M/S H M CONSTRUCTIONS V. M/S CENTURY SILICON CITY

WP/21404/2019

AI Insights

The case involves M/s H M Constructions, a registered partnership firm, which entered into two Joint Development Agreements (JDAs) with M/s Century Silicon City. Disputes arose regarding the registration requirements of these agreements under the Registration Act, 1908. The Arbitral Tribunal, comprising three former judges, ruled that the JDAs were required to be registered, leading to the petitioner challenging this decision through writ petitions. The High Court of Karnataka dismissed these petitions, emphasizing the limited scope of judicial intervention in arbitral proceedings as per the Arbitration and Conciliation Act, 1996.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 670623 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 17-06-2019
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. Balbir Singh Maini, Rambhau Namdeo Gajre Vs. Narayan Bapuji Dhotra, Sushil Kumar Agarwal Vs. Meenakshi Sadhu and Others, Radiant Infosystems Limited Vs. The Karnataka State Road Transport Corporation Limited, SBP & Co. Vs. Patel Engineering Ltd. And Another
• Laws Referred To: Constitution of India, Registration Act, 1908, Transfer of Property Act, 1882, Arbitration and Conciliation Act, 1996
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K G RAGHAVAN
• Assessee Lawyers: UDAY HOLLA
• Keywords: Arbitral tribunal; Compulsory Registration; Joint Development Agreement; Maintainability of writ petition; Review of Arbitral Order
• Section: 37; 34; 53A; 226; 227; 17(1)(b)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF JUNE, 2019 :PRESENT: THE HON’BLE MR. JUSTICE L.NARAYANA SWAMY AND THE HON’BLE MR. JUSTICE R.DEVDAS WRIT PETITION NOs.21404-21405/2019 (GM-RES) BETWEEN M/S H M CONSTRUCTIONS A REGISTRED PARTNERSHIP FIRM NO.14, H M GENEVA HOUSE CUNNINGHAM ROAD BENGALURU 560052 REPRESENTED BY ITS PARTNERS A. MR H J SIWANI AGED ABOUT 58 YEARS, S/O LATE J K SIWANI B. MR M J SIWANI AGED ABOUT 56 YEARS, S/O LATE J K SIWANI ... PETITIONERS (BY SRI UDAY HOLLA, SENIOR COUNSEL FOR SRI ABHINAV R, ADVOCATE) AND M/S CENTURY SILICON CITY NO.10/1, LAKSHMINARAYANA COMPLEX GROUND FLOOR, PALACE ROAD BENGALURU-560052 REPRESENTED BY ITS PARTNER CENTURY REAL ESTATE HOLDINGS PRIVATE LIMITED REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE MR P ASHWIN PAI AGED ABOUT 39 YEARS, 2 S/O P SATISH PAI ... RESPONDENT (BY SRI K G RAGHAVAN, SENIOR COUNSEL FOR SRI G SRIDHAR, ADVOCATE) THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED DORDER DTD:18.12.2018 PASSED BY THE ARBITRAL TRIBUNAL COMPRISING OF JUSTICE.S.VEKATARAMAN, JUSTICE PATRI BASAVANNA GOUD AND JUSTICE V.JAGANNATHAN AT ANNEXURE-N AND DECLARE THE JOINT DEVELOPMENT AGREEMENTS IN GENERAL AND THE JOINT DEVELOPMENT AGREEMENT DTD:28.12.2004 AT ANNEXURE-A AND THE JOINT DEVELOPMENT AGREEMENT DTD:10.11.2011 AT ANNEXURE-C DO NOT REQUIRE REGISTRATION UNDER THE PROVISIONS OF THE REGISTRATION ACT, 1908 AND ETC. THESE WRIT PETITIONS HAVING BEEN HEARD AND RESERVED ON 12.06.2019 AND COMING ON FOR PRONOUNCEMENT OF ORDERS, THIS DAY, DEVDAS J., MADE THE FOLLOWING: ORDER The petitioner is before this Court assailing the order dated 18.12.2018 passed by the Arbitral Tribunal comprising three former Judges of this Court. 2. The petitioner entered into a Joint Development Agreement (hereinafter referred to as ‘JDA’ for short) with Sri H.Yeshwanth Shenoy and others on 28.12.2004, followed by a Power of Attorney being executed by the said Sri H.Yeshwanth Shenoy and 3 others, in favour of the petitioner herein, which is into the business of development and construction. On the same day one Sri P.Dayananda Pai, also executed a Power of Attorney in favour of the petitioner. The joint development was with respect to eight items of property as shown in the Schedule to the JDA. On 10.11.2011, a second JDA was executed by the respondent herein i.e., M/s.Century Silicon City along with a General Power of Attorney, in favour of the petitioner herein. The second JDA, it appears, was required in view of the owners of the property entering into a partnership with the respondent herein. Since dispute arose between the parties to the JDA, legal notice dated 24.10.2017 was issued by the respondent to the petitioner. The petitioner got a reply dated 27.11.2017 issued to the legal notice dated 24.10.2017. Subsequently, an Arbitral Tribunal was constituted comprising of three former Judges of this Court. The respondent herein is the claimant before the Arbitral Tribunal. Statement of 4 objections was filed by the petitioner herein, while a counter-claim was also raised. 3. The Arbitral Tribunal proceeded to frame points for determination on 24.10.2018. The learned Counsel for the respondent objected to the marking of the first and second JDA, on the ground that they were required to be compulsorily registered. Since the two documents were not registered and the authenticity of one of the documents was said to be questionable, the respondent raised an objection. At that stage, it was agreed by the parties that point No.2(b) which related to the question of non-registration of the two JDAs could be heard as a preliminary issue. After hearing the learned Counsels on either side, the Arbitral Tribunal passed an order dated 18.12.2018 holding that the two documents styled as ‘JDA dated 28.12.2004 and 10.11.2011 fall within the scope of Section 17(1)(b) of the Registration Act’ and as such, are required to be registered compulsorily. Thereafter, an application dated 12.02.2019 was made by the petitioner herein seeking 5 review of the order dated 18.12.2018. By order dated 16.04.2019, the Arbitral Tribunal held that the Arbitral Tribunal has no power to review the order passed by the Tribunal and even if there is any such power, no case is made out for review. 4. Sri Uday Holla, learned Senior Counsel, appearing for the petitioner submits that both the orders passed by the Arbitral Tribunal are contrary to established principles of law and therefore, both the orders are required to be set aside. In this regard, the learned Senior Counsel places reliance on a judgment of the Apex Court in the case of Commissioner of Income Tax Vs. Balbir Singh Maini reported in (2018) 12 SCC 354. Drawing the attention of this Court to paragraphs- 21 and 22, it is submitted that an agreement would require registration only if possession has been parted by the transferee as part performance of the contract, as provided in Section 53A of the Transfer of Property Act, 1882. Following the decision of the Apex Court in the case of Rambhau Namdeo Gajre Vs. Narayan Bapuji 6 Dhotra reported in (2004) 8 SCC 614, the Hon’ble Apex Court in the case of Balbir Singh Maini (supra) held that an agreement of sale which fulfilled the ingredients of Section 53A is required to be registered, if not, it shall not have any effect in law, other than being received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument. 5. Per contra, Sri K.G.Raghavan, learned Senior Counsel, appearing for the respondent would submit that the decision in Balbir Singh Maini (supra) was cited by the petitioner herein, before the Arbitral Tribunal also. The Arbitral Tribunal observed that the decision in Balbir Singh Maini is based upon Section 53A of the Transfer of Property Act, while Section 17 (1)(b) of the Registration Act has been pressed into service, by the respondent herein. It was also noticed that the provisions considered in Balbir Singh Maini are Section 53A of the Transfer of Property Act, Sections 17 (1-A) and 49 of the Registration Act. On the other hand, the 7 Tribunal has considered the relevant clauses of the JDAs on the aspect of ‘delivery of possession’ and thereafter held that Section 17(1)(b) of the Registration Act was attracted in the instant case and Section 17(1)(b) would provide that where the document purports or operates to create, whether in the present or in the future, any right, title or interest in the immovable property of value more than Rs.100/-, the law requires the documents of such nature to be registered. 6. Sri K.G.Raghavan, learned Senior Counsel places reliance on a decision of a co-ordinate Bench of this Court in the case of Radiant Infosystems Limited, rep. by its Authorized Representative and Senior Project Manager Vs. The Karnataka State Road Transport Corporation Limited, rep. by its Managing Director reported in (2018) SCC OnLine Kar 1209, to buttress his contention that a writ petition under Article 226 or 227 of the Constitution is not maintainable against interlocutary 8 orders passed by the Arbitrator, in the course of arbitration proceedings. 7. Notwithstanding the objection regarding maintainability of the writ petition, Sri K.G.Raghavan, learned Senior Counsel would also draw the attention of this Court to a latest decision of the Apex Court in the case of Sushil Kumar Agarwal Vs. Meenakshi Sadhu and Others reported in (2019) 2 SCC 241 wherein the nature and purport of ‘development agreement’ was considered elaborately. It is submitted that the Apex Court has held that development agreement which would provide for someone to carryout the work of construction on the property for monetary consideration could be termed as pure construction contract. On the other hand, under the agreement, if the owner grants rights to a third party to carry on development for a monetary consideration payable by the developer to the other, it was held that the owner may in effect create an interest in the property in favour of the developer for a monetary consideration. 9 8. Heard the learned Senior Counsels for the petitioner and the respondent and perused the writ papers. 9. Since the respondent has raised an objection regarding maintainability of the writ petition, it would be necessary to deal with the said contention. The co- ordinate Bench of this Court in the case of Radiant Infosystems (supra) has taken note of the decision of the constitution Bench of the Apex Court in the case of SBP & Co., Vs. Patel Engineering Ltd. And Another reported in (2005) 8 SCC 618. The Constitution Bench has observed that some of the High Courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, could be challenged under Article 226 or 227 of the Constitution. The Constitution Bench proceeded to hold that under Section 37 of the Arbitration and Conciliation Act, 1996, certain orders of the Arbitral Tribunal are appealable. Under Section 34, the aggrieved party has an avenue for ventilating its grievances against the award including any in-between orders that might have been passed by the Arbitral Tribunal acting under Section 16 of 10 the Act. It was held that the party aggrieved by an order of the Arbitral Tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. It was authoritatively concluded that once the matter reaches the Arbitral Tribunal or the sole Arbitrator, the High Court would not interfere with the orders of the Arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act. 10. In view of the above, the other decisions cited by the learned Senior Counsels need not be gone into. The question regarding power of review of the Arbitrator/Arbitral Tribunal also need not be gone into, in view of the authoritative decision of the Constitution Bench of the Apex Court in Patel Engineering (supra), wherein it has been held that the orders passed by the Arbitrator/Tribunal could be tested before the Court only in terms of Section 37 or Section 34 of the Act. For 11 the very same reason, this Court desists from entering into the merits of the case. 11. The petitions are accordingly dismissed as not maintainable, for the reasons stated hereinabove. Sd/- JUDGE Sd/- JUDGE JT/- "