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IN THE HIGH COURT OF BOMBAY
Dr. D. Y Chandrachud, J.
JEWEL TOUCH (INDIA) PVT. LTD. - Petitioner.
vs.
NAHEED HAFEEZ QURAISHI (PATRAWALA) and others - Respondents.
Arb.Petn. No. 409 of2007
decided on 25-1-2008.
The second principal which must be borne in mind is based on the provisions and scheme of the Arbitration and Conciliation Act, 1996. Under Section 7(2), an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement Sub-section (3) postulates that it shall be in writing. Section 7(4) then provide as follows :
"(4) An arbitration agreement is in writing if it is contained in-
(a) document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or
(c) an exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other’’.
Under Section 16 (1), the Arbitral Tribunal is empowered to rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of the arbitration agreement. For that purpose, Clause (a) says that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. Clause (b) provides that a decision by the Arbitral Tribunal that the contact is null and void shall not entail ipso jure the invalidity of the arbitration clause. These provisions are significant where a dispute such as the one which arises in the present case, on the fulfilment of an escrow condition is raised. The provisions of Section 7 (4) when juxtaposed with sub-section (1) of Section 16 would lead to a reasonable inference that an arbitration clause can well be treated as a condition independent of the other terms of the contract and that even the nullity of the underlying contract shall not necessarily in the eyes of law, lead to invalidity of the arbitration clause. Any interpretation by the Court must, therefore, fulfill the salutary object of Parliament while enacting these provisions of the Arbitration and Conciliation Act, 1996.
The third aspect of the case is the facts as they have emerged before the Court. The petitioner invoked the arbitration clause by a letter dated 23rd January, 2007. Respondent Nos. 1 to 7 did not respond to the letter. Respondent No. 8 in his reply dated 21st February, 2007 did not contend that there was no arbitration clause at all, but that the MoU "had been rendered cancelled, invalid, and infructuous". The next important aspect which requires emphasis is that the petitioner filed an application under Section 11 of the Act seeking the appointment of Arbitrator. The reply that was filed on behalf of respondent Nos. 1 to 7 to the Section 11 petition is extremely significant. In their reply, respondent Nos. 1 to 7 do not deny the existence of the arbitration agreement, but on the contrary, the averment that was made was to the effect that the invocation of the arbitration clause by the petitioner was premature.
The reply filed to the petition under Section 11 thus clearly demonstrates that there has been an acceptance of the position that (i) There was a valid agreement between the parties to refer disputes to arbitration; and (ii) The arbitration clause was enforceable and valid. Respondent No. 8, as already noted earlier, has in his reply dated 21st February, 2007 not contested the existence or validity of the arbitration clause.
In these circumstances, for all the three reasons noted above, it is impossible for the Court to accept the submission which has been urged on behalf of the respondents that there was no valid and enforceable agreement between the parties to refer their disputes to arbitration.
In a petition under section 9 of the Arbitration and Conciliation Act, 1996, two reliefs have been sought pending the commencement and conclusion of arbitral proceedings: (i) The appointment of a Receiver in respect of a plot of land which forms the subject-matter of the dispute, with a direction to the Receiver to take possession and hand over possession to the petitioner; (ii) An order of injunction restraining the respondents from alienating or creating third party rights in respect of the plot.
2. Respondent Nos. 1 to 7 are the legal heirs of Abdul Hafeez Khairulla Quraishi (Patrawala) who died on 31st July, 2005. During his lifetime, the deceased entered into a Memorandum of Understanding of 9th June, 2005 under which he is alleged to have agreed to transfer and assign his right title and interest in a plot of land at the Bandra Kurla Complex, bearing CTS No. 4207, admeasuring 819.3 sq.mtrs. to the petitioner. The deceased, the petitioner and the Eighth respondent as developer, were parties to the agreement. The MOU contemplates that the Eighth respondent would construct on the land a building of the required specifications, for consideration. The petitioner claims to have paid an amount of Rs. 1.15 crores to the deceased and an amount of Rs. 2.16 crores to the Eighth respondent. Prior to the execution of the MOU, the deceased had entered into a Development Agreement dated 27th July, 2004 with the Eighth respondent. In the circumstances, the Eighth respondent was a party to the subsequent MOU executed in June, 2005 in favour of the petitioner.
3. The case of the petitioner is that a joint meeting was held at the office of its Advocate. Parties agreed that three originals of the MOU, all duly executed, would be kept in escrow with the Advocates for the three parties until such time as the formalities contemplated in accordance with the schedule set out in Clause• 9 of the MOU were completed. According to the petitioner, until such time, the original title deeds were to be kept in escrow with Mr. Anil Harish, a partner of D. M. Harish and Co., a firm of Advocates representing the petitioner. None of the parties retained a copy of the MOU which at that stage was not stamped or registered, it being in the contemplation of the parties that the MOU may have to be redrafted in the form of several documents while keeping the basic terms intact and binding.
4. The petitioner has averred that it arranged a Pay Order of Rs. 1.74 crores in favour of the Mumbai Metropolitan Regional Development Authority (MMRDA) which had granted leasehold rights in respect of the plot of land to the deceased. However, the payment was not completed on account of the failure of the Eighth respondent to obtain a letter of offer for the Transferable Development Rights (TDR) from MMRDA at the prevailing value.
5. After the death of the predecessor-in-title of respondent Nos. l to 7 on 31st July, 2005, the petitioner claims to have approached the legal heirs to complete formalities such as obtaining letters of administration to facilitate an assignment and transfer of the plot to the petitioner. Upon the instructions of respondent Nos. 1 to 3, the petitioner paid Rs. 2,35,635/- on 30th March, 2006 to the Municipal Corporation for Greater Mumbai.
6. The MOU contemplates, according to the petitioner, that the consideration payable by the petitioner was to be computed on the basis that an FSI of two would be available. However, parties agreed that since the then prevailing FSI was one, if the higher FSI of two was not available, the consideration would stand proportionately reduced. The contention of the petitioner is that the actual value of the property was to be either Rs. 23 crores (in the event of the FSI of two being available) or Rs. 11.5 crores, in the event of an FSI of one being available Paragraph 6 of the Rejoinder.
7. According to the petitioner, respondent Nos. 1 to 7 had informed them that there were disputes between the legal heirs. On 2
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