Bombay High Court
Gammon Realty Limited vs Jagdish Shingote on 1 July, 2024
2024:BHC-OS:9613
7,8,10-7-OSCARAPL-23961-2023.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION APPLICATION (L) NO. 23961 OF 2023
Gammon Realty Ltd ...Applicant
Versus
Pradeep Dabholkar & Anr ...Respondents
WITH
COMMERCIAL ARBITRATION APPLICATION (L) NO. 24033 OF 2023
Gammon Realty Ltd ...Applicant
Versus
Jagdish Shingote & Anr ...Respondents
WITH
COMMERCIAL ARBITRATION APPLICATION (L) NO. 24131 OF 2023
Gammon Realty Ltd ...Applicant
Versus
Anil Madhukar Naik & Anr ...Respondents
Ms. Tanisha Choudhary, a/w Romin Sangoi, i/b IC Legal,
Advocates for the Applicant.
Mr. Abhijeet J. Kandarkar, Advocate for Respondent in
CARAPL/23961/2023.
Mr. Rajesh Mahesh Yadav, Advocate for Respondents in
CARAPL/24033/2023 and CARAPL/24131/2023.
CORAM : SOMASEKHAR SUNDARESAN, J.
DATE: JULY 01, 2024 Digitally signed by ASHWINI ASHWINI JANARDAN JANARDAN VALLAKATI VALLAKATI Date: Page 1 of 12 2024.07.03 18:04:49 +0530 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc ORAL JUDGEMENT: (Per, Somasekhar Sundaresan J.)
1. These three captioned Applications with a prayer to appoint an arbitrator under the Arbitration and Conciliation Act, 1996 ("Arbitration Act") have the same underlying facts. Therefore, with consent of the parties, these are taken up together for hearing and disposal.
2. At the heart of the dispute between the parties in each of the three Applications lies the alleged delay on the part of each of the Respondents in vacating their premises as required of them under an addendum dated 8th February, 2022 ("Addendum"), which supplemented a Development Agreement dated 31 st December, 2012 ("Agreement") - collectively, "Development Agreement".
3. It appears that under the Development Agreement, various members of the Bandra Abhijat Co-operative Housing Society Ltd. whose building (viz. Building No. 4, Khernagar, Bandra East, Mumbai - 400051) was to be redeveloped, were required to vacate their premises by 25th March, 2022 and eventually they vacated on 23 rd July, 2022. The Applicant is the Developer who is redeveloping the building in which these Respondents own premises.
4. It is seen that the Agreement was executed between the Developer and the Society. The individual members of the society were not signatories as parties to the Development Agreement before the Addendum. It is also apparent from the record that when the Addendum was executed, the Society and the Developer took care to Page 2 of 12 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc ensure that all the members of the society are signatories to the Addendum. It is the Addendum that brings in the rights of the individual members to receive transit rent, alternate accommodation and such other rights customary to redevelopment. Therefore, for the members to have the benefit of the rights flowing from the Development Agreement, it is the Addendum that constitutes the contract-forming documentation, indeed, bringing with it, the obligations owed in consideration for such rights.
5. It is seen from the Addendum annexed to these Applications that in Clause 22, the signatories to the Addendum have agreed that all the terms and conditions of the Agreement would remain unchanged, and the terms and conditions contained in the Addendum would be deemed to have been incorporated in the Agreement as if the same are originally incorporated in the Agreement and that the Addendum would form an integral and operative part of the Agreement. It was agreed that in that context, the term "Agreement" would mean to include the Addendum as well.
Privity with Mr. Shingote and Mr. Naik:
6. The replies filed by the Respondents are taken on record. Upon a careful review of the material on record it is evident ex facie, that the Respondents in Commercial Arbitration Application (L) No. 24033 of 2023 (Mr. Jagdish Haribhau Shingote) and Commercial Arbitration Application (L) No. 24131 of 2023 (Mr. Anil Madhukar Naik) are in fact signatories to the Addendum and through the structure of the Addendum have become signatories to the Development Agreement. Consequently, the Respondents in these two Applications are clearly signatories to the arbitration agreement contained in the Page 3 of 12 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc Agreement, and, therefore, would not be able to claim that they are not signatories to the arbitration agreement or that the arbitration agreement does not exist in relation to their relationship with the Developer.
7. Consequently, Mr. Shingote and Mr. Naik would not be able to resist this Court concluding that an arbitration agreement is validly in existence between the Developer and each of these Respondents . Eminently, the disputes and differences are capable of being arbitrated upon under the arbitration agreement. Therefore, expressing no opinion on merits, leaving it all to the domain of the Arbitral Tribunal, the aforesaid two Applications deserve to be allowed for appointment of an Arbitral Tribunal to adjudicate the matter on merits.
Privity with Mr. Dabholkar:
8. As regards the Respondent in Commercial Arbitration Application (L) No. 23961 of 2023 (Mr. Pradeep Anant Dabholkar), the submission of Learned Counsel for the Respondent is that his client alone has in fact not signed the Addendum. Consequently, according to him, this Court cannot return a finding that there is an arbitration agreement in existence. Therefore, he would submit, the jurisdiction under Section 11 of the Arbitration Act, for appointing an arbitrator is incapable of being invoked.
9. In response, Learned Counsel for the Applicant in these three Applications submits that this issue is being well covered by the judgments rendered in:-
a) Chirag Infra Projects Pvt. Ltd. Vs. Vijay Jwala Coop.Page 4 of 12
July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc Hsg. Soc. Ltd. & Anr - 2021 SCC OnLine Bom 364 ("Chirag") (Paragraph 18);
b) Westin Sankalp Developers vs. Ajay Sikandar Rana and Others - 2021 SCC OnLine Bom 421 (Paragraph
14) ("Westin"); and
c) Girish Mulchand Mehta and Anr. Vs. Mahesh S. Mehta - 2010(2) Mh.L.J. 657 ("Girish") (Paragraph
16)
10. Based on these judgements, Learned Counsel for the Applicant would argue that a member of a society would lose individual identity and would then have to act only in terms of what the Society (to which he has surrendered his individual will), decides, by majority, to bind the entire larger collective. Such a principle is unexceptionable. However, it must be noted that in all these cases cited, the Court was considering petitions for interim measures under Section 9 of the Arbitration Act against parties purporting to have not executed the arbitration agreement. Girish succinctly puts it in the following words:-
"At the same time, the Kerala High Court has plainly opined that it is possible to pass orders under section 9 against a third party if such person is claiming under the party to the Arbitration Agreement. Thus understood, Section 9 can be invoked even against a third party who is not party to an arbitration agreement or arbitration proceedings, if he were to be person claiming under the party to the arbitration agreement and likely to be affected by the interim measures.....the court would certainly have jurisdiction to pass appropriate order by way of interim measures even against the appellants herein, Page 5 of 12 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc irrespective of the fact that they are not party to the Arbitration Agreement or the Arbitration Proceedings."
[Emphasis Supplied]
11. In Chirag, a Learned Single Judge of this Court issued protective directions under Section 9 of the Arbitration Act, vacating a member of a housing society who had refused to sign the relevant development agreement and refused to vacate his premises. Differentiating and rejecting reliance on a judgement of the Hon'ble Supreme Court Indowind Energy Ltd. Vs. Wescare (I) Ltd. & Anr. - (2010) 5 SCC 306 ("Wescare") placed on behalf of such member, the Learned Single Judge held that the decision in Wescare, being rendered in the Section 11 jurisdiction, it could not be imported into application in proceedings under Section 9. Chirag explains this position in the following words:-
"The petitioner before the Supreme Court sought an order under Section 11 against two parties. One of them resisted the petition saying that the agreement did not contemplate any contractual relationship between the petitioner and itself and there was no arbitrable dispute. It was in that context that Wescare was decided."
[Emphasis Supplied]
12. The Learned Single Judge followed the view expressed in Chirag when ruling in Westin, again when exercising jurisdiction under Section 9 and not under Section 11. Indeed, in matters relating to redevelopment, the Court exercising jurisdiction under Section 9 of the Arbitration Act has time and again intervened to preserve the subject matter of the arbitration in the form of issuing directions including Page 6 of 12 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc forcible eviction of members of societies who do not vacate their flats by the scheduled deadline, thereby holding up redevelopment, and inflicting costs on other members and on the Society.
13. Therefore, the core question to be answered is whether this Court, in exercise of jurisdiction under Section 11 of the Arbitration Act, would be able to return a conclusive finding about the existence of an arbitration agreement, between the Developer and Mr. Dabholkar, who had held back his signature from the Addendum. It is apparent that Mr. Dabholkar's entitlement to his rights to the redeveloped property now accrues to him and it is but the Development Agreement that it flows through to him. Mr. Dabholkar consciously refused to sign the Addendum, which is now the basis of his submission that the Developer has no privity with him as regards an arbitration agreement.
14. The parties primarily relied on case law and did not address the distinction, if any, between the scope of jurisdictions under Section 9 and Section 11 of the Arbitration Act. Wescare, rendered in the context of the Section 11 jurisdiction, is indeed a positive declaration that for purposes of Section 7 of the Arbitration Act, the the arbitration agreement has to be in writing and cannot be inferred by conduct of the parties. Therefore, this Court examined the factual record closely to examine what privity, if any, between the Developer and Mr. Dabholkar, has come into existence, in respect of the arbitration agreement.
15. It became evident from the record that Mr. Dabholkar executed a Permanent Alternative Accommodation Agreement ("PAAA") on 12th July, 2022, which was registered on 22 nd July, 2022, and on the next day, he handed over vacant possession. The PAAA is Page 7 of 12 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc contained at Exhibit F to the Application. Two provisions in the PAAA stand out as relevant, and are extracted below:-
Clause 2:
"The Parties hereto agree, declare and confirm that the Development Agreement and the said Power of Attorney and the Addendum are valid, subsisting and binding on the Parties hereto."
[Emphasis Supplied] Clause 17:
"All the rights and entitlements of the Parties as contained in the Development Agreement and the Addendum shall be deemed to have been incorporated herein."
[Emphasis Supplied]
16. Therefore, the cumulative effect of these two provisions needs to be analysed. Under Clause 17 of the PAAA, all the rights and entitlement of the Parties contained in the Agreement and in the Addendum are deemed to have been incorporated in the PAAA. Under Clause 2, Mr. Dabholkar and the Applicant have agreed and declared that the Development Agreement and the Addendum are binding on them. Therefore, through the instrument of the PAAA, Mr. Dabholkar indeed has privity of contract with the arbitration agreement contained in the Development Agreement.
17. Section 7(5) of the Arbitration Act provides that the reference in a contract to a document containing an arbitration clause would constitute an arbitration agreement if it were in writing, and the reference is such as to make the arbitration clause a part of the contract.
Page 8 of 12July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc The signatories to the PAAA have declared that the Development Agreement (including the Addendum) binds them. They have also declared that the rights and entitlements in the Development Agreement are deemed to have been incorporated in the PAAA. The net effect of these two provisions is that Mr. Dabholkar has confirmed that the Development Agreement is binding on him and has agreed to incorporate its terms into the PAAA that has been signed by him. Thereby, the arbitration agreement contained therein is also a binding contract to which he has committed.
18. Such a position is consistent and well aligned with the fact that Mr. Dabholkar's entitlements to his share of the redeveloped property flows from the Development Agreement. After his initial conduct of refusing to sign, he has eventually accepted his rights under the Development Agreement, with the attendant obligations and signified that by executing the PAAA. He has also abided by the obligation to vacate as required under the Addendum. In his affidavit in reply, Mr. Dabholkar has also articulated that once the PAAA was executed and registered, he vacated the premises, consistent with Clause 6 of the Addendum. Evidently, in this Court's opinion, the existence of a valid and binding arbitration agreement is therefore, conclusively established.
19. In these circumstances, in view of the decisions rendered in the case law referred above, there is no reason to keep these Applications pending further and these Applications deserves to be allowed, and consequently, we pass the following order:
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a) Mr. Vinay Kanodia, an advocate of this Court is hereby appointed as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties arising out of and in connection with the Agreement referred to above. For clarity, the contact particulars of the Learned Sole Arbitrator as submitted by the parties is extracted below:-
[ Mr. Vinay Kanodia, Address : 5 & 6, Bombay Mutual Building, 3rd Floor, 293, Dr. D.N. Road, Fort, Mumbai.
Email : [email protected] ]
b) A copy of this Order will be communicated to the Learned Sole Arbitrator by the Advocates for the Applicant within a period of one week from today. The Applicant shall provide the contact and communication particulars of the parties to the Arbitral Tribunal along with the copy of this Order;
c) The Learned Sole Arbitrator is requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Arbitration Act to the parties within a period of two weeks from receipt of a copy of this Order;
d) The parties shall appear before the Learned Sole Arbitrator on such date and at such place as indicated, to obtain appropriate directions with regard to Page 10 of 12 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc conduct of the arbitration including fixing a schedule for pleadings, examination of witnesses, if any, schedule of hearings etc. At such meeting, the parties shall provide a valid and functional email address along with mobile and landline numbers of the respective Advocates of the parties to the Arbitral Tribunal. Communications to such email addresses shall constitute valid service of correspondence in connection with the arbitration;
e) The fees payable to the Learned Sole Arbitrator shall be governed by the Bombay High Court (Fee payable to Arbitrators) Rules, 2018;
f) All arbitral costs and fees of the Arbitral Tribunal shall be borne by the parties equally in the first instance, and shall be subject to any final Award that may be passed by the Tribunal in relation to costs; and
g) The parties have agreed that the venue and seat of the arbitration will be in Mumbai. It is clarified that it shall be open to the Arbitral Tribunal to conduct the proceedings online through electronic mode;.
20. Each of the Respondents has also expressed grievances against the Applicant for alleged non-compliance of obligations due. Needless to say, these grievances would all fall within the scope of disputes and differences under the Development Agreement and the Page 11 of 12 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 ::: 7,8,10-7-OSCARAPL-23961-2023.doc Respondents would be well entitled to agitate the same in the arbitration proceedings.
21. These Applications are accordingly disposed of.
22. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
[SOMASEKHAR SUNDARESAN, J.] Page 12 of 12 July 01, 2024 Ashwini Vallakati ::: Uploaded on - 03/07/2024 ::: Downloaded on - 04/07/2024 03:22:53 :::