(1.) This Original Side Appeal (O.S.A) has been filed against the order dated 23.12.2016 made in O.P.No.231 of 2016 passed by the learned Single Judge, setting aside the arbitral award, dated 16.03.2016 passed by the second respondent in the arbitral dispute between the first respondent and the appellants pursuant to Joint Development Agreement, dated 17.12.2004.
(2.) For the purpose of convenience, the parties are referred to as they are ranked in this O.S.A. Brief facts which are necessary to decide the issue involved in this appeal are as follows:
(a) The first respondent-Company (claimant) is engaged in the business of property development and construction. The respondents 1 to 3 in the Original Petition, who are the appellants herein, are brothers. They are absolute owners in possession of land bearing New Door No.165, Old No.110, St.Mary's Road, Alwarpet, Chennai-600 018, comprised in R.S.No.3925/8, 3926/5, 3927/6, Block No.86, Mylapore Division, Mylapore-Triplicane Taluk, Chennai, ad-measuring 20 grounds and 600 Sq.Ft. According to the first respondent-Company, the appellants had represented to the first respondent that they were seeking to develop their property and after several rounds of discussions and negotiations, it was agreed to develop the property jointly. While the appellants could contribute their land, the first respondent-Company would put up construction over the property of the appellants. In consideration of the first respondent- Company to put up construction over the said premises, the appellants agreed to convey 50% undivided share of the land to the first respondent-Company. To this effect, a Joint Development Agreement (JDA), dated 17.12.2004 was entered into between the first respondent-Company and the appellants.
(b) As per the JDA, 50% of the undivided share in the subject property was to be conveyed to the first respondent-Company on condition that the first respondent delivers 50% of the constructed area to the appellants after the building is completed in all respects and is certified as being fit for occupation by the Project Architect. The first respondent-Company was to develop the subject property at their own costs. The following are the relevant clauses of the JDA:
".. .. 6. As security for the due performance of LG's obligations under this agreement, LG has this day given a refundable Interest- free deposit of Rs.3,57,00,000/- (Rupees Three Crores Fifty Seven Lakhs only) at the time of signing of this agreement, the receipt whereof by Pay Order in favour of Prem Kumar Menon - Manor Menon Account" for and on behalf of all the LAND-OWNERS, the LAND-OWNERS do hereby admit and acknowledge. LG promises to pay a further refundable interest-free deposit of Rs.25,00,000/- (Rupees Twenty-Five Lakhs only) within 6 months from this day. The said two Security Deposits (hereafter together referred to as "the said Security Deposits") shall be returned without interest to LG by the LAND-OWNERS within 15 (fifteen) days of the fulfilment of all of the following four conditions by LG:
a) LG completes the construction of the building in all respects, including the LAND-OWNERS CONSTRUCTED AREA fit for occupation and the Architects for the project certify to the LAND OWNERS that the building has been put up and completed according to the sanctioned plan and is fit for occupation.
b) LG has applied to the Chennai Metropolitan Development Authority for Completion Certificate in respect of the said building and
c) LG offers, in writing, to hand over the LAND- OWNERS CONSTRUCTED AREA to the LAND- OWNERS, after the conditions stipulated in clause (a) & (b) are fulfilled.
The date on which all the above conditions are fulfilled by LG is hereinafter referred to as "the said Handover Date".
It is expressly agreed between the parties hereto that, whether or not the LAND-OWNERS have taken delivery of the LAND-OWNERS CONSTRUCTED AREA, upon expiry of a period of 15 (fifteen) days from the said Handover Date, LG will be deemed to have fulfilled their obligation to deliver the LAND-OWNERS CONSRUCTED AREA (whether or not physical possession of the LAND-OWNERS CONSRUCTED AREA has been taken by the LAND OWNERS from LG) and the said Security Deposit would be due and payable by the LAND-OWNERS on such date (i.e. 15 (fifteen) days after the said Handover Date.
It is further expressly agreed between the parties hereto that LG
will not be required to hand over physical possession of the LAND-
OWNERS CONSTRUCTED AREA to the LAND-OWNERS until the said
Security Deposit, together with interest, if any, in terms of this
Agreement, has been returned by the LAND-OWNER to LG.
7. If the LAND-OWNERS do not repay the said Security Deposit within 15 (fifteen) days from the said Handover Date, the LAND-OWNERS shall pay interest @ 12% per annum on the said Security Deposit from the said Handover Date till the date the said Security Deposit is refunded, together with interest, to LG.
8. In addition to the deposits detailed in Clause 6 above, LG has already paid to the LAND-OWNERS, a Refundable Interest-free Earnest Money Deposit of Rs.1,25,00,000/- (Rupees One Crore Twenty Five Lakhs only), the receipt whereof the LAND OWNERS do hereby admit and acknowledge. The said Earnest Money Deposit shall be returned by the Land Owners to LG within 30 days from the Handover Date.
9. In consideration of LG delivering the said LAND-OWNERS CONSTRUCTED AREA to the LAND-OWNERS per clause 4 supra, the LAND-OWNERS shall transfer/convey to LG or their nominee(s) an undivided 50% share in the Schedule Property (which 50% undivided share is hereinafter referred to as "LG's UNDIVIDED SHARE") in one or more sale deeds, in terms of this Agreement.
11.1. It is agreed by and between the parties hereto as follows:
(b) LG shall, at their own cost and expenses, undertake and complete the development of the Schedule Property by way of construction of building as per sanctioned plans with internal and external services, amenities, lifts, facilities including but not limited to compound walls, staircases, lobbies, terraces, balconies, passages, covered and uncovered car parking spaces, basement, gardens, machine room, service room, recreational areas etc., and obtain the Completion Certificate from the concerned authorities in respect of such buildings and facilities (hereinafter referred to as "the said development") as hereinafter provided. The construction shall be in accordance with specifications contained in ANNEXURE I.
11.2. If any additional construction is put up on the Schedule Property over and above the sanctioned plan, or because of favourable changes in the building bye-laws, the additional construction so put up shall also be shared in the ratio of 50% for LAND-OWNERS and 50% for LG. The spirit of this agreement being that whatever is built on the Schedule Property shall be shared in the ration of 50% for LAND-OWNERS and 50% for LG.
15.1. The LAND-OWNERS and LG shall take a decision as to whether the Schedule Property should be developed into a commercial or residential complex, within a period of 120 days from this day (hereinafter referred to as "the said Decision Date").
15.2 .. ..
15.3. a) LG shall obtain the necessary sanctions and permissions from the concerned authorities to undertake the said development (hereinafter referred to as "the said Sanctions") and in the event that the Schedule Property is to be developed into a commercial complex within a period of 12 (twelve) months from the said Decision Date.
15.5. The LAND-OWNERS shall demolish the structures on the Schedule Property within 45 days from the said Sanctions and LG shall commence construction within 60 days from the said sanctions, subject to the land owners demolishing the structures (hereinafter referred to as, "the said Commencement Date").
15.6 .. ..
16. LG hereby undertakes to complete the construction of the project in all respects within 24 months from the said Commencement Date. Time shall be the essence of this agreement.
17. Should there be any delay in completion of the project beyond 24 months as aforesaid, LG shall pay to the LAND-OWNERS, for the entire LAND-OWNERS CONSTRUCTED AREA, as compensation: (a) a sum of Rs.8/- per sq.ft. of Super Built-up Area per month in case of residential complex and (b) a sum of Rs.15/- per sq.ft. of Super Built-up Area per month in case of commercial complex. If the completion of the project is delayed beyond the period of 36 months, LG shall pay an incremental penal compensation of 50% for every quarter beyond the 36th month. 18. It is made clear that in case LG fails to complete and hand over the LAND-OWNERS CONSTRUCTED AREA to the LAND- OWNERS within 42 (forty two) months from the said Commencement Date, the LAND-OWNERS shall have the right to take over the project and complete the same at the cost of LG.
g. The total amount of loans/credit facilities that LG may avail at any point of time, against the security of the title deeds pertaining to the Schedule Property, shall not exceed a sum of Rs.7,50,00,000/- (Rupees Seven Crores and Fifty Lakhs only).
22. LG shall periodically provide to the LAND-OWNERS a progress report, along with photographs showing the progress of the said development and the LAND-OWNERS shall have the right to inspect the progress of the development from time to time with due notice to LG.
23. The LAND-OWNERS shall be entitled to demolish the existing structures on the Schedule Property at their own cost and expenses and to appropriate the proceeds from such demolition. The Demolition approval charges payable to the Corporation of Chennai shall be borne by the LAND-OWNERS.
24. The name of the Building shall have the prefix "MENON". The said prefix shall appear equally prominently along with the rest of the name of the building in all places where the name of the building is displayed.
25. LG shall appoint the Architect for the said development after obtaining the consent of the LAND-OWNERS. Similarly, LG shall obtain the consent of the LAND-OWNERS for the design and plans for the said development. All other decisions with regard to the said development shall be solely taken by LG who shall however keep the LAND-OWNERS informed of the same as well as about the progress of work in the said development.
31. After LG has delivered, or is deemed to have delivered,
the LAND-OWNERS CONSTRUCTED AREA to the LAND-OWNERS,
LG shall be entitled to get conveyance of LG's UNDIVIDED SHARE in
the Schedule Property in its favour or in favour of its nominee/s.
32. After LG take, or cause to be taken, in favour of itself or
its nominee/s, the conveyance of LG's UNDIVIDED SHARE in the
Schedule Property within 12 months from the said Handover Date.
33. After LG gets conveyed to itself or to its nominees LG's
UNDIVIDED SHARE in the Schedule Property, LG shall be entitled to
sell or lease or rent or transfer by any other mode/nature or give
for any other usage the said LG's CONSTRUCTED AREA or any part
or portion thereof to such person or persons or company or entity
or body at such price and on such terms that LG may decide at its
36. The LAND-OWNERS will execute and register in favour of
LG or its nominee(s) a specific Power of Attorney/S (hereinafter
referred to as the FIRST POWER OF ATTORNEY or 1st POA) to
carry out the said development and to obtain various approvals,
sanctions and permissions relating to the said development and to
enter into Agreement to Sell or Agreements to Lease or Mortgage,
by way of deposit of title deeds, the LG's CONSTRUCTED AREA and
the proportionate LG's UNDIVIDED SHARE in the Schedule
37. The LAND-OWNERS have also this day executed another
Power of Attorney (hereinafter referred to as the SECOND POWER
OF ATTORNEY or 2nd POA). The said 2nd POA shall be kept in
escrow with M/s.HDFC, who will deliver the same to LG on the said
Handover Date in accordance with the terms of the Escrow
Agreement between the parties as per the draft annexed hereto as
Annexure V. The LAND-OWNERS shall also register the aforesaid
2nd POA simultaneously with taking delivery of the LAND-OWNERS
CONSTRUCTED AREA. The said 2nd POA shall, inter alia, authorise
and empower LG or their nominees to execute and register sale
deeds in respect of LG's UNDIVIDED SHARE in the Schedule
Property relatable to LG's CONSTRUCTED AREA. It is specifically
declared by the LAND-OWNERS that this Power of Attorney shall be
irrevocable. The said second Power of Attorney can be acted upon
only after LG has delivered, or is deemed to have delivered, the
LAND-OWNERS CONSTRUCTED AREA to the LAND-OWNERS.
38. The LAND-OWNERS shall not revoke the Power of
Attorney(s), executed as above, provided however there is no
breach of the terms contained herein to be performed/observed by
43. If there is a breach or violation of the terms of this
Agreement, the aggrieved party shall give written notice to the
defaulting party, and such defaulting party shall rectify/remedy
such breach within 30 days of receipt of such notice. The LAND-
OWNERS will only be entitled to terminate this Agreement in the
(a) Failure of LG in completing the said
development within the agreed time.
(b) Failure of LG in delivering the LAND-OWNERS
CONSTRUCTED AREA within the stipulated time without
(c) Permitting the change in ownership of the
equity share capital in LG
Provided however that the LAND-OWNERS will be
entitled to terminate this Agreement only if the LAND-
OWNERS have not defaulted in any of their obligations
under this Agreement.
44. In the event of this Agreement being
terminated in terms of Clause 43 hereinabove, the LAND-
OWNERS shall simultaneously with such termination
refund to LG the said Security Deposit of
Rs.3,82,00,000/- (Rupees Three Crores Eighty Two Lakhs
only) paid by LG, after deducting the losses that the
LAND-OWNERS may have suffered.
46. Any structural defects in the Building, including
the LAND-OWNERS CONSTRUCTED AREA shall be repaid
by LG at their cost and expense upto a period of one
year from the Handover Date.
52. All disputes, differences, claims and questions
whatsoever which may arise during the continuance of
this Agreement between the parties hereto touching
these presents or the construction, meaning, effect or
application thereof or any Clause or thing contained in
this Agreement or in respect of any account or as to any
act of omission of either party or as to any other matter
in any way relating to or arising out of or touching this
Agreement or the rights, duties and liabilities of either
party under this Agreement shall be referred to
arbitration in accordance with and subject to the
provisions of the Arbitration and Conciliation Act, 1996 or
any statutory modifications or enactment thereof for the
time being in force, each party nominating an arbitrator
of the ranking of a retired High Court Judge residing at
Chennai. The two arbitrators so appointed shall confer
and nominate an umpire. The arbitration proceedings
shall be held at Chennai and courts in Chennai alone
shall have the jurisdiction.
(c) Initially, the parties were vacillating between the residential building
and commercial building and were uncertain of this even at the time of signing
the JDA. Hence, the JDA provided a period of 120 days for the parties to decide
on the nature of structure to be put up. As per the terms of the JDA, the first
respondent-Company, at the first instance, deposited with the appellants a sum
of Rs.3.57 Crores towards refundable security deposit. On 29.03.2006, the
parties entered into a Supplemental Agreement, whereby they decided to put up
a Software Technology Park (STP) in the said property. This agreement was also
reduced into writing. Besides this, the appellants executed a Power of Attorney
of even date empowering the first respondent-Company to put up construction
over the said property, apply for required sanction in this regard, execute
agreements for sale for 50% of the said property and also enter into lease
agreement pertaining to the first respondent-Company's share. The appellants
also executed another Power of Attorney on 29.03.2006 empowering the first
respondent-Company to convey 50% undivided share in the land in favour of its
nominee or any other person. An Escrow Agreement was entered into on the
same day between the first respondent-Company and the appellants and HDFC,
Bangalore. Under the terms of the Escrow Agreement, HDFC was appointed as
an Escrow Agent having custody of this Power of Attorney and was to act in the
interest of both the parties. Under the terms of the Escrow Agreement, HDFC
was obligated to hand over to the first respondent-Company the original Power
of Attorney dated 29.03.2006 upon receipt of proof from the first respondent-
Company that the construction was completed as per the terms of the JDA,
which contemplated both delivery and deemed delivery. Further, a sum of
Rs.25 lakhs was paid by the first respondent-Company towards further security
deposit on 13.01.2005 at the request of the appellants.
(d) Another supplemental agreement dated 22.02.2007 was entered into
between the parties, whereby the security deposit was enhanced by a further
sum of Rs.3 crores and the total sum of Rs.6.82 crores was deposited with the
appellants by the first respondent-Company. This amount being security deposit,
is refundable by the appellants upon due performance by the first respondent-
Company and contemporaneous to handing over vacant possession of their
share of the constructed area.
(e) Clause 6 of the JDA provided that upon fulfilment of its obligations, the
first respondent-Company shall offer to hand over to the appellants the areas
constructed by it and such offer shall be made in writing. The date of such offer
shall be reckoned as the "hand over date." On their failure to take delivery
within 15 days from such date of hand over, it shall be deemed that the first
respondent-Company has delivered possession by completing the obligations
cast on the first respondent-Company under the JDA. All other provisions of the
JDA revolving around the issue of the handing over date, include the possibility
of deemed delivery.
(f) Changes were also brought about in Clauses 15.1 to 15.6 of the JDA,
by incorporating fresh clauses which were numbered as 15.1, 15.2 and 15.3.
The details of the areas and the allocation of spaces were reflected in Clause 6.1.
As per the said clause, the second, third, fourth and fifth floors were to be
allotted to the share of the first respondent-Company, while the sixth, seventh,
eighth and ninth floors were allotted to the share of the appellants. The plinth
area, common area and the super built up area, of each floor, was equally
divided. Insofar as the tenth floor was concerned, the North Wing was allotted to
the share of the first respondent-Company, while the South Wing was allotted to
the share of the appellants. The terrace area was divided equally among the
parties. The car parks, which were to be located in the basement, ground floor
and first floor, and the open areas around the building, were also equally divided
between the parties.
(g) The plan sanction was duly obtained and workers were engaged in
different shifts to carry out the construction activities at commendable speed.
First quality materials were used by the first respondent-Company being
oblivious to the cost involved and elevation was given due importance, as the
parties contemplated only a shell inside. The appellants and their representatives
were in continuous supervision of the progress of work and actively participated
in various discussions. They have also made many suggestions and requests for
enhancements to the structure. According to the first respondent-Company,
though these fell outside the ambit of the JDA, the first respondent-Company
obliged merely to please the appellants. An extent of 1.86 lakhs square feet was
erected and in excess of Rs.50 crores was spent on construction and related
activities. The building has met the U.S. Green Building Council Norms and
Standards and the Certification was under process. The specifications provided in
the JDA were outshined and the first respondent-Company delivered much more
than what was assured under the JDA. The property has been named "Menon
(h) Having completed the construction as per the requirements, the first
respondent-Company was ready to deliver to the appellants their share of the
superstructure, which was sixth, seventh, eighth, ninth and Southern half of the
tenth floor. The first respondent-Company was to retain the second, third,
fourth, fifth and Northern half of the 10th floor for itself, as per the Supplemental
Agreement, dated 29.03.2006. The basement, ground floor and first floor were
allocated for car parking. Even while the construction activities were being
wound up, the first respondent-Company had identified a tenant for the entire
sixth floor of the appellants. The said tenant, M/s.Future Management and
Consultancy Private Limited, had inspected the premises in and around August
2008 and after satisfying itself, offered to pay rent of Rs.88/- per Sq.Ft. per
month to the appellants. The said tenant also paid little over Rs.2 crores to the
appellants towards advance for taking on lease the entire sixth floor of the
(i) Under Clause 25 of the JDA, the first respondent-Company was entitled
to engage a Project Architect and had appointed one M/s.Natraj & Venkat as the
Project Architect. The appellants were also aware of the same and even attended
various meetings in their office to understand the interior specifications,
materials used and understating the construction practices. The Project Architect
issued a Certificate, dated 10.10.2008 stating that the building was fit for
occupation, upon the Tamil Nadu Electricity Board (TNEB) giving power
connection and CMWSSB providing water and sewerage connections to the
property. It was specifically mentioned in the said Certificate that the same was
being issued by them in the capacity of Project Architect. Similarly, the CMDA,
after inspection of the premises and upon being satisfied that the structure has
been constructed as per the sanctioned plan, issues a Completion Certificate
certifying that the building is ready for occupation. The TNEB and the CMWSSB
provide their respective services only after issuance of the Completion
Certificate. With regard to the building, the first respondent-Company had
applied for the Completion Certificate as early as on 29.07.2008. In fact, the JDA
provided two limbs to ascertain fulfilment of obligations by the first respondent-
Company, namely, (a) Certificate of Architect, and (b) Application to CMDA for
Completion Certificate. Thus, fulfilment of the first respondent-Company's
obligations did not include obtaining Completion Certificate from the CMDA, so
also the electricity and sewerage Connections.
(j) In the meanwhile, there were further meetings and discussions
between the first respondent-Company and the appellants. During the said
meetings, various issues relating to the property were discussed. The appellants
had alleged delay on the part of the first respondent-Company in completing the
project. The Service Tax payable in respect of the project was another bone of
contention which was discussed in detail. The first respondent-Company also
placed on record that during the meetings, it was agreed between the parties
that the entire construction was completed by the first respondent-Company and
though entitled to exercise rights conferred under the Power of Attorney, the
first respondent-Company sought execution of sale deed in their favour by the
appellants directly. But the appellants had suggested that they would refund the
security deposit only upon the first respondent-Company finding the tenants for
the appellants' portion. This was not accepted by the first respondent-Company.
It was further specifically stated that the additional works were also under way.
However, such works were not within the scope of the JDA and hence, they did
not require further discussion.
(k) While so, vide letter dated 20.10.2008, the first respondent-Company
addressed the appellants informing them that the building was complete and
ready and fit for occupation. As contemplated under Clause 6 of the JDA, the
Certificate of the Project Architect and a copy of its application to the CMDA for
Completion Certificate were enclosed with such documents. The appellants were
also called upon to duly refund the security deposit and take possession of their
share of the superstructure. It was categorically stated in the said letter that
date of delivery shall be reckoned as the handing over date. Out of the entire
sum of Rs.6.82 crores of security deposit, a sum of Rs.1 crore had already been
refunded by the appellants from and out of the advance paid by the tenant
identified by the first respondent-Company. The balance Rs.5.82 crores was
demanded from the appellants. This amount was only in respect of the security
deposit and other charges and the expenses to be shared by the appellants.
(l) While so, to the first respondent-Company's letter dated 20.10.2008,
the first appellant, on behalf of all the appellants, addressed a reply, dated
28.10.2008 and through this letter, the appellant(s) refused to consider
"20.10.2008" as the handing over date and alleged that the building was not
complete in all respects. It was further contended that the Certificate of the
Architect was not in accordance with Clause 6 of the JDA, as it is mentioned that
the building would be fit for occupation only upon the electricity and sewerage
connection being obtained. Basing that as the reason, the appellants contended
that the Architect's Certificate could not be treated as certifying completion of
the building, as electricity, water and sewerage connections were yet to be
obtained. It was further alleged by the appellants that the obligation of the
Project Architect extended to obtaining Occupancy Certificate and that the
Project Architect was also obliged to certify that the first respondent-Company
had submitted all the relevant documents to the CMDA as per the rules and
regulations. It is the further case of the appellants that "20.10.2008" could not
be deemed as the handing over date and called upon the first respondent-
Company to withdraw the letter. However, it was unequivocally admitted by the
appellant that they were holding a sum of Rs.5.82 crores re-payable to the first
respondent-Company by the appellants.
(m) Shocked by the letter of the appellants, dated 28.10.2008, the first
respondent-Company addressed a reply, dated 05.11.2008 and it was reiterated
that the building was complete in all respects and ready and fit for occupation.
While so, by letter dated 13.11.2008, the appellants addressed the Project
Architect accusing the Architect of ineptness and lack of interest towards the
project. Several rounds of discussions and meetings took place between the
appellants and the first respondent-Company, and it became obvious and
apparent that the appellants had no intention to return the money re-payable to
the first respondent-Company. Besides that, the appellants had also engaged
themselves in a private dialogue with the Escrow Agent and several
communications were exchanged between the appellants and the HDFC being
the Escrow Agent. According to the first respondent-Company, the Escrow Agent,
instead of acting as a Trustee of the interest of both the parties, had taken sides
with the appellants. In the meanwhile, on 26.11.2008, the first respondent-
Company addressed the appellants enclosing a Statement of Accounts showing
the amounts due to the first respondent-Company from the appellants. The first
respondent-Company had incurred heavy expenses and requested the appellants
once again to refund the dues to them. By then, the Completion Certificate was
also received from the CMDA. The appellants returned a further sum of Rs.1
crore to the first respondent-Company on 01.12.2008, reducing the balance of
security deposit to Rs.4.82 crores.
(n) Thereafter, meetings were held between the parties and notices were
also exchanged between them. While so, the appellants had moved this Court
under Section 9 of the Arbitration and Conciliation Act and filed O.A.Nos.201 and
202 of 2009 and A.Nos.1143 to 1145 of 2009, praying for the following reliefs:
(i) interim injunction restraining the first
respondent-Company from leasing out any portion of
the property belonging to them;
(ii) restraining HDFC from releasing the original
Power of Attorney;
(iii) restraining HDFC not to sanction any loans
to the first respondent-Company against security of
the rent payable in respect of the portions of the
(iv) interim injunction restraining the first
respondent-Company from interfering with the
appellants' rights who have joint possession of the
constructed portion of the building, and
(v) interim injunction restraining the
registration of the balance 5400 Sq.Ft. undivided
share in favour of the first respondent-Company.
Except A.No.202 of 2009, all the other applications were dismissed on merits by
this Court on 21.04.2009 and in respect of A.No.202 of 2009 regarding the joint
possession, the first respondent-Company had undertaken not to disturb or
interfere with such joint possession and hence, the said application alone stood
allowed. According to the first respondent-Company, the appellants had not
exercised their right to nominate an Arbitrator and hence, the first respondent-
Company moved this Court under Section 11 of the Arbitration and Conciliation
Act. In the meantime, the appellants had filed C.S.No.279 of 2009 praying for
permanent injunction restraining the Sub-Registrar, Mylapore from registering
the sale deed presented by the first respondent-Company in respect of
5400 Sq.Ft. undivided share over the said property; permanent injunction
restraining the Sub-Registrar, Mylapore from registering lease deed or document
or instrument presented by the first respondent in respect of the second, third,
fourth, fifth and half of the tenth floor of the building "Menon Eternity" and for
mandatory injunction directing the Sub-Registrar, Mylapore to initiate action
against the first respondent-Company and its officials under Section 83 of the
Indian Registration Act. The said application was dismissed on merits, and
pending the said suit, the appellants had taken out interim applications.
(o) The appellants preferred Original Side Appeal (O.S.A) against the order
of the learned Single Judge. However, no interim order had been granted in
favour of the appellants. The appellants sought for appointment of an Advocate
Commissioner to inspect the building which is constructed by the first
respondent-Company, pursuant to which, an Advocate Commissioner was
appointed, who had inspected the premises in the presence of the
representatives of the first respondent-Company and the appellants and also
their respective counsels. The Advocate Commissioner filed report mentioning
the defects pointed out by the appellants' representative and remained silent on
the explanation given by the first respondent-Company's representative. The
grouting process that had already been done and the explanation given by the
first respondent-Company, were also not noted by the Advocate Commissioner.
The Advocate Commissioner, besides the dampness in the basement electrical
room, also mentioned in his report about the patch work in the stair-ways and
tiles being chiselled in the wash rooms. The Advocate Commissioner had also
pointed out certain inconspicuous flaw in the seventh floor of the premises,
which the first respondent-Company had duly set right and pursuant to the
grouting process, the dampness had also been set right. These defects cannot be
cited to hold that the building is not fit for occupation.
(p) According to the first respondent-Company, Clause 46 of the JDA provides that they shall rectify the structural defects, if any, in the building. The first respondent-Company shall be obliged to do so for a period of one year from the date of handing over of the possession. It is evident from the said Clause that completion of the building and handing over of the possession of the completed building, was clearly understood to be different from structural defects. The first respondent-Company had specifically undertaken to set right the defects, if any and being the owner of 50% share in the property, the first respondent-Company is equally interested in protecting and maintaining the property in the best possible state and condition. According to the first respondent-Company, as a direct consequence of the appellants' failure to refund the first respondent-Company's security deposit and on their failing to pay the expenses incurred with respect to statutory charges, the first respondent- Company suffered severe loss.
(3.) In the above background, the parties proceeded to have their disputes
adjudicated upon by an Arbitrator appointed by this Court. Since the appellants
did not appoint their nominee in terms of the arbitration agreement, the first
respondent-Company approached this Court by filing a petition under Section 11
of the Arbitration and Conciliation Act, 1996, which was numbered as O.P.No.137
of 2009 and this Court passed an order appointing the first respondent-
Company's nominee as an Arbitrator.;