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L. Dharmichand & Others v/s Vaibhav B. Kamdar, Director & CEO, ASV Constructions Pvt. Ltd, Chennai & Others

    Cont. P. No. 92 of 2021 & Sub. Appln. No. 29 of 2021 in A. No. 4507 of 2019

    Decided On, 15 September 2022

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE SENTHILKUMAR RAMAMOORTHY

    For the Petitioners: Satish Parasaran, Senior Advocate for M/S. R. Parthasarathy, Advocate. For the Respondents: R1, C.A. Sundaram, Senior Advocate for Rohini Musa, C. Seethapathy, R2 & R3, M/S. K.V. Babu, Advocates.



Judgment Text

(Prayer: This Contempt Petition filed under Section 11 of Contempt of Courts Act, 1971 praying to issue notice to the respondents to show cause as to why they should not be punished for having committed contempt of this Hon'ble Court's order dated 09.08.2019 passed in A.No.4507 of 2019 and punish them for disobedience in accordance with law.)

1. By alleging that the respondents herein wilfully disobeyed the order dated 09.08.2019 of this Court in A.No.4507 of 2019, the present petition is filed. Although not germane to this proceeding, by way of factual status, it should be noticed that, after the above order was passed, the petitioners prosecuted arbitral proceedings against the first respondent that culminated in arbitral award dated 11.08.2021. Such award is under challenge in proceedings before this Court under Section 34 of the Arbitration and Conciliation Act, 1996 (the Arbitration Act).

2. The petitioners and ASV Constructions Private Limited (the Developer) entered into a Joint Development Agreement dated 09.04.2012 (the Petitioners' JDA). On the same date, the first respondent entered into a separate Joint Development Agreement with the second and third respondents on area sharing basis (the Area-sharing JDA). The Petitioners' JDA contains a clause for resolution of disputes by arbitration. At the prearbitration stage, the petitioners filed Application Nos.4505, 4507 & 4508 of 2019 under Section 9 of the Arbitration Act seeking interim orders. A.No.4505 of 2019 was for an interim direction to the first respondent to deposit a sum of Rs.56,34,06,234/- to the account of the application pending arbitral proceedings. A.No.4507 of 2019 was for an interim direction to the first respondent to deposit 48% of the consideration received by it in exchange for alienating, transferring, selling, pledging or otherwise creating any encumbrances, either directly or indirectly, partly or fully, on the property situated at Survey Nos.476/35, 476/2A1, 476/2A2, 476/4A2 and 476/2A3A1 in Sholinganallur Village, Tambaram Taluk, Kanchipuram District, pending arbitral proceedings. A.No.4508 of 2019 was to appoint an ad-hoc third party receiver for the above mentioned property and to commit the property to the possession, custody or management of the receiver by empowering the receiver to receive and deposit 48% of the consideration from transactions before the Court pending arbitral proceedings. The Court concluded that the petitioners are not entitled to the relief of deposit of Rs.56,34,06,234, which was prayed for in A.No.4505 of 2019, and further concluded that the relief requested in A.No.4508 of 2019 cannot be granted in view of the order passed in A.No.4507 of 2019. As regards A.No.4507 of 2019, the Court disposed of the application, by order dated 09.08.2019, which contained, in the operative paragraph, a finding that the applicants therein/petitioners herein are entitled to 48% of revenue share under the Petitioners' JDA and, with a view to preserve such revenue share and enable the petitioners to receive the same when flats are sold, directed the first respondent not to sell apartments/flats covered by the Petitioners' JDA without the consent of the applicants therein. The present petition arises out of the said order.

3. Oral submissions on behalf of the petitioners were made by Mr.Satish Parasaran, learned senior counsel; on behalf of the first respondent by Mr.C.A.Sundaram, learned senior counsel; and on behalf of the second and third respondents by Mr.K.V.Babu, learned counsel.

4. Mr.Satish Parasaran, learned senior counsel, submitted that the contention of the Developer before the Court was that the revenue share of the petitioners cannot be apportioned until they choose their units in the built up area of 1,82,130 sq.ft. According to Mr.Satish Parasaran, the said contentions were rejected by this Court as would be evident from paragraphs 7, 9, 10 and 12 thereof. In particular, by drawing reference to paragraph 9 of the order, he submitted that this Court entered the finding that the applicants are entitled to a revenue share of 48%. Therefore, the Court further recorded that whenever the first respondent sells any apartment, it should have shared the sale consideration with the applicants; and that even if one unit is sold under the Petitioners' JDA, the first respondent should account for the sale. After recording such finding, he pointed out that the Court also issued a direction that flats covered under the Petitioners' JDA should be sold only with the consent of the applicants.

5. In wilful violation of the order, learned senior counsel submitted that a large number of flats that were built on the petitioners' lands were brought to sale by the Developer, without the consent of the petitioners, and that the petitioners were thereby deprived of revenue share in violation of the order.

6. These contentions were refuted by Mr.C.A.Sundaram, learned senior counsel. At the outset, he submitted that the scope of contempt jurisdiction is limited to examining whether the relevant order was disobeyed and, if so, whether such disobedience was wilful. In order to test whether the order was disobeyed, he submitted that the directions, in contradistinction to discussions and observations, in the said order should be examined. By drawing reference to paragraph 12 of the order, he pointed out that the Court concluded that the applicants are entitled to 48% of the revenue share from and out of the sale proceeds of the flats, as per the Petitioners' JDA, and directed the first respondent not to sell any flat covered under the Petitioners' JDA without the consent of the applicants. By drawing reference to the sale deeds pertaining to the conveyance of undivided interest in the land, he pointed out that only the land belonging to the second and third respondents herein were transferred under the sale deeds. He pointed out that the project was executed on an aggregate extent of 6.15 acres. Out of this, 2.82 acres were contributed to the joint venture under the Petitioners' JDA. The remaining 3.33 acres were contributed under the Area-sharing JDA, which is a separate agreement between the second and third respondents, on the one hand, and the first respondent on the other. Apartments were constructed on the aggregate extent of 6.15 acres and the total super built up area is 8,28,120 sq.ft. Since the JDA between the Developer and the second and third respondents is on area sharing basis, he submitted that 4,48,485 sq.ft. has been designated as the aggregate share of the two parties to the Area-sharing JDA. Consequently, he stated that 3,79,635 sq.ft. is available under the Petitioners' JD, except for two flats that were retained by the promoters for personal use.

7. Thus, he submitted that the directions in paragraph 12 of the order were not disobeyed and that the first respondent has not sold any flat covered under the Petitioners' JDA.

8. He further submitted that the first respondent is entitled to the benefit of doubt because the order of this Court was interpreted in a plausible manner even if the Court were to interpret the same differently. In support of this contention, he relied upon the judgment of the Hon'ble Supreme Court in Anil Ratan Sarkar v. Hirak Ghosh (2002) 4 SCC 21, particularly, paragraphs 13 to 15 thereof, wherein the Hon'ble Supreme Court held that if two interpretations are possible and the action of the alleged contemnor was based on one such interpretation, the action cannot be held to be contumacious.

9. Mr.K.V.Babu, learned counsel for second and third respondents, made submissions next. His first submission was that the said respondents were unnecessarily made parties to the contempt petition. He pointed out that the second and third respondents are not parties to the Petitioners' JDA. He also pointed out that the second and third respondents were not joined as parties in arbitral proceedings between the petitioners and the first respondent. By pointing out that the second and third respondents entered into a separate JDA with the first respondent (the Area-sharing JDA), he also submitted that the said JDA provided for area sharing by earmarking the specific flats of the developer and land owners, respectively, and that only flats under the Area-sharing JDA were sold. Therefore, he stated that the contempt proceedings should be rejected as against the second and third respondents.

10. In rejoinder, Mr.Satish Parasaran submitted that the order of this Court should be read as a whole so as to appreciate the context in which the directions in paragraph 12 were issued. For such purpose, he submitted that the findings entered in paragraphs 9 and 10 are material. If paragraphs 9 and 10 are examined, he reiterated that the arguments of the Developer to the effect that the share of the applicants cannot be determined in the absence of a memorandum of agreement were rejected. If viewed in context, he submitted that the first respondent was restrained from selling any flats constructed on the composite land.

11. Upon taking stock of the above contentions, it is evident that much of the confusion is attributable to the fact that the Developer entered into two separate JDAs without a tripartite agreement to deal with areas of intersection and disputes arising therefrom. These JDAs appear to have been entered into on revenue sharing basis with the petitioners herein and on area sharing basis with the second and third respondents herein. After entering into such JDAs, the lands owned by the two sets of landowners, namely, the petitioners, on the one hand, and the second and third respondents, on the other, were consolidated for purposes of construction, and an apartment complex was constructed on such consolidated lands. In such circumstances, the identification of the flats falling to the petitioners' share is fraught with uncertainty. Because of the dispute, it is possible that the Developer has taken advantage of the situation. However, it should not be forgotten that the petitioners have invoked contempt jurisdiction, which, by definition, is narrow.

12. Therefore, the order of this Court should be subject to close scrutiny to determine whether the order was disobeyed and, if so, whether such disobedience was wilful. Towards such end, paragraphs 9, 10 and 12 of the order are set out below:

“9. Learned counsel for the first respondent also contended that the built up area of 1,82,130 sq.ft. is ready to be identified and it is open to the applicants to choose their choice of units. However, learned Senior Counsel for the applicants would insist upon compliance of Clause 5(a) of the JDA, as per which, the sale proceeds have to be shared in proportion of 52:48. In addition to that, the land owners/the applicants are entitled to certain apartments out of their share and the same can be identified and earmarked. In the absence of any Memorandum of Agreement with respect to the identification and earmarking of the apartments to the share of the applicants, the arguments of the first respondent cannot be accepted. In fact, as averred by the applicants in their affidavit, in so far as the sales that are made by the first respondent and not by the other respondents out of their share area, the applicants are entitled to a revenue share of 48%. Clause 5(b) envisages that the sale proceeds should be paid to the land owners, as agreed, within 30 days of its collection. Therefore, whenever the first respondent sells any apartment, it should have shared the sale consideration with the applicants.

10. Admittedly, the land owners have already executed a Power of Attorney for sale of 52% of the land belonging to them and have retained 48%. Once the first respondent had started marketing the constructed units, the parties have to share it in the ratio of 52:48. It is not the case of the first respondent that none of the units have been sold to any third party. Even if only one unit is sold, as per the JDA, the first respondent is to account for the sale.

.... .... ....

12. However, the applicants are entitled to 48% of revenue share from and out of the sale proceeds of the apartment in terms of the JDA that they have entered into with the first respondent. To enable the applicants to have such revenue share, the first respondent shall not sell any apartments/flat covered under the JDA without the knowledge of the applicants. In other words, the apartment/flat covered under the JDA shall be sold with the consent of the applicants.”

13. The submission of learned senior counsel for the petitioners that the order should be read as a whole and not divorced from context is liable to be accepted. If so read, a reasonable conclusion would be that the Court rejected the contention of the first respondent herein that the identification and earmarking of apartments to the share of the applicants cannot be carried out without a separate memorandum of agreement for such purpose. Thereafter, the Court further recorded that the first respondent should account for every unit which it sells. Eventually, in paragraph 12, in order to preserve the petitioners' revenue share, the Court restrained the first respondent from selling apartments covered under the Petitioners' JDA without the consent of the applicants.

14. The first respondent does not deny that apartments in the project were brought to sale. Instead, the contention is that apartments falling under the Petitioners' JDA were not sold. In support of this contention, the sale deeds pertaining to transfer of undivided interest corresponding to the flats were placed on record. On perusal thereof, it is evident that only lands that were contributed by the second and third respondents were conveyed to and in favour of the respective flat purchasers.

15. It should, however, be noticed that the order of the Court did not relate only to the undivided interest in the land; instead, it related to the sale of flats covered by the Petitioners' JDA. The project has been executed on the consolidated land made available to the Developer by the p

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etitioners and the second and third respondents. Therefore, at this juncture, in the absence of an agreement between the petitioners and the Developer by which specific flats are identified and earmarked for each party, the only method of identifying the flats falling to the share of the petitioners is by eliminating the flats designated as falling to the share of the parties under the Areasharing JDA. The respondents contend that all the flats sold till date are designated flats under the Area-sharing JDA, and the petitioners are unable to convince me that this assertion is incorrect. 16. In the facts and circumstances detailed above, it cannot be concluded that the first respondent wilfully disobeyed the order although it appears that the first respondent took advantage of the ambiguity and uncertainty in the project structure. As correctly contended by the learned senior counsel for the first respondent, in contempt jurisdiction, the benefit of doubt should go to the alleged contemnors if more than one interpretation is possible. For reasons set out earlier, the interpretation placed on the order by the first respondent cannot be rejected as implausible. 17. Therefore, the Contempt Petition fails and is hereby dismissed. Consequently, the sub-application is also rejected. By way of abundant caution, it is recorded that the observations contained herein are solely for purposes of disposing of this petition, and are not intended to influence the pending challenge to the arbitral award in any manner. There will, however, be no order as to costs.
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