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Wonderland Properties Pvt Ltd. v/s Moonlight Continental Pvt Ltd. & Others

    ARB.P. No. 484 of 2012

    Decided On, 28 October 2014

    At, High Court of Delhi


    For the Petitioners: Anil Sapra, Sr. Advocate with Sacchin Puri & Monica Chugh Manchanda, Advocates. For the Respondents: R1 & R3, N.S. Bajwa, Advocate.

Judgment Text

Rajiv Shakdher, J.

1. This is a petition filed under Section 11 of the Arbitration & Conciliation Act, 1996 (in short the Act). Notice in this petition was issued on 12.12.2012. Since then the four respondents, arrayed as parties herein, have been served. The respondents have filed their replies and, rejoinders thereto, have also been filed. While respondent nos.1 and 3 are represented by Mr Bajwa, there is no representation on behalf of respondent nos.2 and 4, at least today.

2. Mr Sapra, learned senior counsel, who appears for the petitioner, has submitted that the petition needs to be disposed of as delay in adjudicating this petition is delaying the adjudication of the principal cause. I tend to agree with him and, therefore, do not intend to wait for representation, by the other respondents.

3. In the course of arguments addressed by Mr Bajwa, who, as indicated above, represents respondent nos.1 and 3, it has emerged that there are broadly, two objections which are taken by his clients as well as respondent nos.2 and 4. The first objection is with respect to limitation as envisaged in clause 28 of the agreement obtaining between the parties, which is an agreement dated 02.05.2006. The argument in respect of this objection is, that the petitioner was required to invoke the arbitration mechanism within ten days of the cause of action arising, which having not been done, the right to trigger the arbitration mechanism, dissolved thereafter.

3.1 In this connection, it was pointed out by Mr Bajwa that the agreement dated 02.05.2006 was terminated on 25.04.2008 and, in the response filed by the petitioner, on 09.05.2008, there was no request made for triggering the arbitration clause contained in agreement dated 02.05.2006.

4. The second objection, which is also in substance an objection vis-a-vis limitation, is that, the arbitration petition has been filed way beyond the period of three years after the termination of the agreement. It is Mr Bajwa’s contention that the arbitration petition was filed on 01.12.2012. It is thus contended, since the termination of the agreement dated 02.05.2006, took place on 25.04.2008, the captioned petition cannot be entertained as it is hopelessly time barred.

5. In order to adjudicate upon two objections taken by Mr Bajwa, the following brief facts require to be noticed.

5.1 The petitioner, evidently, entered into an agreement dated 02.05.2006, with the respondents. This was essentially an agreement whereby, respondent nos. 1 and 3 were to develop the property in issue, which was at the relevant point in time owned by respondent no.4, and after development of the property an area comprising of 22550 sq. ft. was to be handed over to the petitioner.

5.2 For this purpose, the total sale consideration, as fixed between the parties, was a sum of Rs. 6,14,75,000/-. It is the case of the petitioner that out of the said sum, a sum of Rs.2,45,90,000/- was paid in terms of the obligations envisaged under the aforementioned agreement.

5.3 It is also the case of the petitioner that based on the rights acquired under the aforementioned agreement, it entered into a back-to-back agreement with one, Aeren-R Entertainment Pvt. Ltd. which was an authorized licensee of IMAX Corporation. It is, therefore, the case of the petitioner that huge investments, to the extent of nearly 10.45 crores, were made in the hope that it would acquire rights as envisaged in the agreement dated 02.05.2006.

6. It appears that the disputes arose between the parties. As a matter of fact, attempts towards demand of payments qua the remaining amount were also made by the respondents vide letter dated 03.12.2007, which of course, the petitioner, did not comply with as according to it the respondents had already breached their obligations under the agreement.

6.1 Be that as it may, the respondents proceeded to terminate the agreement dated 02.05.2006, as indicated above, vide a notice dated 25.04.2008. Admittedly, the said termination notice was responded to by the petitioner vide a reply dated 09.05.2008. The aforesaid reply was followed up by the petitioner by a notice invoking the arbitration agreement. This notice is dated 24.11.2010.

6.2 There is no dispute raised before me as regards the receipt of the said notice by the respondents. There are several other communications exchanged between the parties articulating their respective grievances. I do not propose to refer to the same as they are not material for the purposes of disposal of the present petition and the objections raised before me.

6.3 I may only add that the petitioner had filed an action under Section 9 of the Act, which was numbered as OMP No.536/2012. The said petition is also on board today. In that petition, an interim order dated 01.06.2012 has been passed, which continues to operate to date. As noted above, the captioned petition was filed on 10.12.2012.

7. Having narrated the facts, I propose to take up the objections which are set out above. In order to appreciate the nature of the objections, the relevant clause in the arbitration agreement would have to be referred to. For the sake of convenience, the same is extracted here-in-below:


28.1 Disputes. The Parties shall attempt to amicably settle all dispute arising out of this Agreement and the obligations there-under (the 'Dispute'). Either party may given written notice of the Dispute to the other party within Ten (10) days of the occurrence of the event which gives rise to such Dispute or such event came to the notice of the concerned party.

28.2 Arbitration. If any claim, dispute or difference arising out of or relating to this agreement including interpretation of its terms between the parties is not amicably resolved through joint discussions, t he same shall be referred to and be finally settled by arbitration. The Parties agree that the arbitration proceedings will be conducted at New Delhi and shall be governed by the provisions of the Indian Arbitration and Conciliation Act, 1996 including any statutory modification or amendment thereto. The decision of the arbitrator(s) shall be final and binding on the parties.'

7.1 A bare perusal of clause 28.1 would indicate that it requires the parties to attempt an amicable settlement of dispute arising under the agreement and the obligations undertaken therewith. Under the very same clause, a right has been vested in the aggrieved party to give a written notice of dispute to the other party within ten (10) days of occurrence of the event which gave rise to a dispute or of such an event coming to the notice of the concerned party.

7.2 The language of the clause is clearly indicative of the fact that it gives a discretion to the aggrieved party to issue a notice of dispute. The word 'may' used in clause 28.1 clearly bears this out. In other words, issuance of notice of dispute within ten (10) days is not mandatory for triggering the arbitration, though parties are obliged to resolve the disputes amicably. The requirement of attempting an amicable resolution of the dispute also emerges upon reading of the subsequent clause, which is clause no.28.2. The correspondence on record though, does seem to indicate that an amicable resolution of dispute has not been possible.

7.3 Therefore, the objection taken by Mr Bajwa that the petitioner had not given a notice for invoking the arbitration within ten days of the termination, which was carried out vide communication dated 25.04.2008, in my view, is not sustainable.

7.4 This apart, according to me, any limitation incorporated in a contract which is contrary to limitation provided under law, would fall foul of Section 28 of the Indian Contract Act, 1872 (in short the Contract Act), as such a clause will amount to putting a fetter on taking recourse to a legal proceedings which are otherwise alive in the eyes of law. For these reasons, I am not impressed with the objection taken by Mr Bajwa in this behalf.

8. In so far as the second objection is concerned, which is that the arbitration petition was filed three years after the termination of the contract, in my view, is also not sustainable. The simple reason for this, is that, the notice invoking arbitration, the receipt of which is not disputed, is dated 24.11.2010. The termination was carried out vide communication dated 25.04.2008. In terms of Section 21 of the Act, the arbitration, in my opinion, got triggered on the issuance of the notice by the petitioner dated 24.11.2010. Concededly, the time gap between the termination notice and the notice invoking arbitration is less than three years.

9. Mr Sapra, learned senior counsel for the petitioner, in support of his argument and to meet the objection in this behalf raised by Mr Bajwa, has relied upon a judgement of a Single Judge of thi

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s court in Barco Electronic Systems Pvt. Ltd. vs Mrs. Kiran Malik 187 (2012) DLT 19. The said judgement takes a view which is in consonance with what I have indicated above. 10. Thus for the reasons given above, I intend to allow the petition. Accordingly, Hon’ble Mr. Justice Manmohan Sarin, former Chief Justice of Jammu and Kashmir High Court is appointed as an arbitrator in the matter. The parties and their counsels shall appear before the learned arbitrator on 17.11.2014 at 11.00 a.m. At this stage, I have ascertained from the counsels for the parties as to whether they are agreeable to the rule and fee schedule of the Delhi International Arbitration Centre (DIAC) being made applicable to the present proceedings. Counsels for the parties say that they are agreeable to the same. It is ordered accordingly. The DIAC will issue appropriate communication to the parties and the counsels in this behalf, including respondent nos. 2 and 4. The petition is, accordingly, disposed of.