The execution of a Conveyance Deed extinguishes the original Agreement for Sale and its arbitration clause, rendering them ineffective.

JUDGMENT :

1. By this Arbitration Appeal, the Appellants are seeking to set aside the impugned order dated 2nd May, 2024 passed by the Civil Judge, S.D. Belapur, in below exhibit 14 in Special Civil Suit No.87 of 2024. The impugned order was passed rejecting the Application filed by the Appellants under Section 8 of the Arbitration and Conciliation Act, 1996 (for short, “Arbitration Act”) for referring the aforementioned Suit for Arbitration. The present Arbitration Appeal has been filed by the Appellants under Section 37 of the Arbitration Act.

2. Brief background of the facts is necessary to be stated as under:-

(a) The Respondent No.6 was erstwhile owner of the land being Gat Nos.51(2), 56 and 57(2) admeasuring 5 acres or thereabouts situated at Thane Belapur Road, Village Dighe, Kalwa, District Thane, (for short, “subject property”).

(b) The Respondent No.7 had owned and was seized of a factory structure situated on the subject property.

(c) An unregistered Memorandum of Understanding ((MoU 2015) dated 8th September, 2014 was executed by Respondent No.6 in favour of Respondent No.1 for transfer of the subject property on the terms and conditions recorded therein and for a total sale consideration of Rs.58,50,00,000/- (plus capital gains tax).

(d) The Respondent no.1 as owner executed an unregistered Joint Development Agreement dated 7th October, 2014 in favour of Appellant Nos.1 and 2 (as Developers) for joint development of the subject property.

(e) The terms of the Joint Development Agreement were subsequently amended under Addendum dated 26th November 2014.

(f) The Respondent No.1 had failed to comply with their obligations under the Joint Development Agreement. The dispute ensued between Respondent No.6 and 1 and it was agreed between them that Respondent No.6 would transfer the undivided share i.e. 75:25 in favour of Appellant Nos.1 and 2 respectively. This was in the year 2014 and 2015.

(g) A registered Agreement for Sale (“the said Agreement”) was executed on 5th November, 2015 in respect of the subject property between Respondent No.6 (as the owner); Appellant Nos.1 and 2 (as purchasers); Respondent No.7 (as the first confirming party); and Respondent 1 (as the second confirming party). By the said Agreement, Respondent No.6 had agreed to sell the subject property in favour of Appellant Nos.1 and 2. It is necessary to note that in Clause 16 of the said Agreement it is provided that Appellant No.1 and 2 with Respondent No.1 will execute a separate Agreement in writing identifying all the obligations of the Second confirming party as provided in the said Agreement. Clause 35 provides for Arbitration Clause.

(h) On 5th November, 2015, in pursuance to Clause 16 of the said Agreement, an unregistered Memorandum of Understanding (“MoU 2015”) was executed between the Appellant Nos. 1 and 2 with Respondent No.1 on the stamp paper of Rs.100/- detailing the obligations of Respondent No.1 to be complied with under the said Agreement and specifying the consideration payable to Respondent No.1 on successful compliance of the obligations. In the operative portion of the MoU 2015, it is provided that Respondent No.1 would be entitled to a monetary consideration of Rs.3500/- per square feet of the saleable area. Further Respondent No.1 shall comply with all obligations/responsibilities/duties in the said Agreement/MoU 2015 on or before 31st December, 2015 subject to which balance payment shall be payable to Respondent No.1. Further, in the operative portion, it is provided that the responsibilities, duties and entitlements of the said Agreement and MoU 2015 shall be read jointly and not separately.

(i) As a security for the monetary consideration payable to Respondent No.1 for compliance of obligations of the said Agreement which are detailed in MoU 2015, Appellant No.1 and 2 had issued an Allotment Letter dated 5th November 2015 in favour of Respondent No.1 (j) Respondent No.6 and 7 executed a registered Conveyance Deed dated 2nd March, 202