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2025 DIGILAW 437 (TS)

BVM Property Leasing Pvt. Ltd. v. Sree Venkataraya Builders Pvt Ltd

2025-04-25

P.SREE SUDHA, T.VINOD KUMAR

body2025
JUDGMENT : T.Vinod Kumar, J. This Civil Miscellaneous Appeal is directed against the order dt. 05.01.2024 passed in I.A. No. 589 of 2024 in O.S. No. 45 of 2024 on the file of Senior Civil Judge, Ranga Reddy District at Kukatpally, dismissing the application filed under Section 5 r/w Section 8 of Arbitration and Conciliation Act, 1996 (for short ‘the Act’) r/w Section 151 of CPC seeking to refer the parties to the Arbitration. 2. The appellant herein is the petitioner in the underlying Interlocutory Application. 3. The case of the appellant in brief is that, theappellant is a maintenance company appointed by the Developer i.e. Kausalya Shelters Limitedin terms of the Registered Development Agreement-cum-General Power of Attorney (DAGPA) dt.12.01.2015 entered into by the Developer with the respondent herein. 4. It is the further case of appellant that, respondent had invoked Clause 26 of Development Agreement providing arbitration in relation to disputes arising under the DAGPA with the developer. 5. Appellant contends that, anarbitral Tribunal was formed consisting of Justice Sri P Venkata Ram Reddi, Retired Supreme Court Judge, Justice Sri M.N Rao, Retired Chief Justice and Sri B.V Kumar (Retd. Board Member CBIC) to hear the parties. 6. The appellant contends that, in the aforesaid arbitral proceedings, the respondent herein had claimed various reliefs and one such relief sought for in paragraph 32(ix) of statement of claim filed for grant of permanent injunction restraining the appellant herein as the nominee of the developer from interfering with the possession of the respondent company’s share. 7. The appellant also contends that the respondent was aware of its obligation under Section 21 of the Telangana Apartments (Promotion of Construction and Ownership) Act, 1987, to pay maintenance, electricity charges, corpus fund, and water cess, which are not provided by the Developer gratuitously and thus, in case of default of payment of aforesaid charges, minimal electricity supply is liable to be disconnected. The Respondent was informed via email dt. 16.03.2024 that separate electricity connections would be provided upon payment of dues, as per the Development and Supplementary Agreements, subject to the outcome of Arbitration Case No.1 of 2022, which in fact has been conveniently suppressed by the Respondent. 8. It is further contended by the appellant that despite non- payment of aforesaid charges, excluding AC sockets, minimal electricity continues to be supplied. 8. It is further contended by the appellant that despite non- payment of aforesaid charges, excluding AC sockets, minimal electricity continues to be supplied. The respondent has not shown any intent to pay even the basic dues, as per the counter- claim filed by the Developer i.e. M/s. Kausalya Infra Projects Pvt Ltd. in Arbitration Case No. 1 of 2022: that maintenance charges claimed amounted to Rs.6,90,24,036/- at Rs. 9.50 per sft per month for a period of 24 months from 01.02.2021 to 31.01.2023 and Rs.4,31,40,022/- as future maintenance charges. 9. The appellant contends that the Court below failed to appreciate that, while it is an admitted fact that arbitration proceedings are going on between the respondent herein & the Developer, since the appellant is a nominee of Developer discharging the obligation of providing maintenance ought to have referred the parties in the underlying Interlocutory Application to the Arbitration by noting that, relief sought in para 32 (ix) of Claim Statement filed by the respondent/petitioner before the Arbitral Tribunal and the prayer before the Civil Court are very similar in nature, concerning the appellant; and that the Court below erred in dismissing the underlying Application. 10. Per contra, on behalf of the Respondent No.1, it is contended that the appellant herein is neither a party to the arbitral proceedings pending nor a signatory to the DAGPA. It is contended that the Appellant/ petitioner is a 3 rd party to DAGPA and is only a maintenance company appointed unilaterally by the Developer and as such is not entitled to be joined as a party to the proceedings before the Tribunal. 11. It is contented on behalf of the Respondent No.1 that the appellant who is a 3 rd party to DAGPA cannot interfere with the peaceful possession of respondent/petitioner property and the same cannot be a subject matter of Arbitration. 12. It is also contended on behalf of respondent No.1 that, mere mention of a unilaterally appointed company against the terms of the DAGPA does not ban or bar the respondent/petitioner to file a suit for injunction against any third-party interfering with its peaceful possession and therefore the underlying petition filed by the Applicant/petitioner seeking reference to arbitration u/s. 8 of the Act has been rightly dismissed. 13. 13. It is contended on behalf of respondent No.1 that the unilateral appointment made by the "Developer" and its demand to push its subsidiary company i.e., BVM Properties as a sole trustee to maintain common areas and corpus without the consent of other parties, i.e., the owners and the purchasers, not only breaches Clause 25 of DAGPA, but also is in violation of Section 23 of Contract Act 1872, and Sections 11(4)(e), 11(4)(f), 17, 19(3) of RERA, Act 2016, and amounts to vertically integrating a subsidiary company of the developer to abuse its dominant position, which is prohibited by law. 14. It is further contended on behalf of Respondent No.1 its request for providing separate electrical meters being ignored by the Developer, it had approached the Electrical Department for providing separate electrical meters, and on the same is being obstructed by the appellant, was constrained to file the suit against the Appellant who had disconnected the electricity and water supply which are basic amenities for enjoyment of the rights of the property belonging exclusively to the respondent. 15. The Respondents further contended that the reliefs sought for in the Suit filed by it against the Applicant herein are independent to the reliefs sought for in the arbitration proceedings as specific averments were made against the Appellant company which is interfering and causing disturbance to the Respondent company. Since, the appellant is not a signatory to the terms of the DAGPA, the disputes are outside the ambit of the said agreement and there is no contract or agreement entered into by and between the appellant and respondent much less containing an arbitration clause. Hence prayed to dismiss the Petition in toto. 16. The Respondent No.1 also contends that it cannot be said that the Respondent is parallelly prosecuting the proceedings for the reliefs against the Appellant. It is categorically submitted that no reliefs are sought against the Appellant in the Arb OP 114 of 2024 filed against the Developer U/S 9 of the Act. Therefore, it is clarified that both are under different Causes of Action. 17. Basing on the material that is available on the record, the trial Court has framed the point for consideration as under: - 18. “Whether the Petitioner/Defendant Nos.1 & 2 are entitled to refer the parties to the present suit for arbitration as prayed for.” 19. Therefore, it is clarified that both are under different Causes of Action. 17. Basing on the material that is available on the record, the trial Court has framed the point for consideration as under: - 18. “Whether the Petitioner/Defendant Nos.1 & 2 are entitled to refer the parties to the present suit for arbitration as prayed for.” 19. Basing on the oral and documentary evidence adduced on both sides, the trial Court held that the said DAGPA was in between the plaintiff and Developer Kausalya Shelters limited. The arbitration clause existing in the said DAGPA is binding upon the parties to the said document. Since, the parties to the present suit are different from parties to the DAGPA, the petitioner/defendant cannot press the said arbitration clause in the present suit. By observing as above, the Court below held that the appellant/petitioner is not entitled to seek the relief in order to refer the parties to the arbitration by relying on arbitration clause in the above said DAGPA and accordingly, dismissed the underlying application. 20. Assailing the said order, the present appeal is filed. 21. Heard learned counsel for the appellant and learned counsel for respondents through online and perused the record. 22. It is pertinent to note that though Respondent No.1 contended that they are unaware of the Appellant/Petitioner and also how it came into existence, to seek for the relief of being referred to arbitration in ongoing arbitration proceedings, a perusal of the statement of claim filed by the respondent No.1 before the Arbitral Tribunal in the dispute between the respondent herein and the developer, in Para 23, 26, and Para VI (ix) thereof, it has been stated that the appellant is a nominee company of the Developer (i.e., the Respondent in O.P. No. 114 of 2024). Furthermore, Respondent No.1 herein in Para 2 of O.S. No. 45 of 2024 filed by it had admitted that the Appellant is a maintenance company appointed by the Developer. The above averments made by Respondent No.1 clearly contradict the stand taken by them in the counter filed in the underlying application. Thus, the Court is of the view that the respondent cannot be allowed to approbate and reprobate. 23. Further, as per Clause 27(e) ofthe Development Agreement- Cum-General Power of Attorney (DAGPA) dt. The above averments made by Respondent No.1 clearly contradict the stand taken by them in the counter filed in the underlying application. Thus, the Court is of the view that the respondent cannot be allowed to approbate and reprobate. 23. Further, as per Clause 27(e) ofthe Development Agreement- Cum-General Power of Attorney (DAGPA) dt. 12.01.2015 entered into between the Respondent and the Developer i.e. Kausalya Shelters Limited, the developer is obligated to maintain the complex by providing all amenities, facilities and since, the appellant being an assignee of the developer for undertaking to perform the said obligation, although the Appellant is a non- signatory to DAGPA, would be bound by the terms of DAGPA in so far as post development obligation to be performed by Developer. 24. It is further to be noted that the expression ‘claiming through or under’ as used under Sections 8 and Section 45 of the Act, 1996 depicts the notion of a derivative cause of action where the non-signatory steps into the shoes of a party rather than claiming an independent right under the arbitration agreement. 25. The Hon’ble Supreme Court in the case of Chloro Controls (I) P. Ltd. vs. Severn Trent Water Purification Inc. and Ors , [ (2013) 1 SCC 641 ] has held that: “167. Section 45 is a provision falling under Chapter I of Part II of the 1996 Act which is a self-contained Code. The expression 'person claiming through or under' would mean and take within its ambit multiple and multi-party agreements, though in exceptional case. Even non-signatory parties to some of the agreements can pray and be referred to arbitration provided they satisfy the pre-requisites under Sections 44 and 45 read with Schedule I. Reference of non- signatory parties is neither unknown to arbitration jurisprudence nor is it impermissible.” 26. The Hon’ble Supreme Court in the case of Cox and Kings Ltd. vs. SAP India Pvt. Ltd. and Ors , [ (2024) 4 SCC 1 ] . has held that: “45. Power of judicial authority to refer parties to arbitration. The Hon’ble Supreme Court in the case of Cox and Kings Ltd. vs. SAP India Pvt. Ltd. and Ors , [ (2024) 4 SCC 1 ] . has held that: “45. Power of judicial authority to refer parties to arbitration. - Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of theparties or any person claiming through or under him, refer the parties to arbitration, that the said agreement is null and void, inoperative or incapable of being performed. In view of the language of Section 45, this Court held that the expression "any person" reflects a legislative intent of enlarging the scope beyond "parties" who are signatories to the arbitration agreement to include non-signatories. However, the court noted that such non-signatory parties are required to claim "through or under the signatory party." Thus, this Court accepted that arbitration is possible between a signatory to an arbitration agreement and a third party or non-signatory claiming through a party.” 27. Further, it is to be noted that under Sections 8 and 11 of the Act, the referral Court’s inquiry into whether a non-signatory is bound by the arbitration agreement is confined to a prima facie evaluation. The Court is only required to ascertain the existence and validity of the arbitration agreement and whether there is a plausible link indicating the non-signatory’s involvement. A detailed factual and legal enquiry to extend jurisdiction to non- signatory party, by ascertaining mutual consent, should be undertaken only by the arbitrator. 28. The Hon’ble Supreme Court in the case of Shin-Etsu Chemical Co. Ltd. v. Aksh Opti fibre , [ AIR 2005 SC 3766 ] has held that: “164. In case of joinder of non-signatory parties to an arbitration agreement, the following two scenarios will prominently emerge: first, where a signatory party to an arbitration agreement seeks joinder of a non-signatory party to the arbitration agreement; and second, where a non-signatory party itself seeks invocation of an arbitration agreement. In both the scenarios, the referral court will be required to prima facie Rule on the existence of the arbitration agreement and whether the non-signatory is a veritable party to the arbitration agreement. In both the scenarios, the referral court will be required to prima facie Rule on the existence of the arbitration agreement and whether the non-signatory is a veritable party to the arbitration agreement. In view of the complexity of such a determination, the referral court should leave it for the Arbitral Tribunal to decide whether the non- signatory party is indeed a party to the arbitration agreement on the basis of the factual evidence and application of legal doctrine. The Tribunal can delve into the factual, circumstantial, and legal aspects of the matter to decide whether its jurisdiction extends to the non-signatory party. In the process, the Tribunal should comply with the requirements of principles of natural justice such as giving opportunity to the non- signatory to raise objections with regard to the jurisdiction of the Arbitral Tribunal. This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of determination of true parties to an arbitration agreement to be decided by the Arbitral Tribunal Under Section 16.” 29. The doctrine of “kompetenz-kompetenz”, also referred to as “compétence-compétence”, or “compétence de la recognized”, implies that the Arbitral Tribunal is empowered and has the competence to rule on its own jurisdiction, including determining all jurisdictional issues, and the existence or validity of the arbitration agreement. This doctrine is intended to minimise judicial intervention, so that the arbitral process is not thwarted at the threshold, when a preliminary objection is raised by one of the parties. ( See: Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd , [ AIR 2020 SC 979 ] 30. In view of the complexity involved in the determination of the question as to whether the Respondent No. 2 is a party to the arbitration agreement or not, we are of the view that it would be appropriate for the arbitral tribunal to take a call on the question after taking into consideration the evidence adduced before it by the parties and the application of the legal doctrine as elaborated in the decision in Cox and Kings (supra) 31. The Hon’ble Supreme Court in the case of Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Stamp Act, 1899 , [ (2024) 6 SCC 1 ] has held that: “81. The Hon’ble Supreme Court in the case of Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Stamp Act, 1899 , [ (2024) 6 SCC 1 ] has held that: “81. One of the main objectives behind the enactment of the Arbitration Act was to minimise the supervisory role of Courts in the arbitral process by confining it only to the circumstances stipulated by the legislature. For instance, Section 16 of the Arbitration Act provides that the Arbitral Tribunal may Rule on its own jurisdiction "including ruling on any objection with respect to the existence or validity of the arbitration agreement". The effect of Section 16, bearing in view the principle of minimum judicial interference, is that judicial authorities cannot intervene in matters dealing with the jurisdiction of the Arbitral Tribunal. Although Sections 8 and 11 allow Courts to refer parties to arbitration or appoint arbitrators, Section 5 limits the Courts from dealing with substantive objections pertaining to the existence and validity of arbitration agreements at the referral or appointment stage. A Referral Court at Section 8 or Section 11 stage can only enter into a prima facie determination. The legislative mandate of prima facie determination ensures that the Referral Courts do not trammel the Arbitral Tribunal's authority to Rule on its own jurisdiction.” 32. In view of the law as annunciated by the Apex Court, and in view of the reasons assigned above, this Court of the view that the appellant being a maintenance company/nominee of the Developer, though is not a party to the DAGPA, would be bound by the terms, of DAGPA entered into by the Developer when it comes to post development obligations. Thus, any dispute arising under DAGPA relating to post development activity can be referred to the arbitral proceedings, although the Appellant is not a signatory to the DAGPA. Since, in the present case the appellant company is involved in activities such as maintaining property or providing services integral to the DAGPA, the disputes arising in relation to post development could be considered as part of the dispute resolution process. 33. Therefore, this Court is of the considered opinion that the Court below has erred in dismissing the underlying Interlocutory application. 34. 33. Therefore, this Court is of the considered opinion that the Court below has erred in dismissing the underlying Interlocutory application. 34. Accordingly, the C.M.A. is allowed; the order of the Court below dated 05.01.2024 passed in I.A. No.589 of 2024 in O.S. No.45 of 2024 is set aside and the parties are referred to the ongoing arbitral proceedings. 35. Thus, the Civil Miscellaneous Appeal is allowed and No Costs. As a sequel, miscellaneous petitions pending if any shall stand closed. No order as to costs.