M C ABDUL KHADER Vs. K MOIDU

JUDGEMENT

(1.) The prayer made in this application filed under Section 11(6) of the Arbitration & Conciliation Act, 1996, hereinafter referred to as 'Act of 1996', is for appointment of Arbitrator in the dispute between the petitioner and respondent. It has, inter alia, been pleaded in the application that the petitioner and respondent are businessmen. They entered into an agreement for sale of a plywood manufacturing unit called "Sulthan Veneer" including 33 cents of property for a sale consideration of Rs.58.50 lakhs. The terms and conditions were reduced into writing and signed by both parties. The property and unit were having a heavy financial liability towards Kerala Financial Corporation and the respondent represented to the petitioner that K.F.C. has agreed to settle the loan amount for an amount of Rs.38 lakhs. Believing the said representation of the respondent, petitioner paid an amount of Rs.5,00,000/- to the Corporation and took possession of the Unit. He is stated to have paid an amount of Rs.7,00,000/- to the respondent directly. So, altogether he had spent nearly Rs.15,00,000/- towards the maintenance of the Unit. Subsequently, it came to light that in fact the respondent was cheating the petitioner by representing that K.F.C. had agreed to settle the account for Rs.38 lakhs. The respondent never turned up to take any steps to settle the liability as agreed. It is gathered from the Corporation that they had not given any promise to settle it for Rs.38 lakhs. The respondent, in the meanwhile, came to the Unit and took possession of the Unit. In the agreement Annexure-I, there is an arbitration clause. Clause-9 pertaining to arbitration reads as follows:-

(2.) Pursuant to notice issued by this Court, respondent has entered appearance and contested the matter by filing a counter affidavit. It has inter alia been pleaded in the counter affidavit that the Arbitration Request is not maintainable. Even though the respondent had entered into an agreement with the petitioner on 10.1.2005 for the sale of the plywood manufacturing Unit including 33 cents of property belonging to the respondent, the possession of either the Unit or the landed property was never handed over to the petitioner. He denied the contention of the petitioner that the petitioner paid Rs.5,00,000/- to K.F.C. and took possession of the Unit from the K.F.C. In fact, the petitioner had not acted in terms of the agreement Annexure-I and under that circumstance, the respondent paid the amount to K.F.C. In order to settle the financial liabilities. He denied the contention of the petitioner that the petitioner paid Rs.7,00,000/- directly to him and spent nearly Rs.15,00,000/- towards the maintenance of the Unit. It is further contended that in so far as agreement Annexure-I is concerned, the same would be void as in terms of Clause-4 thereof, the petitioner had not paid an amount of Rs.14,50,000/- by 9.1.2006, failure of which was to render the agreement void. In so far as the pleadings with regard to 2nd agreement Annexure-II extending the time is concerned, the respondent contends that the same is a forged one. With a view to substantiate the contention of forgery in respect of second agreement extending the time, reliance has been placed on the order passed by the District Court, Kasaragod, Annexure-B dated 18th March, 2006, which came into being on an application filed by the petitioner under Section 9 of the Act of 1996. It may be mentioned that the order Annexure-B has already been challenged in appellate forum.

(3.) On the facts as fully detailed, learned counsel for the petitioner states that even if Annexure-B is to be ignored, at this stage or up to the time the appeal is disposed and that too in favour of the petitioner, the request for arbitration has to be considered on the strength of Clause-9 of Annexure-I. Per contra, learned counsel for the respondent contends that agreement Annexure-I would be void as the petitioner did not make the payment as envisaged in Clause-4 thereof. He contends that it is not even the case of the petitioner that payment as envisaged in Clause-4 of the agreement has been made.