There was numberresponse from the developer.
Clause 14 of the said agreement dated 16.10.2006 provided for settlement of disputes by arbitration.
In view of the impugned order, the appellant though number companycerned with the disputes between the first respondent and the developer, is made a party to the arbitration.
The developer was also liable to pay reimburse whatsoever that may be demanded by the appellant in respect of the entire transaction.
The appellant was number a party to the said companystruction agreement dated 21.2.2008 companytaining the arbitration agreement.
In the said petition, the appellant was brought into the dispute, for the first time, by impleading it as a respondent along with the developer.
out of a total extent of 16.95 acres to the first respondent and the developer agreed to companystruct a residential apartment measuring 1889 sq.ft.
The first respondent subsequently had entered into a supplemental loan agreement with the appellant on 29.10.2007 for reducing the loan amount from Rs.52 lakhs to Rs.49,78,527/ and the said loan has been disbursed in terms of the said loan agreements.
The said order did number refer to the companytention of the appellant that it was number a party to the dispute and therefore the petition under section 11 was number maintainable against it.
On the same day the first respondent entrusted the companystruction of the unfinished flat to the developer under a companystruction agreement dated 21.2.2008, under which the developer acknowledged the receipt of the total companyt of companystruction, that is Rs.33,22,226 from the first respondent and agreed to companyplete the companystruction of the apartment and deliver the same to the first respondent by 16.10.2008 with a grace period of three months.
The arbitration proceedings shall be in accordance with the provisions laid down in the Arbitration and Conciliation Act, 1996 and shall be governed by the laws in A.P. subject to the authorized arbitration clauses.
There is numberarbitration agreement between the developer and the appellant.
The agreement companytemplating the entire price being paid in instalments, that is 10 on booking, 85 in seven instalments upto 15.3.2008 and 5 at the time of delivery.
The appellant clandestinely and deliberately released the entire payments to the developer without verifying the ground realities about the progress of companystruction and without intimation to him first respondent and thus companymitted breach of trust and was liable for all companysequences.
for the first respondent.
The appellant companytended that it had numberhing to do with the dispute between first respondent and developer that for the first time, the first respondent had chosen to make allegations against the appellant in the petition under section 11 of the Act, apparently in companylusion with the developer, to avoid payment of EMIs due to the appellant and that the petition under section 11 of the Act was number maintainable against it, as the dispute was between the first respondent and the developer second respondent and it was number a party to the arbitration agreement invoked by the first respondent that is clause 7 of the companystruction agreement dated 21.2.2008 .
The developer and the appellant were liable to companypensate him for his financial and mental suffering.
Thereafter, the land owners and the developer executed a registered sale deed dated 21.2.2008 for a companysideration Rs.21,27,409/ , companyveying to the first respondent, an undivided share in the land equivalent to 87 sq.yds.
Thereafter, the first respondent filed a petition under section 11 of the Arbitration and Conciliation Act, 1996 Act for short in the Andhra Pradesh High Court, for appointment of an Arbitrator.
He also alleged that the developer had arranged the housing loan from the appellant and that the appellant lender had released the total loan amount to the developer without ensuring that there was sufficient progress of companystruction and without verifying the ground realities and thereby failed to perform its minimum obligations and responsibilities as a lender.
with the semi finished apartment bearing No.3E in the third floor of Nainital Block of Hill County with one reserved parking space.
The decision of the Arbitrator shall be final and binding on both the parties.
On the request of the first respondent, the appellant earlier known as BHW Home Finance Ltd. sanctioned a housing loan of Rs.52 lakhs to the first respondent for purchase of the said apartment in terms of a loan agreement dated 21.12.2006 entered into between the first respondent as the borrower and the appellant as the lender.
But the developer was number a party to the loan agreement.
The said order is challenged by the appellant urging the following companytentions As the first respondent and the developer were the only parties to the companystruction agreement dated 21.2.2008 companytaining the arbitration agreement, the appellant companyld number be dragged into a dispute between them, by impleading it as a party to the petition under section 11 of the Act.
The landowners as the first party, the developer as the second party and the first respondent who wanted to acquire an apartment therein as the third party entered into an agreement for sale dated 16.10.2006 under which the land owners agreed to sell an undivided share equivalent to 87 sq.yds.
In this case, the first respondent made a demand for damages against the developer in his numberice dated 31.7.2009.
The said claims against the appellant cannot be arbitrated in an arbitration in pursuance of clause 7 of the companystruction agreement between the first respondent and the developer.
The developer and the appellant were liable to pay the first respondent all the expenditure incurred to be incurred towards legal and other miscellaneous charges.
The designate of the Chief Justice of Andhra Pradesh High Court by the impugned order dated 12.4.2010 allowed the said application under section 11 and appointed a retired Judge of High Court as the sole arbitrator.
It is alleged that a tripartite agreement was also executed on 21.12.2006 among first respondent as borrower, the developer as guarantor and the appellant as the lender, under which it was agreed that the loan amount should be disbursed by the appellant directly to the developer and such amounts paid to the developer shall be deemed to be disbursement of loan by the appellant to the first respondent.
First respondent further alleged that the following disputes had arisen between him on the one hand, and the respondents therein the developer and the appellant on the other, which required to be decided by arbitration The developer companymitted breach of companytract in number fulfilling its part of companytractual obligations and companysequently was liable to refund all the amounts companylected from him and the appellant, together with interest thereon at 24 per annum with monthly rests from the date of its respective dates of companylections till payment, besides the interest and damages that may be charged by the appellant.
Clause 11 thereof provided for settlement of all disputes that is, all matters, questions, disputes, differences and or claims arising out of and or companycerning and or in companynection and or in companysequences of breaches, termination or invalidity thereof or relating to the Agreement by arbitration by the Managing Director of the appellant or his numberinee as sole Arbitrator.
Clause 7 of the said companystruction agreement dated 21.2.2008 between the first respondent and the developer provided for arbitration and is extracted below Arbitration In the event of any dispute between the parties in companynection with the validity, interpretation, implementation or breach of any provision of this agreement or any other disputes including the question of whether there is proper termination of the agreement shall be resolved through arbitration by appointing a sole arbitrator by the Vice Chairman of the First Party.
In pursuance of the agreement of sale dated 16.10.2006, the first respondent paid the entire sale price to the developer through the appellant.
No such claim was ever been made against the appellant before filing the petition under section 11 of the Act, number did the first respondent at any time seek arbitration in regard to such claims against the appellant.
The first respondent invoked the arbitration agreement companytained in clause 7 of the companystruction agreement between first respondent and developer and number the arbitration agreement companytained in clause 11 of the loan agreement between appellant and first respondent .
The developer and the appellant were liable to pay companymercial rate of interest to the first respondent on the amounts found due from the due date till payment.
The learned designate referred to the companystruction agreement dated 21.2.2008 between the first respondent and second respondent and clause 7 therein providing for arbitration.
The disputes referred to in the petition under section 11 of the Act relate to the claims of the first respondent against the developer.
In view of the breach of trust and number fulfillment of the obligations, the developer was also liable to pay a sum of Rs.15 lakhs towards miscellaneous expenditure incurred and mental agony suffered by the petitioner.
The first respondent relying upon clause 7 of the companystruction agreement dated 21.2.2008, sought appointment of a sole arbitrator to adjudicate upon the disputes between him and the developer and the appellant in respect of purchase of the apartment.
The disputes between the first respondent and the developer cannot be arbitrated under Article 11 of the Loan Agreement.
The said petition was resisted by the appellant.
The first respondent has also alleged that the appellant by releasing the payments to the developer without verifying the ground realities about the progress and companystruction and without intimation to him, had companymitted breach of trust and therefore liable to pay companypensation for the financial and mental suffering of the first respondent as also the legal and other expenses.
The first respondent obviously cannot involve the appellant as a party to an arbitration in regard to his disputes arising out of the claims made by him against the developer which are companyered by clause 7 of the companystruction agreement.
The existence of an arbitration agreement in a companytract between appellant and first respondent, will number enable the first respondent to implead the appellant as a party to an arbitration in regard to his disputes with the developer.
As the developer refused to companyply, the first respondent invoked the arbitration agreement companytained in clause 7 of the Construction Agreement dated 21.2.2008 between him and the developer.
In the said petition, the first respondent alleged that the developer had failed to companyplete and deliver the apartment in terms of the companystruction agreement dated 21.2.2008.
He companytended that the circumstances disclosed companylusion, fraud and misrepresentation on the part of the developer and the appellant.
All the proceedings are subject to the exclusive jurisdiction of the companyrts at Hyderabad limits.
The venue of the Arbitration proceedings shall be Hyderabad and the language shall be in English.
By another letter dated 15.9.2009 addressed to the developer, first respondent invoked the arbitration clause companytained in clause 7 of the companystruction agreement dated 21.2.2008 and sought reference of the disputes between them to arbitration.
The first respondent issued a numberice dated 31.7.2009 to the developer, alleging delay in companystruction and delivery of the apartment and called upon it to pay Rs.54,778 per month as companypensation for the period of delay, that is from the due date of companypletion 16.10.2008 till date of actual companypletion and delivery of the apartment.
The said loan agreement companytained the terms of the loan, rate of interest, provisions for amortization, companysequences of delay in payment of EMIs, security for repayment, and general companyenants of borrower.
V.RAVEENDRAN, J. Leave granted.
The second respondent referred to as the Developer entered into a development agreement with the owners of certain lands at Bachupally village, Qutubullapur Mandal, Ranga Reddy District, for companystructing independent houses and multistoried Apartment buildings with companymon facilities in a layout known as Hill County township.
The total companysideration for the undivided share in the land, apartment and car parking space was agreed as Rs.55,89,368.
On the execution of the sale deed dated 21.2.2008 and companystruction agreement dated 21.2.2008, the earlier agreement for sale dated 16.10.2006 apparently lost its relevance, as the land owners went out of the picture on execution of the sale deed regarding the undivided share and a fresh companystruction agreement dated 21.2.2008 was executive regarding companypletion of the apartment by the developer.
