It is sought to be argued on behalf of the petitioner that, issuance of No-Objection Certificate, as well as, the transaction of sale between the petitioner and M/s. Raheja Universal has no bearing on the arbitration agreement. The argument needs outright rejection. Grant of No-Objection Certificate by KDMC for sale of the property by the petitioner, is directly connected to the dispute to be referred for arbitration. The need for No-Objection Certificate arose solely on account of the dispute. Besides, acceptance of such an argument would mean, reading Clause-6 in isolation, which cannot be done. The agreement needs to be read as a whole. On reading it as a whole, it becomes apparent that but for the deposit of the entire tax dues in Escrow Account, KDMC would not have agreed either for issuance of No-Objection Certificate or for reference of the dispute to arbitration. The trial Court in it's order has noted the word "further" used in Clause-6 of the agreement and opined that, use of the word would mean that the clause is to be resorted to after compliance of the earlier clauses. In that case, deposit of the amount in Escrow Account becomes a condition precedent.{Para 25}
26. Thus, the Courts below are correct in their conclusion that, deposit of the amount in Escrow Account was condition precedent to the arbitration agreement. In the circumstance, unless the condition is fulfilled, the arbitration agreement does not get activated and come into existence. A mere writing on a piece of paper with signature of the parties by itself cannot mean existence of an agreement. What is material, is the intention of the parties in executing the document.
27. Both the Courts below have also held that, the application for reference to arbitration is nothing but an attempt to protract the hearing of the appeals. It is nobody's case that the appeals have remained pending on account of procedural delay. The Court, as well as, KDMC are ready and anxious for taking up the appeals for hearing. But, there was clear reluctance on the part of the petitioner in prosecuting the appeals. After obtaining concession from the Apex Court in November, 2006 the petitioner has not taken any step to lead evidence of it's valuer. Today, it is 18 years since the filing of the first appeal by the petitioner and 10 years since the filing of the last appeal. It would also be relevant to note here that, the petitioner had initially filed Writ Petition to challenge the demand for taxes when the petitions were patently not maintainable. Had the petitioner on due adjudication of the dispute discharged it's tax liability, a substantial amount would have been available to KDMC for utilisation for public purposes. On account of the mischievous and dishonest conduct on the part of the petitioner, the public body has been deprived of it's legitimate funds from the year 1996 till date.
28. For all the above reasons, the petitions are dismissed with costs.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.P. SONDURBALDOTA, J.
NRC Limited Vs. Kalyan Dombivli Municipal Corporation & Anr.
Writ Petition No.2587 of 2014,Writ Petition Nos.2567-2573 of 2014
4th August, 2014
Citation: 2014(6) ALL MR 318
JUDGMENT :- This is a common order on the above Writ Petitions between the same parties and having identical subject matter.
2. The petitioner, a Company incorporated under the Companies Act is the owner of a large property at Kalyan. Respondent no.1, Kalyan Dombivli Municipal Corporation ("KDMC" for short) issued bills to the petitioner during the period 1996 to 2004 for the property taxes. Being aggrieved by the rateable value fixed of the properties and the tax charged thereon, the petitioner filed eight appeals under Section 406 of the Bombay Provincial Municipal Corporation Act, 1949 ("BPMC Act" for short) in the Court of Civil Judge, Senior Division, Kalyan ("CJSD" for short). The details of the appeals are tabulated below :-
| Municipal Appeal No. | Amount (Rs.) | Bill No. |
| 52/96 | 1,20,44,430.00 | 33602 |
| 18/97 | 2,31,98,033.5o | 33628 |
| 19/98 | 3,41,45,421.5o | 5201 |
| 09/99 | 4,28,93,736.5o | o10301 |
| 04/01 | 5,15,74,599.5o | 205 |
| 33/01 | 6,23,37,714.00 | 54335 |
| 23/02 | 7,31,00,828.00 | 61054 |
| 20/04 | 7,82,27,274.00 | 6713 |
3. The petitioner had earlier filed Writ Petitions in this Court to challenge the demand notices issued to them on the basis of the rateable value fixed. Those petitions were dismissed by this Court in view of alternate remedy available to the petitioner by way of an appeal under Section 406 of the BPMC Act. The petitioner carried the order to the Apex Court in S.L.P. No. 14419 of 2006. By the order dated 13th November, 2006, while disposing off the S.L.P., the Apex Court took note of the appeals under Section 406 of the BPMC Act, that had been already filed by the petitioner and the fact that at no point of time, the petitioner had led evidence of an expert valuer on the question of fixation of rateable value. The Apex Court as a matter of indulgence and particularly in view of the fact that the petitioner was earlier under BIFR directed the appellate Court to allow the petitioner to lead evidence on valuation of the property. The indulgence shown was subject to a condition that the petitioner first pays, under protest, Rs.4,50,00,000/-, less the amount of Rs.77,58,000/- which amount had already been paid to the Corporation, within a period of 8 weeks.
4. Pursuant to the direction of the Apex Court, the petitioner paid, under protest, amount of Rs.4,50,00,000/- to KDMC. But thereafter, instead of leading the evidence of an expert valuer on the question of rateable value as permitted by the Apex Court, the petitioner executed agreement dated 1st March, 2007 and supplementary agreement dated 29th September, 2007 with one M/s. K. Raheja Universal for sale of 339.40 Acres, out of the total area of 442.55 acres of the land in question and applied to KDMC for grant of a "No-Objection Certificate" for transfer of the land, free from liability of all municipal taxes upto the date of sale. Since KDMC was not willing to give the "No-Objection Certificate" as desired by the petitioner, meetings had been held with the Hon'ble Deputy Chief Minister of Maharashtra and Hon'ble Labour Minister. During the meetings, the Company's representative, representative of the Union, Principal Secretary of Labour Department, the Commissioner, KDMC and Tax Assessment Collector of KDMC were present. Pursuant to the decision taken in the meetings, agreement dated 22nd April, 2009 was executed by the petitioner and KDMC. Under the agreement, the petitioner agreed to deposit a sum of Rs.6,68,76,000/- in Escrow Account with any Scheduled/Nationalised bank. The Escrow amount was to remain with the Escrow agent until the decision in the dispute as regards the taxes and then payment made in accordance with the decision. The petitioner and KDMC further agreed that the dispute relating to rateable value and tax charged by KDMC upto the date of sale shall be referred to arbitration as provided under Section 408 of BPMC Act. Both were to make separate applications giving their consent to the arbitration to the Court of CJSD, Kalyan where the appeals are pending for referring the dispute to the arbitration by a retired Judge of the High Court of the Supreme Court as mutually agreed upon.
5. Without depositing the amount in the Escrow Account, the petitioner, by its letter dated 6th October, 2009 requested Justice A.P. Agiar (Retired) for acting as a sole arbitrator for adjudication of the dispute relating to the rateable value. By the letter dated 8th October, 2009 Justice Agiar (Retired) gave his acceptance. KDMC also by its letter dated 25th November, 2009 made a similar request to Justice Agiar (Retired). Then, on 13th July, 2010, a common application was filed before the Court of CJSD under Section 408 of BPMC Act for referring the dispute for arbitration. The application was, however, subsequently opposed by KDMC, contending that, the petitioner had committed breach of the terms and conditions of agreement by not depositing the amount of Rs.6,68,76,000/- in the Escrow Account. KDMC also contended that the agreement dated 22nd April, 2009 was not in accordance with Chapter-5 of BPMC Act, in as much as, there was no approval of the Standing Committee for execution of the agreement. The Court of CJSD, Kalyan by its order dated 18th January, 2012 dismissed the application.
6. Being aggrieved by the order of CJSD, Kalyan, the petitioner preferred Appeal under Section 411 BPMC Act to the District Court, Kalyan being Civil Appeal No. 35 of 2012. By way of an interim order, it had applied for stay of the proceedings before CJSD, Kalyan. The District Court, by it's order dated 12th February, 2013 rejected the application. The order of rejection was then carried by the petitioner to this Court by preferring Writ Petition No. 9122 of 2013. This Court by the order dated 12th November, 2013, declined to interfere with the order of the lower appellate Court, holding that the view taken by the District Court was a correct view. It, however, expedited the hearing of the appeals with a direction that the same be disposed off by 21st January, 2014.
7. Pursuant to the direction of expeditious hearing, the appeal preferred by the petitioner was heard by the District Court and dismissed by it's order dated 28th January, 2014. The District Court upheld the findings of the Court of CJSD, Kalyan in it's order dated 18th January, 2012. Being aggrieved by that order, the petitioner has approached this Court.
8. The Court of CJSD, Kalyan for dismissing the application under Section 408 of BPMC Act filed by the petitioner, noted that the petitioner had despite directions from the Apex Court, failed to lead evidence in the appeals. Instead, it entered into an agreement with the third party for sale of a large portion of the land and by executing the agreement dated 22nd April, 2009 , it tied up the issue of recovery of taxes from the petitioner to the sale transaction with a third party. The Court of CJSD also noted that there is nothing on record to show that Standing Committee had given consent to the agreement or that the agreement was entered into in compliance of the provisions of Chapter V of BPMC Act. The next shortcoming noted by the Court of CJSD was of the failure on the part of the petitioner to deposit the amount of Rs.6,68,76,000/- in Escrow Account. It further opined that, execution of the agreement dated 22nd April, 2009 was in fact a way found out by the petitioners to prolong the matter.
9. In its appeal before the District Court filed under Section 411 of BPMC Act, the petitioner contended that once there was an agreement entered into by the parties to refer the dispute for arbitration, it was not open for any party to resile from the agreement. Further, the mandate of Section 408 of BPMC Act and of Section 8 of the Arbitration and Conciliation Act ("Arbitration Act" for short), is such that the Court is bound to refer the matter for arbitration. It was also contended that, opening an Escrow Account and deposit of amount therein has no bearing with the issue of referring the matter to the Arbitrator. Besides, both the parties had already acted upon the agreement by approaching the sole arbitrator and obtaining his consent.
10. The KDMC, on the other hand, argued before the District Court that deposit of the amount in Escrow Account was a condition precedent to refer the matter for arbitration and in view of non-compliance with the condition, there could be no reference to the arbitration. According to it, the agreement dated 22nd April, 2009 is null and void as there is no approval of Standing Committee or Government to the agreement. The dispute as regards the rateable value of the property had already been carried upto the Apex Court and the Apex Court had directed the petitioner to lead evidence in the appeals by examining it's valuer. But, the petitioner with a view to delay the decisions in the appeals filed the application. One more argument advanced by KDMC before the District Court was that, KDMC was tricked into executing the agreement dated 22nd April, 2009 by the petitioner. It had made a false representation that it would deposit the amount of property taxes of Rs.6,68,76,000/- in an Escrow Account and obtained "No Objection Certificate" for sale of it's property to M/s. K. Raheja Universal. The KDMC believed in the promise given by the petitioner and the promise was not kept. Thus, it played fraud upon KDMC and has been abusing the process of law.
11. The District Court rejected the argument of KDMC on the validity of the agreement. However, on appreciation of the agreement, it found that two of the material clauses i.e. Clause-1 and 2 were contrary to each other and that deposit in Escrow Account is the condition precedent to refer the matter for arbitration. It concluded that, for non-compliance with the condition precedent, the matter cannot be referred to arbitration.
12. The principle grounds of challenge to the orders of the Courts below as set out in the petition are that, in view of Section 8 of the Arbitration Act and Section 408 of the BPMC Act, the Courts below ought to have referred the dispute to arbitration instead of making the parties to face rigmaroles of litigation. Further, Section 16 of the Arbitration Act provides that objections as regards the validity of the arbitration agreement can be gone into and dealt with by the Arbitral Tribunal. Hence, the Courts below could not have usurped the jurisdiction of the Arbitrator to interprete clauses of the agreement. They also erred in holding that, there was a condition precedent for invoking the arbitration clause and the petitioner has committed breach of that condition. According to the petitioner, the sale of land by the petitioner to Raheja Universal, as well as, Clauses-1 and 2 of the agreement have no bearing on the matter, with respect to rateable value and tax on the property in question, being referred to arbitration. The agreement also does not contain termination clause in case of breach of any of the stipulations of the agreement.
13. In the above factual background, the two questions that would arise for consideration of this Court are :-
(i). Whether in view of Section 8 of the Arbitration Act and Section 408 of the BPMC Act, mere existence of a clause for arbitration in an agreement, ipso-facto casts an obligation on the Court to refer the matter for arbitration, and
(ii) Whether deposit of Rs.6,68,76,000/- in Escrow Account by the petitioner is the condition precedent under the agreement for reference of the dispute to arbitration.
14. It would be convenient to reproduce Section 8 of the Arbitration Act and Section 408 of the BPMC Act for ready reference :
"8. Power to refer parties to arbitration where there is an arbitration agreement.-
(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
"408. Arbitration-
Where any appeal against the rateable value or tax fixed or charged under this Act is pending and all the parties interested agreed that any matter in difference between them shall be referred to arbitration, they may, at any time before a decision is given in such appeal, apply in writing to the judge for an order of reference on such matter and on such application being made the provisions of the Arbitration Act, 1940 (X of 1940), relating to arbitration in suits shall, so far as they can be made applicable apply to such application and proceedings to follow thereon, as if the said Judge were a Court within the meaning of that Act and the application were an application made in a suit."
15. There is no dispute as regards the execution of the agreement dated 22nd April, 2009 and Clause-6 therein for reference of the dispute relating to rateable value and tax charged by the Corporation on the properties in question to arbitration. The dispute raised by KDMC to the validity of the agreement has been laid to rest by the decision of he District Court on this aspect, which decision is not challenged by KDMC. Mr. Sawant, the learned Advocate appearing for the petitioner, submits that considering the language of Section 8 of the Arbitration Act and Section 408 of the BPMC Act with the use of the word "shall", there can be escape for KDMC from reference of the matter to arbitration. On the compulsive nature of the provisions, Mr. Sawant relies upon the decision of the Apex Court in National Insurance Company Limited Versus Boghara Polyfab Privated Limited, reported in (2009) 1 SCC page 267 : [2008 ALL SCR 2533] and in particular paras-21, 22 and 23 thereof.
16. The provisions referred to from the two statutes undoubtedly use the word "shall" for referring the parties to arbitration. However, that is preceded by the need of consideration of existence of an arbitration agreement. Both the provisions empower the Courts before whom the proceedings are pending, to refer the parties to arbitration, where there is an arbitration agreement. (emphasis supplied). Therefore, even if the document of agreement between the parties contains a clause for reference of the dispute to arbitration, the Court is required to first ascertain that there is an arbitration agreement in existence between the parties. This view is in fact supported by the decision cited by Mr. Sawant as can be seen hereinafter.
17. In the decision cited, the question of existence of an arbitration agreement arose for consideration of the Apex Court in the facts of discharge of the agreement by performance and satisfaction. The dispute before the Apex Court had arisen out of a contract of insurance, which contained a clause for arbitration. There was a settlement arrived at between the parties as regards the insurance claim and the insured had issued "discharge voucher-in-advance" acknowledging receipt of amount in full and final settlement of the insurance claim. The insured, however, subsequently raised a dispute as regards the settlement alleging that settlement had been arrived at under duress and coercion. It filed an application under Section 11 of the Arbitration Act in this Court. The application was opposed by the insurer with a contention that the insured could not invoke the arbitration clause in the agreement as the agreement stood discharged by accord and satisfaction. In the facts, the question framed by the Apex Court for its consideration was "In what circumstances, a Court will refuse to refer a dispute relating to quantum to arbitration, when the contract specifically provides for reference of the disputes and differences relating to quantum to arbitration?" For answering the question, Apex Court amongst several others referred to the decision of its seven Judges Bench in SBP and Co. V/s. Patel Engineering Ltd, reported in (2005) 8 SCC page 618 : [2006(1) ALL MR 156 (S.C.)], wherein the scope of Section 11 of the Arbitration Act, was considered and it was held that the scheme of Section 11 of the Act required the Chief Justice or his designate to decide whether there is an arbitration agreement in terms of Section 7 of the Act before exercising his power under Section 11(6) of the Act and its implications. The observations quoted from the decision of the seven judges Bench, which observations would be relevant for the present purposes also, read as follows :-
"39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense, whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the arbitral tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral tribunal."
"47. (iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators." (emphasis supplied)
18. In the case of SBP & Co., the Apex Court had also examined the competence of the Arbitral Tribunal to rule upon its own jurisdiction and about the existence of the arbitration clause when the Chief Justice or his designate had appointed an Arbitral Tribunal under Section 11 of the Act after deciding upon such jurisdictional issue. It was held that the decision of the Chief Justice on the issue of jurisdiction and existence of an valid arbitration agreement would be binding on the parties when the matter goes to Arbitral Tribunal. The further observations on the competence under Section 16 of the Arbitration Act quoted from SBP Co.'s case, read as follows :-
"20. Section 16 is said to be the recognition of the principle of Kompetenz - Kompetenz. The fact that the arbitral tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can and possibly, ought to decide them. This can happen when the parties have gone to the arbitral tribunal without recourse to Section 8 or 11 of the Act. But where the jurisdictional issues are decided under these Sections, before a reference is made, Section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it. That is the position arising out of Section 11(7) of the Act read with Section 16 thereof. The finality given to the order of the Chief Justice on the matters within his competence under Section 11 of the Act, are incapable of being reopened before the arbitral tribunal." (emphasis supplied)
19. On the basis of the observations in the decision in SBP and Co.'s case, [2006(1) ALL MR 156 (S.C.)] (supra), the Apex court in National Insurance's case, [2008 ALL SCR 2533] (supra), at para-21 concluded that, when a contract contains an arbitration clause and any dispute in respect of such contract is referred to arbitration, without intervention of the Court, the Arbitral Tribunal can decide upon the questions affecting its jurisdiction. But, when the intervention of the Court is sought for appointment of Arbitral Tribunal under Section 11 of the Arbitration Act, one of the preliminary issues that the Chief Justice or his designate is bound to decide is, whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. If the respondent, to the application contends that, the dispute is not arbitrable on account of discharge of a contract in a settlement agreement and the claimant contends that it was obtained by fraud, coercion or undue influence, the Chief Justice or his designate may decide the same, if necessary, by taking evidence. Alternatively, he may leave the issues open with a direction to the Arbitral Tribunal to decide the same. Thus the issue can be decided by the Arbitral Tribunal only if the Chief Justice/designate leaves the question to be decided by the Arbitral Tribunal and gives directions in the regards.
20. The Apex Court has thus drawn distinction between reference to arbitration of dispute without intervention of the Court and the reference to arbitration with recourse to Section 11 of the Arbitration Act. Where the reference is made without intervention of the Court, the Arbitral Tribunal can decide the question affecting it's jurisdiction, one of which is the existence and validity of the arbitration agreement. But, where the intervention of the Court is sought for the purpose, the Court has the discretion to decide the preliminary issue of existence and validity of the arbitration agreement. The same principle will have to apply to an application for reference to arbitration made under Section 8 of the Arbitration Act. Infact, this has been so recognised by the Apex Court in SBP & Co.'s case at para-20 of the decision quoted above. Therefore existence of an arbitration clause in an agreement, ipso-facto is not a compelling factor for reference to arbitration. Having said so, it is to be seen whether there exists an arbitration agreement between the parties in the facts and circumstances of the case.
21. For that purpose, a brief reference to the background of the agreement dated 22nd April, 2009, even at the cost of repetition is required to be noted. KDMC has issued eight bills to the petitioner during the period 1996 to 2004 towards the taxes in respect of the property in question. The total tax dues payable as on the date of the agreement apparently were of Rs.6,68,76,000/-. It has attempted to challenge the bills by invoking the extra-ordinary jurisdiction of this Court. But that attempt had failed. The Apex Court had by way of sheer indulgence permitted the petitioner to lead evidence in the appeals that were already filed. The order of the Apex Court was passed on 23rd November, 2006. The petitioner did not take any step to lead evidence in the appeal proceedings. It instead utilised the time to sell a large chunk of the property in question to a third party. That sale would not have come through without the consent of KDMC in view of huge arrears of tax dues and the litigation pending relating thereto. The petitioner needed "No Objection Certificate" from KDMC for sale of the land free from liability of all municipal taxes upto the date of sale. It then sought political intervention by involving two ministers of the State Government, as also, the Secretary to the Government. Only thereafter, the agreement dated 22nd April, 2009 came to be executed.
22. The resort to political intervention in respect of the private sale is an admitted fact having been mentioned in the recital to the agreement. It is obvious that, KDMC agreed to give "No Objection Certificate" only because of the promise from the petitioner to deposit the entire tax dues in a Escrow Account. The petitioner has resiled from the agreement by not depositing the amount.
23. The three material clauses from the agreement dated 22nd April, 2009 i.e. clauses-1, 2 and 6 (the arbitration clause) read as follows :-
"1. The Corporation shall issue No Objection Certificate to the company for sale of Saleable land admeasuring 339.40 acres as per Annexure "B" stating that the purchaser shall be liable for the municipal taxes charged by the Corporation including Open land tax only from the date of conveyance irrespective of tax dispute of the said land between KDMC and NRC Limited, provided that the Company deposit an amount of Rs.6,68,76,000/- in the Escrow Account in accordance with para 2 of the agreement. The said No Objection Certificate shall be issued within 7 days from the date of Execution of this agreement as per draft given in Annexure "D" annexed hereto."
"2. It is agreed that the agreement for sale dtd. 1/3/2007 and supplementary agreement dtd 29/9/2007 between NRC Limited & M/s. K. Raheja Universal has already been executed and conveyance deed in pursuance thereto shall be executed after NOC from the Corporation. As per the said agreement, two installments are already released by M/s. K. Raheja Universal and the third installment is due after getting NOC from the Corporation and completing the formalities of fencing vacant possession of non-colony land and execution of conveyance. The company shall within four months from the date of receipt of the third installment, deposit an amount of Rs.6,68,76,000/- in the Escrow Account to be open in any Scheduled/Nationalised bank (hereinafter called the "Escrow Agent") to be appointed jointly with the approval and consent of both the parties. The amount deposited in the Escrow Account shall be invested by the Escrow Agent from time to time at the instructions of both parties in Fixed Deposit with any Scheduled/Nationalised banks. Both parties agree that a separate tripartite agreement shall be executed between the Corporation, the Company and the Escrow Agent for opening an Escrow Account in terms of this agreement."
6). The company and corporation further agrees that the dispute relating to the rateable value and tax charged by the corporation on open land of the company upto the date of sale shall be referred to the arbitration as provided under Section 408 of Bombay Provincial Municipal Corporation Act, 1949. It is further agreed between the parties that the company and the Corporation shall make separate applications, giving their consents to the arbitration, as required under Section 408 under BPMC Act, 1949, to the Court of CJSD, Kalyan under various petitions, as per details in annexure "C" to this agreement within fifteen days from the date of this agreement. A retired Judge of High Court or Supreme Court as mutually agreed by the company and the corporation shall be appointed as Arbitrator. The Arbitrator shall be appointed within thirty days from date the Court give consent for appointment of arbitrator. The expenses towards arbitration shall be borne by the NRC Ltd."
24. Careful reading of Clauses-1 and 2 above, exposes the mischief played by the petitioner. Under Clause-1, KDMC is to issue "No-Objection Certificate" on condition that the petitioner deposits the amount of Rs.6,68,76,000/- in Escrow Account and "No-Objection Certificate" was to be issued within 7 days from the date of the agreement. For this to happen, the petitioner had to deposit the amount within 7 days from the date of the agreement. But the very next clause, sets the condition at naught, by recording one of the terms of the agreement between the petitioner and the purchaser of the property. Clause-2 records that, the purchaser had already released two installments of the consideration and that the third installment was to be paid after (i) getting "No Objection Certificate" from KDMC, (ii) completing fencing of the property and (iii) execution of conveyance. The clause further says that, the petitioner shall deposit amount in Escrow Account within FOUR MONTHS after the payment of the third installment. This would mean that, the petitioner agreed to deposit the amount on expiry of substantial period after completion of transaction of sale. In this way, the petitioner made the property unavailable to KDMC for recovery of it's tax dues. It would be pertinent to note at this stage, that caught in such situation, KDMC issued the "No-Objection Certificate" on the basis of which the petitioner has already received the third installment of consideration from the purchasers. When enquired about the deposit in the Escrow Account, Mr. Sawant, submits that the non-deposit would be one of the issues falling for consideration of the Arbitral Tribunal. Thus, the petitioner has merely derived the benefits from the agreement but resiled from the obligations. These undisputed facts establish the contention of KDMC that it was tricked into executing the agreement and the petitioner never intended to deposit the amount in the Escrow Account.
25. It is sought to be argued on behalf of the petitioner that, issuance of No-Objection Certificate, as well as, the transaction of sale between the petitioner and M/s. Raheja Universal has no bearing on the arbitration agreement. The argument needs outright rejection. Grant of No-Objection Certificate by KDMC for sale of the property by the petitioner, is directly connected to the dispute to be referred for arbitration. The need for No-Objection Certificate arose solely on account of the dispute. Besides, acceptance of such an argument would mean, reading Clause-6 in isolation, which cannot be done. The agreement needs to be read as a whole. On reading it as a whole, it becomes apparent that but for the deposit of the entire tax dues in Escrow Account, KDMC would not have agreed either for issuance of No-Objection Certificate or for reference of the dispute to arbitration. The trial Court in it's order has noted the word "further" used in Clause-6 of the agreement and opined that, use of the word would mean that the clause is to be resorted to after compliance of the earlier clauses. In that case, deposit of the amount in Escrow Account becomes a condition precedent.
26. Thus, the Courts below are correct in their conclusion that, deposit of the amount in Escrow Account was condition precedent to the arbitration agreement. In the circumstance, unless the condition is fulfilled, the arbitration agreement does not get activated and come into existence. A mere writing on a piece of paper with signature of the parties by itself cannot mean existence of an agreement. What is material, is the intention of the parties in executing the document.
27. Both the Courts below have also held that, the application for reference to arbitration is nothing but an attempt to protract the hearing of the appeals. It is nobody's case that the appeals have remained pending on account of procedural delay. The Court, as well as, KDMC are ready and anxious for taking up the appeals for hearing. But, there was clear reluctance on the part of the petitioner in prosecuting the appeals. After obtaining concession from the Apex Court in November, 2006 the petitioner has not taken any step to lead evidence of it's valuer. Today, it is 18 years since the filing of the first appeal by the petitioner and 10 years since the filing of the last appeal. It would also be relevant to note here that, the petitioner had initially filed Writ Petition to challenge the demand for taxes when the petitions were patently not maintainable. Had the petitioner on due adjudication of the dispute discharged it's tax liability, a substantial amount would have been available to KDMC for utilisation for public purposes. On account of the mischievous and dishonest conduct on the part of the petitioner, the public body has been deprived of it's legitimate funds from the year 1996 till date.
28. For all the above reasons, the petitions are dismissed with costs. The petitioner shall pay costs quantified at Rs.1,00,000/- (Rs. One Lakhs only) for each petition to respondent no.1, KDMC. The costs to be paid within a period of 2 weeks from today. If the costs are not paid within the time granted, the appeals filed by the petitioner in the Court of Civil Judge Senior Division, Kalyan shall stand dismissed without further reference to the Court. After payment of costs, the petitioner, if it so desires, is at liberty to deposit the amount of Rs.6,68,76,000/- (Rs. Six Crores Sixty Eight Lakhs and Seventy Six Thousand only) in Escrow Account within the same period of 2 weeks and renew it's application for reference to arbitration.
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