by the petitioner on 26.02.2018, the claim of the petitioner would not only be barred by the law of limitation but would also be hit by the principles of resjudicata.

22. In M/s Orissa Concrete and Allied Industries Ltd. (supra), this Court held that the dispute that arises subsequent to the arbitration proceedings having been initiated, can be referred in a separate arbitration. The Court in that case prima facie found that the claim of the petitioner therein in the earlier arbitration was different and no cause of action had arisen to the petitioner at the stage of the earlier arbitration. The same cannot be said in the present case. As noted hereinabove, the cause of action, if any, of challenging the termination of the Collaboration Agreement and/or claiming any relief thereunder was available to the petitioner at the stage of the earlier arbitration proceedings, and in any case, the cause of action, if any, arose in favour of the petitioner on 11.05.2007 when the Collaboration Agreement was terminated by the respondent. The invocation of the arbitration having been made on 26.02.2018 and 22.02.2022, the claim of the petitioner is ex facie barred by the law of limitation. It is also barred by the Principle of the res-judicata.

23. The submission of the learned counsel for the petitioner that the demolition of the structure would gave a fresh cause of action to the petitioner, is also ill-founded. Once the Collaboration Agreement had been terminated, the claim, if any, of the petitioner in the superstructure raised by the petitioner could only have been asserted by the petitioner before the earlier Arbitral Tribunal.

24. In Vidya Drolia & Ors. v. Durga Trading Corporation (2021) 2 SCC 1, the Supreme Court while laying down the restrictive scope and ambit of jurisdiction of the Court at the referral stage under Section 11 of the Act, has also held that the Court would have restricted and limited review to check and protect the parties from being forced to arbitrate when the matter is demonstrably deadwood. The Supreme Court observed as under: “132. The courts at the referral stage do not perform ministerial functions. They exercise and perform judicial functions when they decide objections in terms of Sections 8 and 11 of the Arbitration Act. Section 8 prescribes the courts to refer the parties to arbitration, if the action brought is the subject of an arbitration agreement, unless it finds that prima facie no valid arbitration agreement exists. Examining the term “prima facie”, in Nirmala J. Jhala v. State of Gujarat this Court had noted: (SCC p. 320, para 48)

133. Prima facie case in the context of Section 8 is not to be confused with the merits of the case put up by the parties which has to be established before the Arbitral Tribunal. It is restricted to the subject-matter of the suit being prima facie arbitrable under a valid arbitration agreement. Prima facie case means that the assertions on these aspects are bona fide. When read with the principles of separation and competence-competence and Section 34 of the Arbitration Act, the referral court without getting bogged down would compel the parties to abide unless there are good and substantial reasons to the contrary. [ The European Convention on International Commercial Arbitration appears to recognise the prima facie test in Article VI(3):

“VI. (3) Where either party to an arbitration agreement has initiated arbitration proceedings before any resort is had to a court, courts of contracting States subsequently asked to deal with the same subject-matter between the same parties or with the question whether the arbitration agreement was non-existent or null and void or had lapsed, shall stay their ruling on the arbitrator's jurisdiction until the arbitral award is made, unless they have good and substantial reasons to the contrary.”]

134. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and nonarbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straightforward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. Only when the court is certain that no valid arbitration agreement exists or the disputes/subject-matter are not arbitrable, the application under Section 8 would be rejected. At this stage, the court should not get lost in thickets and decide debatable questions of facts. Referral proceedings are preliminary and summary and not a mini trial. This necessarily reflects on the nature of the jurisdiction exercised by the court and in this context, the observations of B.N. Srikrishna, J. of “plainly arguable” case in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234 are of importance and relevance. Similar views are expressed by this Court in Vimal Kishor Shah v. Jayesh Dinesh Shah, (2016) 8 SCC 788: (2016) 4 SCC (Civ) 303 wherein the test applied at the prearbitration stage was whether there is a “good arguable case” for the existence of an arbitration agreement. xxx

139. We would not like to be too prescriptive, albeit observe that the court may for legitimate reasons, to prevent wastage of public and private resources, can exercise judicial discretion to conduct an intense yet summary prima facie review while remaining conscious that it is to assist the arbitration procedure and not usurp jurisdiction of the Arbitral Tribunal. Undertaking a detailed full review or a long-drawn review at the referral stage would obstruct and cause delay undermining the integrity and efficacy of arbitration as a dispute resolution mechanism. Conversely, if the court becomes too reluctant to intervene, it may undermine effectiveness of both the arbitration and the court. There are certain cases where the prima facie examination may require a deeper consideration. The court's challenge is to find the right amount of and the context when it would examine the prima facie case or exercise restraint. The legal order needs a right balance between avoiding arbitration obstructing tactics at referral stage and protecting parties from being forced to arbitrate when the matter is clearly nonarbitrable. [Ozlem Susler, “The English Approach to Competence-Competence” Pepperdine Dispute Resolution Law Journal, 2013, Vol. 13.] xxx

147.6. Exercise of power of prima facie judicial review of existence as including validity is justified as a court is the first forum that examines and decides the request for the referral. Absolute “hands off” approach would be counterproductive and harm arbitration, as an alternative dispute resolution mechanism. Limited, yet effective intervention is acceptable as it does not obstruct but effectuates arbitration.

147.7. Exercise of the limited prima facie review does not in any way interfere with the principle of competence-competence and separation as to obstruct arbitration proceedings but ensures that vexatious and frivolous matters get over at the initial stage.

147.8. Exercise of prima facie power of judicial review as to the validity of the arbitration agreement would save costs and check harassment of objecting parties when there is clearly no justification and a good reason not to accept plea of non-arbitrability. In Subrata Roy Sahara v. Union of India v. Union of India, (2014) 8 SCC 470: (2014) 4 SCC (Civ) 424: (2014) 3 SCC (Cri) 712], this Court has observed: (SCC p. 642, para 191)

25. In the present case, clearly the disputes sought to be referred to the Arbitral Tribunal by the petitioner is a “Deadwood”. It is ex facie barred by the law of limitation and also res-judicata. In fact, in my opinion, these petitions are a gross abuse of the process of the Court. This is clearly evident from the following:

29.12.2017, observed as under: “15.[8] Besides the testimony of claimant, there is admission on the part of respondent that building plan was sanctioned for construction of property upto second floor and approx 2000 sqaure feet on each floor was to be constructed. However, in utter violation of sanctioned plan third floor was also constructed and construction of approx 2750 sqaure feet on each floor was raised with the result a show cause notice was issued by the MCD raising objection to the unauthorized construction. Since the respondent failed to remedy the breaches, officials of MCD demolished the third floor of the property during the period 23rd to 28th April,2006. However, respondent again started construction of third floor, therefore, MCD sealed the entire property on 30.05.2006. Thereafter one FIR was registered against the claimant being no. 609/2006 u/s 188, 466(1) of the Delhi Municipal Corporation Act and S.188 and 457 of IPC. The claimant applied for anticipatory bail, however, in view of the information placed on record by the officials of MCD that unauthorized construction was still being raised, the application was rejected. Another application was moved before High Court on 3rd November 2006 and ultimately on 07.11.2006 High Court granted bail. For the purpose of getting property de-sealed, representation was made before MCD and property was de-sealed vide letter dated 22.01.2007 for a period of 7 days in order to remove unauthorized construction and submit relevant documents for regularization of property. However, instead of removing unauthorized construction, respondent again started raising construction on third floor. Therefore, property was again resealed by MCD. Respondent did not stop his nefarious designs and according to claimant, respondent trespassed into the property and took construction work at the said property. Therefore claimant was constrained to write to MCD not to entertain any request from the respondent with regard to sanctioning of plan etc. and claimant also terminated collaboration agreement vide legal notice dated 11.05.2007, There is no substance in the submission of the learned counsel for the respondent that claimant could not have unilaterally cancel the collaboration agreement and it was undeterminable in nature. Since the respondent was not remedying the breach by removing the unauthorized construction but was also bent upon raising construction upto third floor, there was no option left with the claimant but to cancel the collaboration agreement. Even otherwise, even if according to the respondent the collaboration agreement could not be terminated, a wrongful termination of contract could have been challenged by an independent claim which steps have not been taken by the respondent. 15.[9] Much emphasis has been paid by the learned counsel for the respondent upon the contents of bail application filed by the claimant for submitting that the claimant himself admitted that construction was raised as per the sanctioned plan. Respondent does not get any benefit from this plea taken by the claimant in the face of voluminous evidence available on record that in violation of sanctioned plan, instead of 2000 square feet area, area of 2750 square feet was constructed. Third floor was also constructed with the result twice third floor was demolished and since unauthorized construction was not removed, property was sealed twice and now it is lying sealed. Not only that, FIR was also registered against the claimant. Over and above, there is admission in regard to all these facts by the respondent himself.”

178/2018, this Court while rejecting the challenge of the petitioner to claim „c‟, observed as under:

10. Mr. Kher submits that there can be no justification for the appellant to seek any right in the property in question or any interim orders in respect of the construction/ structure of the property in question.

11. Mr. Kher further submits that there was excess area coverage on each floor and, therefore, each floor had to be demolished. He submits that in fact all the floors have been demolished and the property as existing, is not habitable.

12. In response, learned counsel for the appellant submits that the appellant has moved an application, namely CM APPL. 6878/2020, for amendment of the prayer clause in the memorandum of appeal, so as to incorporate the prayer that the impugned award be set aside.

13. Mr. Kher, learned counsel for the Respondent points out that no notice has been issued on this application yet by the Court.

14. We have heard learned counsels and we do not find any merit in the present application. The appellant - when he preferred the present appeal in January 2019, was aggrieved only by the damages awarded against him. It is for this reason that the prayer was worded as stated herein above. The amendment in the prayer made was sought to be incorporated by the CM APPL. 6878/2020, was filed a year after filing of the appeal. This application has not been allowed. In our view, the moving of this application, it is neither here, nor there. Whether or not, the said amendment should be granted would be an aspect to be considered as and when this application is taken up for hearing along with the appeal itself. The application was moved after the filing of the appeal. It was, therefore, an afterthought, and no emergency is made out by the appellant to pass any orders of injunction against the Respondent.

15. It is clear to us that the appellant builder has taken the Respondent, who is an old person, for a ride and he had to face the harassment of facing criminal charges on account of the acts and omissions of the appellant in raising the illegal construction on the Respondent‟s property. On account of this conduct, he has been restrained from going near the property in question. We are therefore not inclined to recall the order dated 29.09.2019.

16. Application is dismissed.”

26. Therefore, there have been consistent findings of not only of the learned Arbitral Tribunal, but also of this Court, that the respondent is being harassed by the petitioner and for such harassment, the respondent was even awarded damages for mental harassment. The present set of petitions is a continuation of such harassment and the Court cannot give its seal of approval to the same. The Court cannot be a mute spectator to such gross abuse of the process of the Court. In fact, such gross abuse of the process of the Court should be severely dealt with.

27. Accordingly, the present petitions are dismissed with costs quantified at Rs.[1] lakh for each of the petitions, to be paid by the petitioner to the respondent within a period four weeks of this order.

NAVIN CHAWLA, J. FEBRUARY 24, 2023