TaxTMI 
TaxTMI 
2008 (1) TMI 1019
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....i (Patrawala) who died on 31st July 2005. During his lifetime, the deceased entered into a Memorandum of Understanding of 9th June 2005 under which he is alleged to have agreed to transfer and assign his right title and interest in a plot of land at the Bandra Kurla Complex, bearing CTS No.4207, admeasuring 819.3 sq.mtrs. to the Petitioner. The deceased, the Petitioner and the Eighth Respondent as developer, were parties to the agreement. The MOU contemplates that the Eighth Respondent would construct on the land a building of the required specifications, for consideration. The Petitioner claims to have paid an amount of Rs. 1.15 crores to the deceased and an amount of Rs. 2.16 crores to the Eighth Respondent. Prior to the execution of the MOU, the deceased had entered into a Development Agreement dated 27th July 2004 with the Eighth Respondent. In the circumstances, the Eighth Respondent was a party to the subsequent MOU executed in June 2005 in favour of the Petitioner. 3. The case of the Petitioner is that a joint meeting was held at the office of its Advocate. Parties agreed that three originals of the MOU, all duly executed, would be kept in escrow with the Advocates for th....
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....ded, in so far as Respondent Nos.1 to 6 are concerned, an application for the grant of Letters of administration, intimation to MMRDA and a direction to the Advocates to release the MOU from escrow. In so far as the Eighth Respondent is concerned, a direction was sought for the initiation of steps for the purchase of TDR, for obtaining the permission of statutory authorities including 1 Paragraph 6 of the Rejoinder the BMC and MMRDA and a direction to the Advocate to release the MOU from escrow. 8. By a letter dated 14th December 2006, the Eighth Respondent claimed that the MOU stood terminated. The First Respondent by its letter dated 24th January 2007 declined to comply with the requisitions contained in the letter of the Petitioner's Advocate dated 2nd December 2006, while the Sixth Respondent by a letter dated 18th December 2006 offered to hold talks for an amicable settlement. The Seventh Respondent was stated, in the aforesaid letter of the Sixth Respondent, to be a daughter of the deceased and this Court was informed during the course of the hearing that the Sixth Respondent is stated to be the second spouse under a marriage contracted by the deceased. 9. On 23rd J....
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....ong as it continues to remain in escrow with the Advocates. 12. On the other hand it has been submitted on behalf of the Petitioner that (i) The execution of the MOU by the deceased is not disputed by the Respondents, but the defence is that the deceased was deceived into executing the agreement; (ii) In other words, the arbitrability of the disputes which have arisen between parties is not denied. Clauses 9 and 21 of the MOU which is annexed to the petition, would in fact, prima facie show that the escrow relates to the contract of assignment and not the arbitrability of the disputes that have arisen between the parties; (iii) The intention of the parties was never to keep the Arbitration Agreement out of the purview of enforceability but it was the parent contract in regard to enforceability of the assignment which was to be lodged in escrow; (iv) A written contract containing an arbitral agreement can under subsection ( 4) of Section 7 be contained inter alia in letters and communications. The affidavit in reply filed by Respondent No. 1 to 7 in the petition under Section 11 of the Arbitration and Conciliation Act, 1996 filed by the Petitioner would demonstrate beyond doubt t....
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....proached in that behalf, "the Court shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it". Surely, when a matter is entrusted to a Civil Court in the ordinary hierarchy of Courts without anything more, the procedure of that Court would govern the adjudication. In view of the provisions of Section 9, as interpreted in the judgment delivered by a Bench consisting of seven Judges of the Supreme Court, the basic postulate for the purpose of the present case is that since the existence of an arbitration agreement has been disputed it is for this Court to determine whether there exists a valid arbitration agreement to refer disputes to arbitration. The submission which has been urged on behalf of the Respondents is that the entire agreement constituted by the MOU executed in June 2005 has been placed in escrow and, that an agreement which lies in escrow does not become a deed in the eyes of law until the condition subject to which the document was to be released is fulfilled. 14. When parties to an agreement or the executants of a document place the agreement or, as the case may be, the document in escrow, parties inte....
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....rovisions inscribed, not immediately, but only in the case of and upon performance of some condition then stated or ascertained. In the absence of direct evidence whether or not a deed of conveyance was delivered as an escrow, the fact that only part of the purchase price has been paid at the time of delivery justifies the inference that the deed was delivered as an escrow pending payment of the balance. In Halsbury the effect of the delivery of a document as escrow is explained thus: 1334. Effect of delivery as escrow. When a sealed writing is delivered as an escrow it cannot take effect as a deed pending the performance of the condition subject to which it was so delivered, and if that condition is not performed the writing remains entirely inoperative. If, therefore, a sealed writing delivered as an escrow comes, pending the performance of the condition and without the consent, fault, or negligence of the party who so delivered it, into the possession of the party intended to benefit, it has no effect either in his hands or in the hands of any purchaser from him; for until fulfillment of the condition it is not, and never has been, the deed of the party who so delive....
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....nded that the document should not be acted upon until the conditions subject to which the document was held in escrow were fulfilled and since the arbitration clause is a part of the main agreement, the arbitration clause is not effective until the document is released from escrow. This submission which has been urged on behalf of the Respondents cannot upon reflection stand scrutiny for three reasons. The first is based as a matter of first principle, on the common law doctrine of escrow, the second reason is founded on the scheme and provisions of the Arbitration and Conciliation Act, 1996, and the third on the facts as they emerged before the Court at the present stage. 16. The first reason can now be taken up. Parties to a deed, by the lodgment of the document in escrow evince an intent that the document shall be released subject to the fulfillment of the condition under which it is held in escrow. Documents which are held in escrow are sometimes delivered into the custody of a stranger while on other occasions, they are held as escrow by an attorney acting for all parties thereto. Halsbury in fact, postulates that a document may be handed over as escrow even to a Solicitor ....
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....inciple which must be borne in mind is based on the provisions and scheme of the Arbitration and Conciliation Act, 1996. Under Section 7(2), an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Subsection (3) postulates that it shall be in writing. Section 7(4) then provided as follows: (4) An arbitration agreement is in writing if it is contained in (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. Under Section 16(1), the Arbitral Tribunal is empowered to rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of the arbitration agreement. For that purpose, Clause (a) says that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. Clause (b) provides that a decision by the arbitral tribunal tha....
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....he Sole Arbitrator. If that be the case, as per the said arbitration clause, the dispute or differences are to be referred to three Arbitrators. Keeping this in mind, the notice dated 23rd January 2007 is not proper and as per the said arbitration clause. The arbitration clause provides for three Arbitrators and each party had to appoint one Arbitrator. The applicant themselves have not complied with their part of the obligation to appoint an arbitrator and therefore in my respectful submission, the said notice dated 23rd January 2007 itself is defective and bad in law and not as per the provisions of the Arbitration and Conciliation Act, 1996. It is submitted that the present application is a premature application and not as per the procedure prescribed in the said arbitration clause." The reply filed to the petition under Section 11 thus clearly demonstrates that there has been an acceptance of the position that (i) There was a valid agreement between the parties to refer disputes to arbitration; and (ii) The arbitration clause was enforceable and valid. Respondent No.8, as already noted earlier, has in his reply dated 21^st February 2007 not contested the exist....
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.... the letter written by Respondent Nos. 1 to 3 reads thus: Subj: Cheque in favour of M. C. G. M.Ref : GTex Block, Bandra Kurla Complex, Brandra (East), Mumbai 400 051 bearing CTS No.4207 of Village KoleKalyan, Taluka Andheri. We request you to kindly make payment of Rs.2,35,635/( Rupees Two Lacs Thirty Five Thousand Six hundred Thirty-Five only) in favour of Municipal Corporation of Greater Mumbai on our behalf and also request you to kindly adjust the same against amount payable to us by your under MOU dated 10th June 2005 towards the above mentioned property. Prima facie, at this stage, it would, therefore, emerge that Respondent Nos.1 to 3 had, acting on the MOU dated 10th June 2005 requested the Petitioner to make a payment to the Municipal Corporation. Though the aforesaid letter has been produced in the rejoinder filed by the Petitioner on 16th January 2008, the letter has remained to be controverted thereafter on the part of the Respondents. 21. Counsel appearing on behalf of the Petitioner had during the course of the hearing produced a sealed envelope containing the original of the document placed in escrow with Shri Anil Harish, Partner of M/s. D.M.....