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HIGH COURT OF CALCUTTA
S.C. Ghose & R.M. Datta, JJ.
Sayaji Mills Ltd
Vs.
Aradhana Investments Ltd.
MANDAMUS APPEAL No. 101 of 1979 (Special Suit No. 82 of 1978)
Decided on : July 13, 1971)
ARBITRATION - NOMINATION - NOVATION - JURISDICTION - SALE OF LAND - IMMOVABLE PROPERTY - COURT - INTERPRETATION - IMPLEMENTATION - CARRYING OUT DETAILS OF AGREEMENT - DISPUTES - POSSESSION - SPECIFIC PERFORMANCE - LETTERS PATENT - CIVIL PROCEDURE CODE.
Fact of the Case:
Punalur Paper Mills Ltd. and Sayaji Mills Ltd. signed a memorandum confirming discussions and recording the broad terms of an agreement for the sale and purchase of Sayaji Mill No. 2. The memorandum stipulated that the consideration money would be paid inter alia by deduction and adjustment from the consideration or the price of statutory liabilities and employees' dues. The purchaser was to adjust and set off total liabilities to the extent of Rs. 1,45,50,000/: (Rupees one crore: forty five lacs fifty thousands) and pay only a sum of Rs. 7,50.000/- (Rupees seven lacs and fifty thousands) in cash. Punalur wrote to Sayaji Mills Ltd. stating that they had nominated Aradhana Investments Ltd. as their nominee. Aradhana wrote to Sayaji Mills Ltd. stating that they had been nominated as the purchaser by Punalur Paper Mills Ltd. Sayaji Mills Ltd. passed certain resolutions by its Board of Directors, approving the memorandum dated 22nd December, 1977 in principle subject to the clarifications and conditions mentioned in the said resolutions. Sayaji Mills Ltd. along with its letter dated January 18, 1978 written to Punalur enclosed the copies of the resolutions passed by the Board of Director a of Sayaji Mills Ltd. on January 16, 1978. By its letter dated January 25, 1978 Punalur stated that Punalur had already nominated Aradhana Investment Ltd, as the Purchaser and that all the future correspondence should be done by Sayaji Mills Ltd. directly with Aradhana. Aradhana referred to Sayaji Mills Ltd.'s letter dated January 18, 1978 addressed to Punalur and stated that the laid letter had come to the respondent as a complete surprise and that it was an attempt on the part of Sayaji Mills Ltd. to resile from the agreement dated December 22, 1977. Sayaji Mills Ltd. passed another resolution. Copies of minutes of the said Board meeting appear at page 156 of the Paper Book. From the said minutes of the said meeting it appears that there were further discussions with the representatives of the purchaser at Bombay by Sayaji Mills Ltd. relating to the memorandum dated December 22. 1977. Messrs Chiwanlal Shah and Company. Advocates of Sayaji Mills Ltd. wrote to Aradhana that the memorandum dated December 22, 1977 did not record a complete agreement. Aradhana filed a suit under Section 20 of the Arbitration Act.
Finding of the Court:
1. The respondent had or has no locus standi to institute the suit inasmuch as the respondent was not a party to the memorandum dated December 22. 1977 and as such was not a party to the arbitration agreement contained in the said memorandum and thus cannot apply under S, 20 of the Arbitration Act. 2. The agreement evidenced by the memorandum dated December 22. 1977 was not a concluded contract but was subject to the compliance of conditions precedents namely, "(i) the respective vendor and purchaser companies will get the approval of their respective Board of Directors on or before 1.1.1978" and "(ii) The vendor will call an extra-ordinary general meeting of their members on or before 30.1.1978 for approving the sale of their undertaking of Sayaji Mill No. 2 as required by S. 293(1)(a) of the Companies Act.". 3. This was indeed a contract for sale and delivery of Possessions of immovable property and therefore this court has no Jurisdiction to direct the filing of the arbitration agreement under S. 20 of the Arbitration Act and direct a reference to the named Arbitrator.
Issues: 1. Whether the respondent had locus standi to institute the suit? 2. Whether the agreement evidenced by the memorandum dated December 22. 1977 was a concluded contract? 3. Whether this was indeed a contract for sale and delivery of Possessions of immovable property?
Ratio Decidendi: 1. A party to an arbitration agreement is the only person who can take recourse to the provisions of S. 20 of the Arbitration Act. 2. An agreement is not concluded if it is subject to the compliance of conditions precedents. 3. A contract for sale and delivery of Possessions of immovable property is not within the jurisdiction of the court under S. 20 of the Arbitration Act.
Final Decision: Appeal allowed. Suit dismissed with costs.
Ghose, J.
1. This appeal arises out of a Judgment and order dated March 5, 1979 made by the court of first instance. By the said judgment and order, the court of first instance directed the filing of an arbitration agreement contained in a memorandum dated 22nd December, 1977 executed by the Chairman and Managing Director of the appellant Sayaji Mills Ltd. and the Chairman and Managing Director of one Punalur Paper Mills. Ltd. And directed the reference of the disputes in regard to the agreement recorded in the said memorandum to be referred to the arbitration of the named arbitrator I.M. Nanavati.
2. The suit under S. 20 of the Indian Arbitration Act, 1940 was instituted in this Court not by any of the purported parties to the said memorandum, but by a nominee of Punalur Paper Mills Ltd. described as the purchaser in the said memorandum being the respondent Aradhana Investments Ltd.
3. The facts leading to the filing of the suit may be briefly stated. On 22nd December, 1977 the respective Chairman and Managing Director of the appellant (defendant in the suit) Sapaji Mills Ltd. and one Punalur Paper Mills Ltd. signed a memorandum at Bombay. The said memorandum confirmed the discussions and recorded the broad terms of an agreement for the sale and purchase of Sayaji Mill No. 2. Bombay by and between this appellant referred to in the said memorandum as the vendor and Punalur Paper Mills Ltd referred to in the said memorandum as the purchaser. Clause 1 of the said memorandum inter alia provided as follows: "The vendor agrees to sell transfer and convey in favour of purchaser, its nominee or nominees, its block of Sayaji Mills Nos. 2 at Bombay free from all charges encumbrances and lis pendens comprising of lands measuring 51176.81 Sq. Meters. all factory and other building constructed therein, composite textile mills............................................and goodwill and tenancy rights of the shops in Mulji Jetha Market and a rented flat on the 7th floor of Mount Unique building flat No. 51................................for a sum of Rs. 1.53.00,000 (Rupee. one crore fifty three lacs only)”. The said memorandum appears at pages 12 to 18 of the Paper Book.
4. The memorandum stipulated that the consideration money would be paid inter alia by deduction and adjustment from the consideration or the price of (i) "Statutory Liabilities" such as municipal and other taxes upto the date of conveyance, the sales tax and excise duty outstanding as on the date of the conveyance and other statutory payments outstanding and related to the property upto 31.l.78. (ii) employees' dues such as (a) arrears bonus, if any, (b) bonus from 1-1-1977 to 31.1.1978 as Per Bonus Act, (c) arrears of Provident Fund, B.S.I., If any, (d) Provident Fund and E.S.I. contribution upto 31. 1.1978, (e) arrears of unpaid wages if any, and wages (including D.A. upto 3l.1.1978) (f) leave with wages due in respect of leave not hitherto enjoyed and leave wages accruing due upto 31.1.1978;
(iii) dues of Trade creditors and other various liabilities of the vendor. The purchaser was to adjust and set off total liabilities to the extent of Rs. 1,45,50,000/: (Rupees one crore: forty five lacs fifty thousands) and pay only a sum of Rs. 7,50.000/- (Rupees seven lacs and fifty thousands) in cash.
For the purpose of this appeal we reproduce hereunder some: of the material terms contained in the said memorandum:
"Clause 4 To facilitate smooth change-over and consequential accounting.
(a) the Purchaser will enter on de facto management control and possession of the mills as from 1.2.1978 to the date of conveyance;
(b) inventory will be taken of the stocks of cotton, stores, colours, chemicals waste and goods unprocessed (on machines) so as to make it upto date all on 31.1.1978, and the Purchaser will pay to the account of the Vendor the margin money in respect thereof to the Vendor's Bank;
(c) the purchaser will supply to the extent of Margin money required for purchase of raw
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