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Kerala High Court · body

2010 DIGILAW 974 (KER)

S. S. Subair v. DLF Home Developers Limited

2010-12-13

K.T.SANKARAN

body2010
Judgment : 1. This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 to appoint an arbitrator for resolving the dispute between the petitioners and respondents 1 and 2 in respect of Ext.A2 agreement for sale dated 21.2.2008 entered into between the petitioners and respondents 1 and 2. 2. The case of the petitioners is that an extent of 7.83 acres of land in Kakkanad Village belonged to respondent No.4 and five others. The owners entered into Ext.A1 agreement dated 8.2.2008 with the petitioners agreeing to sell the property at the rate of 3.5 lakhs per cent of land. It is contended that on the basis of Ext.A1 agreement, the petitioners entered into Ext.A2 agreement for sale dated 21.2.2008 with the first respondent, to sell the property to the first respondent or its nominee, at the rate of 5.5 lakhs per cent. It is contended that except 1.26 acres of land on the rear side of the property, the rest of the property was assigned by the owners to respondent no.3, the nominee of respondent No.1. According to the petitioners, they had provided a bridge across a canal for the entrance to the property and that is the only entrance to the property. The property having road frontage was sold to the nominee of respondent No.1 under different documents and the balance remaining is an extent of 1.26 acres of land. 3. On 27.1.2009, respondent No.4 and another co-owner sent Ext.A3 notice to the petitioners and the first respondent requesting them to perform the agreement for sale. The petitioners also sent Ext.A4 notice dated 16.3.2009 to the first respondent requesting to comply with the terms of the agreement. The petitioners and the fourth respondent filed O.S.No.303 of 2009 on the file of the Sub Court, Ernakulam for specific performance of the agreement for sale. In that suit, defendants 1 and 2, who are respondents 1 and 3 in the Arbitration Request, filed Ext.A5 application praying to dismiss the suit as not maintainable in view of the arbitration clause contained in the agreement for sale and to refer the plaintiffs and defendants 1 and 2 for arbitration. O.S.No.303 of 2009 was dismissed accepting the contention of respondents 1 and 3 herein and the parties were directed to resort to arbitration. O.S.No.303 of 2009 was dismissed accepting the contention of respondents 1 and 3 herein and the parties were directed to resort to arbitration. Thereafter, Ext.A6 notice dated 9.11.2009 was issued by the petitioners to respondents 1 to 4, in which a panel of three persons to be appointed as arbitrator was suggested. As per Ext.A7 notice dated 27.11.2009, the first respondent declined the request made by the petitioners. The first respondent contended in Ext.A7 that the fourth respondent is not the absolute owner of the property. The request for referring the disputes to arbitration was rejected by the first respondent. In these circumstances, the petitioners filed this Arbitration Request. 4. A counter affidavit was filed on behalf of respondents 1, 2 and 3. They contended that Ext.A2 is not an agreement for sale, but it is only a memorandum of understanding. Ext.A2 was not acted upon. Ext.A2 is not enforceable against the respondents. The third and fourth respondents are not parties to Ext.A2 agreement. The properties were purchased by respondent No.3 directly from the owner of the property and not with the intervention of the petitioners. Exts.A1 and A2 were never acted upon. There is no concluded contract between the first respondent and the fourth respondent. Even assuming that the agreement is enforceable, the petitioners have not chosen to take any steps within the agreed period. Ext.A1 was 'cooked up' by the petitioners. Exts.A1 and A2 are not enforceable in law. The petitioners are not entitled to compel the first respondent to purchase the property belonging to the fourth respondent. 5. As regards the contention taken in O.S.No.303 of 2009, it is stated in the counter affidavit thus: "But since there was an arbitration clause in Ext.A2, these respondents took up a contention that the suit is not maintainable in the light of the arbitration clause and Section 8 petition was filed which was allowed by the Sub Court, Ernakulam and the parties were asked to initiate arbitration proceedings. The suit was also consequently dismissed." 6. As regards the arbitration clause, it is stated in the counter affidavit thus: "As per Clause 6 of Exhibit A2 in the event of any default of any terms and conditions the matter shall be referred to a sole arbitrator who will be appointed by the parties mutually agreed upon as per the Arbitration and Conciliation Act, 1996. As regards the arbitration clause, it is stated in the counter affidavit thus: "As per Clause 6 of Exhibit A2 in the event of any default of any terms and conditions the matter shall be referred to a sole arbitrator who will be appointed by the parties mutually agreed upon as per the Arbitration and Conciliation Act, 1996. Since there was no agreement between the first respondent and the petitioners, any of the persons suggested by the petitioners cannot be appointed as the arbitrator." 7. Learned counsel for the fourth respondent submitted that the fourth respondent is interested in completing the transaction and that he has no objection in appointing an arbitrator. 8. The contesting respondents raised a contention in O.S.No.303 of 2009 that the suit was not maintainable since the agreement contains an arbitration clause. That contention was accepted and the suit filed by the petitioners and the fourth respondent was dismissed referring the parties for arbitration under the Arbitration and Conciliation Act. In this Arbitration Request, the contesting respondents raised a contention that the Arbitration Request is not maintainable and the remedy of the petitioners is to file a civil suit. It is true that an agreement between the parties would not confer jurisdiction. It is also true that decision on a pure question of law unrelated to the rights of parties would not operate as res judicata as between the parties. (Vide Isabella Johnson v. M.A.Susai (AIR 1991 SC 993 = 1990 (2) KLT 968). 9. It is not disputed that Ext.A2 contains an arbitration clause. The arbitration clause reads as follows: "6. In the event of default of any terms and conditions in this agreement, the matter shall be referred for mediation, if not settled shall be referred to a sole arbitrator who will be appointed by the parties mutually agreed upon as per the Arbitration and Conciliation Act, 1996. The decision of the Arbitrator shall be binding on all the parties, the venue of the arbitration shall be at Ernakulam." 10. Another contention raised by respondents 1 and 2 is that respondent No.4 is not a party to Ext.A2 agreement and therefore, the arbitration clause is not binding on him. If it is not binding on him, an arbitrator cannot be appointed to resolve a dispute with the fourth respondent in the party array. 11. Another contention raised by respondents 1 and 2 is that respondent No.4 is not a party to Ext.A2 agreement and therefore, the arbitration clause is not binding on him. If it is not binding on him, an arbitrator cannot be appointed to resolve a dispute with the fourth respondent in the party array. 11. Respondents 1 and 2 have taken diametrically opposite, irreconcilable and contradictory stand before the civil court as well as in this Arbitration Request. It is not in dispute that there is a dispute between the parties. That dispute has to be settled either by the civil court or by the arbitrator appointed as per the terms of the arbitration clause, depending on the jurisdiction. When a suit was filed by the petitioners and the fourth respondent, respondents 1 and 2 objected to the same and contended that the civil court has no jurisdiction. The decision of the civil court is not confined to its lack of jurisdiction. The civil court also referred the parties to arbitration under the Arbitration and Conciliation Act. Respondents 1 and 2 are estopped from contending that since the fourth respondent is not a party to Ext.A2 agreement, the arbitration clause cannot be invoked. The fourth respondent was a party before the civil court and therefore, the decision of the civil court referring the matter to arbitration is binding on the fourth respondent as well. The fourth respondent can also take advantage of the finding rendered by the civil court based on the contention raised by respondents 1 and 2 as well. More over, it is made clear by the fourth respondent that he is prepared to complete the transaction as per the terms of the agreement and that he has no objection in appointing an arbitrator. Taking into account the facts and circumstances of the case and the agreement between the parties, I am of the view that the Arbitration Request is maintainable. I overrule the contention raised by respondents 1 and 2 that the arbitration clause cannot be invoked since the fourth respondent is also involved in the dispute. 12. Taking into account the facts and circumstances of the case and the agreement between the parties, I am of the view that the Arbitration Request is maintainable. I overrule the contention raised by respondents 1 and 2 that the arbitration clause cannot be invoked since the fourth respondent is also involved in the dispute. 12. A contention is raised by respondents 1 and 2 that they are not parties to Ext.A1 agreement entered into between the petitioners on the one hand and fourth respondent and others on the other and, therefore, any matter covered by that agreement cannot be the subject matter of an arbitration, invoking the arbitration clause contained in Ext.A2, in which the fourth respondent and others are not parties. Ext.A2 agreement was executed between the petitioners and respondent No.1 on the basis of Ext.A1 agreement. The property agreed to be transferred is the property which belongs to respondent No.4 and others. A part of the property was transferred in favour of the third respondent, who is a nominee to respondents 1 and 2. Respondents 1 and 2 have raised a contention that the assignment was made by the fourth respondent and others on the basis of direct dealing between respondents 1 and 2 and the owners and, therefore, Ext.A1 agreement cannot be taken in aid by the petitioners to support the Arbitration Request. The petitioners contend that it was based on Ext.A1 agreement that they entered into Ext.A2 agreement for sale with respondents 1 and 2 and, therefore, both the agreements have to be read together and considered together. This also would constitute a dispute between the parties. The question whether Exts.A1 and A2 are intrinsically interconnected and whether the dispute arising between the parties could be considered on that basis is also a matter arising for consideration in the arbitration. These contentions are to be dealt with not in the Arbitration Request but before the arbitrator. These contentions are referred to in this order only to consider whether these disputes could be the subject of arbitration, invoking the arbitration clause in Ext.A2. 13. The further contention of respondents 1 and 2 is that Ext.A2 is only a memorandum of understanding and that it is not an enforceable agreement for sale, particularly when the owners of the property are not the petitioners but respondent No.4 and others. 13. The further contention of respondents 1 and 2 is that Ext.A2 is only a memorandum of understanding and that it is not an enforceable agreement for sale, particularly when the owners of the property are not the petitioners but respondent No.4 and others. As held earlier, this question also would come within the purview of the matters to be decided by the arbitrator and therefore, this question is left for the decision of the arbitrator. 14. The arbitration clause contains an agreed procedure. Before referring the matter to the arbitrator, a mediation is contemplated in the agreement. When the Arbitration Request came up for consideration on 6.7.2010, as agreed by the parties, Advocate P.B.Krishnan was appointed as the mediator. After several rounds of talks and attempts, the parties could not arrive at a mediated settlement. Sri.P.B.Krishnan filed a report dated 8.12.2010 stating that the attempts to arrive at a mediated settlement failed. In the facts and circumstances mentioned above, the Arbitration Request is allowed. All the parties agreed that Advocate George K.Varghese may be appointed as the arbitrator. Accordingly, Advocate George K.Varghese is appointed as the arbitrator. The arbitrator would be entitled to fix his fee. The arbitrator shall resolve the disputes mentioned above and he shall also consider as to whether some of the disputes indicated above would come within the purview of arbitration.