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Karnataka High Court · body

2015 DIGILAW 41 (KAR)

RAJESH AIYAR v. SATHYA REDDY

2015-01-07

B.S.PATIL

body2015
ORDER 1. These petitions are filed seeking appointment of sole arbitrator to adjudicate the dispute between the parties in terms of the relevant clauses contained in the agreements entered into between the parties as enclosed to the petitions. 1st 2. Petitioners are the intending purchasers. The respondent is the owner. The 2nd respondent is the developer. There is a joint development agreement entered into by the owner – 1st respondent with the developer – 2nd respondent dated 27.07.2006. As per the said agreement, the owner has agreed to execute a Special Power of Attorney in favour of the developer to obtain license and sanctioned plan for the purpose of putting up construction on the schedule property and authorizing the developer to represent the owner before the statutory bodies. The owner has agreed to execute necessary documents in this regard. The owner has also agreed to execute the Power of Attorney empowering the developer to sell, develop, convey the constructed area with the corresponding undivided share in the land in the schedule property and to empower the developer to obtain all clearance certificates from the statutory authorities as may be necessary. 3. Based on the joint development agreement and the Power of Attorney executed by the owner in favour of the developer, agreements of sale of the undivided share in the land has been entered into by the owner through the Power of Attorney/developer in favour of the present petitioners on various dates. The said agreements of sale are enclosed to the petitions. It is agreed between the parties in terms of agreement of sale that all differences and disputes arising between the parties shall be referred for arbitration to an Arbitrator. The said clause reads as under : “The parties hereby agree that all differences and disputes shall be referred to arbitration of an arbitrator, the proceedings of which will be governed by the provisions of the Indian Arbitration and Conciliation Act, 1996, as may be amended from time to time. The decision of the arbitrator so appointed shall be binding on the parties hereto. The arbitration proceedings shall be held at Bangalore and conducted in the English language.” 4. Subsequent to the agreement of sale, another agreement has been entered into which is styled as ‘Construction Agreement’. This agreement is entered into between the developer – 2nd respondent herein and the petitioners/intending purchasers. The arbitration proceedings shall be held at Bangalore and conducted in the English language.” 4. Subsequent to the agreement of sale, another agreement has been entered into which is styled as ‘Construction Agreement’. This agreement is entered into between the developer – 2nd respondent herein and the petitioners/intending purchasers. In this agreement, the agreement of sale entered into between the 1st respondent and the intending purchasers/petitioners has been referred. It is specifically stated that under the agreement of sale, the purchasers/petitioners had agreed to retain the developer/contractor to construct a residential apartment in accordance with the plan annexed to the construction agreement. It is thus clear that in the construction agreement, reference is made to agreements of sale and in the agreement of sale also, a reference has been made to the effect that the registration formalities in respect of undivided share of land shall be completed provided the purchasers pay the entire sale consideration amount payable under the agreement of sale as well as under the construction agreement entered into between the purchasers and the concerned contractors. It is, therefore, clear that the agreement of sale and the construction agreement are interlinked with each other. The construction agreement also contains arbitration clause in Clause 16 which reads as under: “The parties hereby agree that all differences and disputes shall be referred to arbitration of an arbitrator, the proceedings of which will be governed by the provisions of the Indian Arbitration and Conciliation Act, 1996, as may be amended from time to time. The decision of the arbitrator so appointed shall be binding on the parties hereto. The arbitration proceedings shall be held at Bangalore and conducted in the English language.” 5. The construction agreement further makes it clear in Clause 17 that the purchasers – petitioners herein shall not be entitled to the possession of the schedule ‘C’ apartments until all payments to the developer under the construction agreement and all payments due to the owner regarding his undivided share are paid by the purchasers. 6. The construction agreement further makes it clear in Clause 17 that the purchasers – petitioners herein shall not be entitled to the possession of the schedule ‘C’ apartments until all payments to the developer under the construction agreement and all payments due to the owner regarding his undivided share are paid by the purchasers. 6. Now the differences having arisen between the parties with regard to both the agreements pertaining to the sale of the undivided share of the land and the construction to be put up on the property, the petitioners, who are the prospective purchasers under the agreement of sale and who are the beneficiaries under the construction agreement, have approached this Court by filing these petitions. It is contended by the learned counsel for the petitioners Sri Prashanth Chandra that both the agreements are interlinked with each other and the rights and obligations that flow from both the agreements overlap and therefore, the dispute between the parties is required to be referred to the Arbitrator in terms of the arbitration clauses contained in two agreements. He further points out that both the developer and the owner are proper and necessary parties in respect of both the agreements for effective and final adjudication of the dispute before the Arbitrator and that is why both of them have been arrayed as party respondents to these proceedings. In this regard, he points out that provisions of Code of Civil Procedure are applicable with regard to the proper and necessary parties to be arrayed as respondents to these petitions and also to the claim to be made before the Arbitrator. Reliance is placed on the judgments of the Apex Court in the case of K.V.GEORGE Vs. SECRETARY TO GOVERNMENT, WATER AND POWER DEPARTMENT, TRIVANDRUM AND ANOTHER – (1989) 4 SCC 595 and in the case of ITI LTD. Vs. SIEMENS PUBLIC COMMUNICATIONS NETWORK LTD. – (2002) 5 SCC 510 . 7. Counsel for the petitioner further points out that scope of these proceedings is limited to and restricted to the examination of question whether there is arbitration agreement between the parties. Any other wider examination with regard to the nature of the rights and interest of respective parties in such summary proceedings are not warranted. In this connection he has placed reliance on the judgment of the Apex Court in the case of INDOWIND ENERGY LIMITED Vs. Any other wider examination with regard to the nature of the rights and interest of respective parties in such summary proceedings are not warranted. In this connection he has placed reliance on the judgment of the Apex Court in the case of INDOWIND ENERGY LIMITED Vs. WESCARE (INDIA) LIMITED AND ANOTHER – (2010) 5 SCC 306 . Reliance is also placed on the judgment in the case of CHLORO CONTROLS INDIA PRIVATE LIMITED Vs. SEVERN TRENT WATER PURIFICATION INC. & OTHERS – (2013) 1 SCC 641 to contend that even a nonsignatory or a third party can be subjected to arbitration without his consent, but in exceptional circumstances. 8. Learned Counsel for respondent No.1 Sri G.R.Mohan contends that so far as the agreement of sale is concerned which is between the petitioners and the 1st respondent, the 1st respondent has no objection for abiding by the terms of the agreement, but insofar as the second agreement regarding 1st construction over the land in question is concerned, the respondent has nothing to do with the same as he is not a party to the said agreement. Therefore, the dispute as regards construction to be carried on by the 2nd respondent in the land agreed to be sold in favour of the petitioners cannot be a subject matter of arbitration involving the 1st respondent. He, therefore, submits that these petitions are liable to be dismissed insofar as the dispute regarding construction over the schedule property is concerned. 9. Having heard the learned counsel for both parties and after careful perusal of the joint development agreement, agreement of sale and the construction agreement, it is clear that the subject matter of dispute in respect of both the agreements i.e., the agreement of sale and the construction agreement are the same. The agreement of sale makes reference to the construction agreement. Indeed the agreement of sale is executed by the 1st respondent through the developer as the Power of Attorney Holder. The construction agreement also makes reference to the agreement of sale and the rights and obligations flowing there from. Thus, the dispute has overlapping ramifications and it is interlinked. There is arbitration clause in both the agreements. Indeed the agreement of sale is executed by the 1st respondent through the developer as the Power of Attorney Holder. The construction agreement also makes reference to the agreement of sale and the rights and obligations flowing there from. Thus, the dispute has overlapping ramifications and it is interlinked. There is arbitration clause in both the agreements. The arbitration clause clearly makes it very clear that the parties have agreed that the differences and disputes shall be referred to arbitration and the decision of the arbitrator so appointed shall be binding on the parties. 10. Even though 1st respondent is not a party to the construction agreement as the obligations cast on the developer and the performance of his function and duties under the agreement are interlinked and dependent upon the agreement of sale entered into by and between the 1st respondent and the petitioners, the 1st respondent becomes a proper and necessary party to the proceedings before the arbitrator. 11. In the absence of the 1st respondent, the dispute raised cannot be effectively and finally disposed of. It is also necessary to notice here that admittedly the 1st respondent has filed a suit in O.S.No.26165/2011 challenging the joint development agreement to which the petitioners are also impleaded as parties. Therefore, it becomes further clear that the 1st respondent is a proper and necessary party to the dispute in respect of the controversy arising out of both the agreements. Hence, counsel for the petitioner is right and justified in placing reliance on the judgment of the Apex Court referred to supra as regards the application of Code of Civil Procedure to the proceedings. 12. Learned counsel for both parties request the Court to refer the matter to the Arbitration Centre, Bangalore, without prejudice to the contentions raised by respondent No.1. They further request that Sri I.S.Antin, learned retired District Judge may be appointed as sole Arbitrator. 13. In view of unequivocal intention expressed by the parties to go for arbitration, the matter deserves to be referred for arbitration. Hence, these petitions are allowed. The matter is referred for arbitration to the Arbitration Centre, Bangalore. Sri I.S.Antin, learned retired District Judge is appointed as arbitrator. Registry is directed to send a copy of this order to the Arbitration Centre and also to Sri I.S.Antin, the learned retired District Judge. Hence, these petitions are allowed. The matter is referred for arbitration to the Arbitration Centre, Bangalore. Sri I.S.Antin, learned retired District Judge is appointed as arbitrator. Registry is directed to send a copy of this order to the Arbitration Centre and also to Sri I.S.Antin, the learned retired District Judge. The Arbitrator is directed to enter upon the reference notify the parties and dispose of the dispute in accordance with law.