w w w . L a w y e r S e r v i c e s . i n


Kwality Resorts and Hospitality Ltd. v/s D.B. Jain

    FAO No.3645 of 2008 (O&M)
    Decided On, 26 March 2010
    At, High Court of Punjab and Haryana
    By, THE HONOURABLE MR. JUSTICE RAKESH KUMAR JAIN
    For the Appellant: Arun Palli, Sr. Advocate with Sunil Garg, Advocate. For the Respondent: Arun Jain, Sr. Advocate with Adarsh Jain, Arun Walia, Ashish Yadav, Advocates.


Judgment Text
Rakesh Kumar Jain, J.

This order shall dispose of three appeals bearing FAO No.3645 of 2008 titled as Kwality Resorts and Hospitality Ltd. Vs. D.B.Jain, FAO No.3646 of 2008 titled as Kwality Resorts and Hospitality Ltd. Vs. Ant Ram Jaharaya and others and FAO No.3647 of 2008 titled as Kwality Resorts and Hospitality Ltd. Vs. Anitadevi Dyama, which have arisen out of a common order passed by the Additional District Judge, Gurgaon dated 29.8.2008 whereby applications filed by the appellant (Kwality Resorts and Hospitality Ltd.) under Section 9 of the Arbitration and Conciliation Act,1996 (for short ‘the Act') have been dismissed.

A few skeletal facts necessary to unfold the basic legal contention only, are noticed as under:

On 18.3.2008, the appellant entered into three separate agreements with D.B.Jain, Ant Ram and others and Anitadevi Dyama as a buyer to purchase three separate parcels of land against a consideration. The detail of the land in all the three agreements as well as earnest money paid is as under:

Details of the land belonging to D.B.Jain Land bearing Khewat No.68, Khatoni No.101, Mustteel No.1, Kila No.14(0-3) Mustteel No.1, Kila No.17/1(2-16) Mustteel No.1, Kila No.18/1(1-15) total admeasuring in aggregate 4 Kanal 14 Marlas situated at village Nangli Umarpur, Gurgaon i) That the total price of the said land as detailed above is Rs.7,00,00,000/- (Rupees Seven Crores only) That the Buyer has this day paid an amount of 59,50,000/- (Rupees Fifty Nine Lacs Fifty thousand only) vide DD No.12544 dated 15.3.2008 drawn Axis Bank, towards part consideration, the receipt of which the Seller hereby admits and acknowledges the Seller hereby also acknowledges receipt of Rs.5,00,000/- (Rupees Five lacs only) vide Cheque No.6245 drawn on Axis Bank dated 26.2.2008.'

Details of the land belonging to Antram Land bearing Khewat No.67/67, Khatauni No.100, Mustteel No.1 Killa No.17/2(4-0) Musstteel No.1 Killa No.18/2 (4-1), Kita 2 total admeasuring approximately 8 Kanals 1 Marla (approx. 1 Acre) situated at village Nangli Umarpur, District Gurgaon.

(i) That the total price of the said land as detailed above is Rs.14,00,00,001/- (Rupees Fourteen Crores One Only).

(ii) That the Buyer has this day paid a total amount of Rs.1,34,00,01/- (Rupees One Crore thirty four lacs one only)

paid vide three DD's bearing No.12546, 12547 and 12548 all dated 15.3.2008 and all drawn on AXIS Banks New Delhi Service Branch for an equal amount of Rs.44,66,667/- (Rupees Forty Four Lacs Sixty Six Thousand six hundred sixty seven only) towards part consideration, the receipt of which the sellers hereby admit and acknowledge. The sellers also hereby acknowledge the receipt of an aggregate of Rs.6,00,000/- (Rupees Six lacs only) vide three cheques bearing Nos.6246, 6247 and 6248 dated 26.2.2008 of Rs.2,00,000/- (Rupees two lacs) each.'

Details of the land belonging to Anitadevi Land bearing Khewat No.34/32, Khatauni No.41, Mustteel No.29, Killa No.22/2(3-8), Mustteel No.36, Killa No.3(1-16), Kita 2 total admeasuirng 5 Kanals 4 Marlas situated at village Tigra, District Gurgaon.

(i) That the total price of the said land as detailed above is Rs.7,32,00,000/- (Rupees Seven Crores Thirty Two Lacs only);

(ii) That the Buyer has this day paid a total amount of Rs.72,70,000/- (Rupees Seventy Two Lacs Seventy Thousand only) vide DD bearing No.12544 dated 15.3.2008 drawn on AXIS Banks towards part consideration, the receipt of which the Seller hereby admits and acknowledges.

The Seller also hereby acknowledges receipt of Rs.5,00,000/- (Rupees Five Lacs only) vide cheque bearing No.6244 drawn on AXIS Bank dated 26.2.2008.

In all the three agreements, the property purported to be sold described in the first Schedule is reproduced as under:-

Description of the land of Anita Devi

North: Road for Sector 56

East: Land of Plot of Mr.D.B.Jain and Mr.Antram etc.

South: Land of Splendor Builders and Mr.Antram etc.

West: Agricultural land

Description of the land of Antram

North : Plot of Mr.D.B.Jain

East: Kacha Rasta of 33 feet

South: Land owned by Splendor Builders

West: Agricultural Land

Description of the land of D.B.Jain

North: Road for Sector 56

East: Kachha Rasta

South: Land owned by Antram etc.

West: Land owned by Mrs.Anita Devi

Besides the above, the salient features of the agreement read as under:-

Clause 13

'The seller is aware that the Buyer is negotiating with (i) D.B.Jain the owner of the adjoining consolidated piece and parcel of land bearing Khewat No.63, Khatoni No.101, Mustteel No.1, Rect.No.1, Kila No.14(0-3) Mustteel No.1, Kila No.17/1(2-16), Mustteel No.1, Kila No.18/1(1-15) total admeasuring in aggregate 4 Kanals 14 Marla situated at village Nangli, Umarpur, Gurgaon, District Gurgaon and (ii) Mr.Anantram, Mr.Satpal and Mr.Dhaniram the owners of the adjoining land bearing Khewat No.67/67, Khatauni No.100, Mustteel No.1 Killa No.17/2(4-0), Mustteel No.1 Killa No.18/2 (4-1), Kita 2 total admeasuring approximately 8 Kanals 1 Marla (1 Acre) situated at village Nangli Umarpur, District Gurgaon for the purchase of the same. The seller agrees that in the event the proposed purchase of such adjoining pieces of land fails to consummate, then in that event, this Agreement shall stand terminated and the Seller shall refund all the amounts received from the Buyer till then.

It is, however, pertinent to mention here that Clause 13 is conspicuously absent in the agreement with D.B.Jain. It is alleged that the appellant is a leading hospitality service provider and part of the prestigious Ghai Enterprises. In order to expand and consolidate its area of business and enterprise, it wanted to set up a hotel at Gurgaon for which a consolidated parcel of land was required. The appellant, through Devi Ram Rawat, property consultant, met the respondents who represented/misrepresented that their property is adjacent to each other which forms a consolidated and contiguous parcel of land measuring 2.24 acres. The appellant was interested in purchasing three parcels of land owned by three set of respondents (sellers) only because of the location of the property being conjoint, consolidated and contiguous. It is a case of the appellant that the respondents did not allow the appellant to conduct a joint survey and insisted that the said exercise be undertaken only after the execution of the agreement to sell. Thus, after the execution of agreement to sell, a joint survey of the property was conducted on 2.4.2008 in the presence of local Patwari, Vice President of the appellant Company and property consultant in which it was found that an area of approximately 12000 sq.feet is located in between the properties belonging to the respondents is owned by Haryana Urban Development Authority (for short ‘HUDA’) and the properties of all the three set of respondents is not adjacent to each other as represented. The appellant has alleged that respondents had not only suppressed the fact that HUDA was the owner of the property in between their lands but also misrepresented that the said piece of land is owned by them. Since the project became unfeasible, the appellant issued a notice for termination of agreement in accordance with the terms and conditions of the agreement and demanded the refund of the earnest money along with additional costs incurred in respect of the transaction. In reply, the respondents alleged that the earnest money has been forfeited in terms of the agreement and they are free to deal with the property in the manner they like. The appellant then came to know that the respondents have started negotiations with the third party in order to dispose of the property in dispute as a result of which three separate applications were filed in respect of separate agreements to sell, under Section 9 of the Act in which the following prayer has been made:

In the case of D.B. Jain '(i) direct the attachment of Property 'B' in Exhibit A to this petition before judgment/award akin to exercise of its powers Order XXXVIII Rule of the Code of Civil Procedure to secure the amounts in dispute of the arbitration.

(ii)pending the commencement of and during the arbitration proceedings and making of the Award therein and the implementation thereof, this Hon'ble Court order the Respondent to furnish a bank guarantee for a sum of Rs.74,50,000/- in favour of this Hon'ble Court to secure the amounts in dispute of the arbitration.

(iii)appoint a Court Receiver in respect of Property at Khewat No.68, Khatoni No.101, Mustteel No.1, Kila No.14(0-3) Mustteel No.1, Kila No.17/1 (2-16) Mustteel No.1, Kila No.18/1(1-15) admeasuring 0.58 Acres situated at village Nangli Umarpur, Gurgaon being Property 'B' in Exhibit-A;

(iv)pending the commencement of and during the arbitration proceedings and making of the Award therein and the implementation thereof, the Respondent by himself, his servants and/or agents or in any manner howsoever be restrained by an order and injunction of this Hon'ble Court from in any manner selling, mortgaging, transferring, parting with possession of, encumbering, alienating, disposing of, licensing, modifying or demolishing or altering or creating third party rights, title, interest or claim of any nature whatsoever in or inducting anyone into the said property being Property 'B' in Exhibit -A.

(v)for ad-interim and interim reliefs in terms of prayers (i), (ii), (iii) and (iv) above;

(vi)for costs of the present petition; and

(vii)for such further and other reliefs as the nature and circumstances of the case may require.'

In the case of Ant Ram

(i)direct the attachment of Property `C' in Exhibit `A' to this petition, before judgment/award akin to exercise of its powers under Order XXXVIII Rule 5 of the Code of Civil Procedure to secure the amounts in dispute of the arbitration;

(ii)pending the commencement of and during the arbitration proceedings and making of the Award therein and the implementation thereof, this Hon'ble Court order the Respondents to furnish a bank guarantee for a sum of Rs.1,40,00,001/- in favour of this Hon'ble Court to secure the amounts in dispute of the arbitration;

(iii)appoint a Court Receiver in respect of Property at Khewat No.67/67, Khatauni No.100, Musteel No.1 Killa No.17/2 (4-)) Musteeel No.1 Killa No.18/2(4-1), Kita 2 admeasuring approximately 1 Acre situated at village Nangli Umarpur, District Gurgaon being Property `C' in Exhibit-A;

(iv)pending the commencement of and during the arbitration proceedings and making of the Award therein and the implementation thereof, the Respondents, by themselves, their servants and/or agents or in any manner howsoever be restrained by an order and injunction of this Hon'ble Court from in any manner selling, mortgaging, transferring, parting with possession of, encumbering, alienating, disposing of, licensing, modifying or demolishing or altering or creating third party rights, title, interest or claim of any nature whatsoever in or inducting anyone into the said property being Property 'C' in Exhibit -'A'

(v)for ad-interim and interim reliefs in terms of prayers (i), (ii), (iii) and (iv) above;

(vi)for costs of the present petition; and

(vii)for such further and other reliefs as the nature and circumstances of the case may require.'

In the case of Anita Devi

'a. direct the attachment of Property 'A' in Exhibit A to this petition before judgment/award akin to exercise of its powers under Order XXXVIII Rule 5 of the Code of Civil Procedure to secure the amounts in dispute of the arbitration.

b. pending the commencement of and during the arbitration proceedings and making of the Award therein and the implementation thereof, this Hon'ble Court order the Respondent to furnish a bank guarantee for a sum of Rs.87,70,000/- in favour of this Hon'ble Court to secure the amounts in dispute of the arbitration.

c. appoint a Court Receiver in respect of Property being Khewat No.34/32, Khatauni No.41, Mustteel No.29, Killa No.22/2 (3-8) Mustteel No.36, Killa No.3(1-16), Kita 2 admeasuring 0.65 acres situated at village Tigra, District Gurgaon, Property ‘A' in Exhibit-A.

d. pending the commencement of and during the arbitration proceedings and making of the Award therein and the implementation thereof, the Respondent by herself, her servants and/or agents or in any manner howsoever be restrained by an order and injunction of this Hon'ble Court from in any manner selling, mortgaging, transferring, parting with possession of, encumbering, alienating, disposing of, licensing, modifying or demolishing or altering or creating third party rights, title, interest or claim of any nature whatsoever in or inducting anyone into the said property being Property 'A' in Exhibit-A.

e. for ad-interim and interim reliefs in terms of prayers (i), (ii), (iii) and (iv) above;

f. for costs of the present petition; and

g. for such further and other reliefs as the nature and circumstances of the case may require.'

The applications were contested with reply and replication. The respondents have taken a plea that the sale deed was to be executed within 34 days i.e. on 21.4.2008 and as time was essence of the contract and the appellant had not performed their part of the agreement, the earnest money stood forfeited and now there is no clog on the rights of the respondents as property has become free from all encumbrances. It is alleged that there was no misrepresentation or concealment. It was projected on behalf of respondent D.B.Jain that details of the land depicted by Khasra Numbers have been specifically mentioned in the agreement and one of the boundaries of land in the agreement to sell was depicted with some wrong description of person could hardly be termed as a case of fraud. It is also alleged that since Clause 13 in his agreement was deleted, therefore, the appellant can not seek refund of the earnest money from him on the failure of the agreement to sell.

From the resume of the aforesaid facts, following admitted facts have come to fore which are as under:

(i) Parties in all the three petitions have admitted execution of the agreement to sell and receipt of earnest money.

(ii) Appellant has cancelled the agreement to sell with each of the respondents (sellers) owing to the allegation that their land is not contiguous and conjoint to each other and does not constitute one parcel of land which has frustrated the project for which the land was sought to be purchased.

(iii) The respondents have declared their intention of forfeiting the earnest money and their right to dispose of the property in the manner they like.

(iv) Clause 13 of the agreement is conspicuously absent in the agreement entered into with D.B.Jain.

The boundaries depicted in the Ist Schedule of the agreement does not reflect the existence of land of HUDA in between the land of all the three set of sellers. A joint survey conducted on 2.4.2008 shows an area of 12000 square feet owned by HUDA situated in between the properties belonging to the respondent which is depicted by a diagram as under:

__________________________B__

A A-I B B

______________________________

A C C

______________________

Legend

(A) Land of Anita Devi

(B) Land of D.B.Jain

(c) Land of Ant Ram etc.

(A-1) Land of HUDA

The learned trial Judge dismissed all the three applications filed by the appellants observing as under :

(i) When the details of land under agreements to sell by the respondents in favour of the petitioner were correct and even three sites of land owners were correct, then because the name of land owner on a particular side was of someone else does not amount to fraud?

(ii) The appellant was the buyer. He should have been beware. This is a common saying that buyer be beware. The appellant was entering into property transactions with the respondents for deals of Crores of rupees and was not expected to deal in a casual manner. He should have been well aware of the facts prior to entering into the agreement. There was no reason why the respondents D.B.Jain and Anita Devi would have given wrong name of land owner on one side of their lands agreed to be sold to the petitioner.

(iii) Even Anita Devi and Ant Ram and other respondents have shown that there was neither any fault nor any misrepresentation on their part. The petitioner cannot take advantage of its own wrong and as per Clause 12 of the agreement to sell, earnest money paid to the respondents stood forfeited.

In nut shell, the learned trial Judge while dismissing the application, has held that even if the boundaries have been wrongly described in Ist schedule of the agreement, the appellant (buyer) itself has to be blamed as he was not vigilant enough before entering into the agreement. Sh.Arun Palli, Sr.Advocate, representing the appellant in all the three aforesaid appeals, has vehemently argued that impugned order is patently illegal and without jurisdiction because the fraud has been played upon the appellant by the respondents in connivance with each other as they deliberately did not mention the property owned by HUDA which is exactly in between the properties of Anita Devi and D.B.Jain. It is alleged that even misrepresentation or suppression of material fact or a document amounts to fraud and in order to support his contention, he has relied upon a decision of the Supreme Court in the case of State of Andhra Pradesh Vs. T.Suryachandra Rao (2005) 6 Supreme Court Cases 149 and another judgment of the Apex Court in the case of A.V.Papayya Sastry Vs.Govt. of A.P. (2007) 4 Supreme Court Cases 221 to contend that fraud vitiates all judicial acts whether in rem or in personam and the judgment, decree or order obtained by fraud has to be treated as non est and a nullity. Reliance is also placed on another decision of the Supreme Court in the case of Hamza Haji Vs. State of Kerala (2006) 7 Supreme Court Cases 416 in support of the aforesaid contention. It is further submitted that in case of an application under Section 9 of the Act, the powers of the Court are wider than the provisions of Order 39 Rules 1 and 2 of the Code of Civil Procedure, 1908 (for short `CPC'). In a Division Bench judgment of Delhi High Court in the case of Niko Resources Ltd. Vs. Union of India and another 2001(3) Arbitration Law Reporter 196 (Delhi) it has been held that 'we are of the view that it cannot be disputed that the three basic legal principles of existence of prima facie case, balance of convenience and irreparable loss and injury have always to be taken into account before any interim order is passed either under Order 39, Rules 1 and 2 or under Section 9 of the Act. While the aforesaid principles cannot be given a go bye the power to grant interim measures of protection under Section 9 of the Act is wider in view of the phraseology used in Section 9 of the Act. In order to further buttress his argument, learned counsel for the appellant has relied upon a decision of the Madhya Pradesh High Court in the case of Nepa Limited Vs. Manoj Kumar Agrawal AIR 1999 Madhya Pradesh 57 to contend that learned Court below even at the stage of interim order, has decided the merits of the case where the validity of the action of termination of the contract is a subject matter to be decided by the Arbitrator in the Arbitration proceedings. On facts, it is submitted that the application has already been filed for the purpose of appointment of Arbitrator.

On the other hand, Mr.Arun Jain, Sr.Advocate with Mr.Adarsh Jain, Advocate appearing on behalf of respondent D.B.Jain has argued that the appellant has failed to make out any prima facie case on merits insofar as their case is concerned because in the case of D.B.Jain, Clause 13 of the agreement, which has been basically relied upon by the appellant, has been deleted and consent of both the parties is that portion has been duly signed and at no point of time, the respondent D.B.Jain has given any assurance about the location of the land of the other two sellers. It is so admitted by the appellant in the replication/rejoinder filed in his case which reads that 'However, the respondent refused to execute the said agreement without the deletion of Clause 13 and part of Clause 8. The respondent informed the petitioner that since he could not guarantee the sale of the properties belonging to Mrs.Anita Devi and Mr.Antram and his brothers, he insisted on the deletion of Clause 13.' It is also submitted that the appellant is not a novice but a Company who should have taken due care by inspecting the land before entering into agreement to sell.

Sh.Ashish Yadav, Advocate who is appearing for respondent Ant Ram and Sh.Arun Walia, Advocate who is appearing for the respondent Anita Devi Dyama have rather read the findings recorded by the learned trial Judge, which has been recorded against the appellant. It is pertinent to mention here that none of the counsel for the respondents referred to any precedent in their favour. I have heard learned counsel for the parties and have perused the record with their assistance. Before adverting to the facts of the case and the respective contentions, it would be relevant to refer to the provisions of Section 9 of the Act, which reads as under :

Interim measures, etc. by Court – A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court-

(i)for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

(ii)for an interim measure of protection in respect of any of the following matters, namely:-

(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement.

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the court to be just and convenient, and the court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.'

According to the aforesaid provisions of Section 9 of the Act, the Court has wide powers to pass an interim order which are enshrined in Section 9(ii) (a to e) before the matter is adjudicated by the Arbitrator. In the present case, admittedly, property owned by HUDA is not depicted in the land desc

Please Login To View The Full Judgment!
ribed by the respondents in all the three agreements. Prima-facie, it appears that the appellant had sought to purchase the property of all the three set of respondents being a consolidated piece of land for the purpose of constructing a hotel. The question whether the respondents have played a calculated fraud at the time of agreement to sell or the appellant himself was negligent, is a matter of concern of the Arbitrator. At this stage, in my view, the Court is not required to adjudicate as to whether the appellant would be finally having some right in this litigation or not because provisions of Section 9 of the Act are meant only to take interim measures for custody of the subject matter of the arbitration agreement and for that purpose, issues interim injunctions. The measures are of interim nature only to enable the parties to get their disputes adjudicated thoroughly from the forum of arbitration which is agreed upon in the terms and conditions of the agreement. While taking into account interim measures, the Court is not required to decide the lis on merits insofar as the rights of the parties are concerned rather the existence of an arbitration clause and the necessity of taking interim measures alone are to be considered for the purpose of issuance of necessary directions and orders. The action of appellant, insofar as the termination of the contract is concerned, is also a subject matter to be decided by the Arbitrator. In the present case, learned Court below has virtually closed the case of the appellant even for the purpose of arbitration by holding that appellant itself was negligent at the time of entering into agreement and therefore, has no legal right at all. The facts of the case, however, indicate a purported attempt on the part of the respondents to mislead the appellant as boundaries described in the agreement of the property in dispute, do not at all show the existence of property of HUDA in between the property of Anita Devi and D.B.Jain. In view of the aforesaid discussion, the impugned order is set aside and the respondents, namely, Ant Ram and Anita Devi are directed not to alienate the property in dispute till the matter is decided by the Arbitrator who is stated to have already been appointed but insofar as third set of respondent D.B.Jain is concerned, he had an independent agreement with the appellant in which Clause 13 is conspicuously absent. Therefore, in his case, the appellant cannot take shelter of Clause 13 of the agreement which has been taken in the case of other two set of respondents. Thus, the present appeal filed qua respondent D.B.Jain, is hereby dismissed.
O R