Karnataka High Court
M/S Smart Asset Services India Pvt.Ltd vs Trishul Developers on 12 January, 2018
Author: Vineet Kothari
Bench: Vineet Kothari
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 12TH DAY OF JANUARY 2018
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
CIVIL MISC. PETITION No.288/2017
BETWEEN
1. M/S SMART ASSET SERVICES
INDIA PVT. LTD.,
PRESENTLY HAVING ITS
REGISTERED OFFICE AT:
NO.151, 9TH MAIN, 6TH SECTOR,
HSR LAYOUT, BANGALORE-560102.
REPD. BY ITS DIRECTOR,
MS. MEENU AGARWAL. ... PETITIONER
(BY SRI. SHIVAPRASAD SHANTANAGOUDAR, ADV.)
AND
1. TRISHUL DEVELOPERS
A PARTNERSHIP FIRM,
HAVING ITS OFFICE AT:
MITTAL TOWERS,
NO.109, "B" WING, FIRST FLOOR,
NO.6, M.G.ROAD, BANGALORE-560001.
REPD. BY ITS MANAGING PARTNER,
MR. NIRAJ MITTAL.
2. MR. NIRAJ MITTAL
MAJOR, MANAGING PARTNER,
TRISHUL DEVELOPERS,
Date of Order 12.01.2018 CMP.No.288/2017
M/s. Smart Asset Services India Pvt. Ltd.,
vs. Trishul Developers & Ors.
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MITTAL DEVELOPERS,
NO.109, "B" WING, FIRST FLOOR,
NO.6, M.G.ROAD, BANGALORE-560001.
ALSO RESIDING AT: 94/D,
9TH "C" MAIN, RMV EXTENSION,
BANGALORE-560080.
3. MR O P MITTAL,
MAJOR, TRISHUL DEVELOPERS,
MITTAL DEVELOPERS,
NO.109, "B" WING, FIRST FLOOR,
NO.6, M.G.ROAD, BANGALORE-560001.
ALSO RESIDING AT: 94/D,
9TH "C" MAIN, RMV EXTENSION,
BANGALORE-560080.
4. MRS. UMA MITTAL
MAJOR, TRISHUL DEVELOPERS,
MITTAL DEVELOPERS,
NO.109, "B" WING, FIRST FLOOR,
NO.6, M.G.ROAD, BANGALORE-560001.
ALSO RESIDING AT: 94/D,
9TH "C" MAIN, RMV EXTENSION,
BANGALORE-560080.
5. MRS. JYOTI MITTAL
MAJOR, TRISHUL DEVELOERPS,
MITTAL DEVELOPERS,
NO.109, "B" WING, FIRST FLOOR,
NO.6, M.G.ROAD, BANGALORE-560001.
ALSO RESIDING AT: 94/D,
9TH "C" MAIN, RMV EXTENSION,
BANGALORE-560080. ...RESPONDENTS
Date of Order 12.01.2018 CMP.No.288/2017
M/s. Smart Asset Services India Pvt. Ltd.,
vs. Trishul Developers & Ors.
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(SRI. K.B.S.MANIAN, ADV. FOR R1, R3, R4 AND
R5.)
THIS CMP IS FILED UNDER UNDER SEC.11(5, 6)
OF THE ARBITRATION AND CONCILIATION ACT 1996,
PRAYING THIS HON'BLE COURT TO (A) NOMINATE
HON'BLE MR. JUSTICE (RETD.) V.JAGANNATHAN,
HON'BLE HIGH COURT OF KARNATAKA, AS THE SOLE
ARBITRATOR, IN TERMS OF CLAUSE 10.2 OF THE
AGREEMENT OF SELL VIDE ANNEXURES A TO A7, A9
TO A13 AND A15 TO A23, ALL DATES 01.02.2013,
ANNEXURE A8 DATED:23/05/2013, ANNEXURE A14
DATED:13/06/2013; AND CLAUSE 8.2 OF THE
CONSTRUCTION AGREEMENTS VIDE ANNEXURES B
TO B7, B9 TO B13 AND B15 TO B23, ALL
DATED:01/02/2013, ANNEXURE B8 DATED:
23/05/2013, ANNEXURE B14 DATED:13/06/ 2013,
TO ADJUDICATE UPON THE DISPUTES WHICH HAVE
ARISEN BETWEEN THE PETITIONER AND THE
RESPONDENTS;(B) PASS SUCH OTHER ORDERS TO
GRANT SUCH OTHER RELIEFS AS THIS HON'BLE
COURT MAY DEEM FIT IN THE INTEREST OF
JUSTICE.
THIS CMP COMING UNDER ORDERS THIS DAY,
THE COURT MADE THE FOLLOWING:-
Date of Order 12.01.2018 CMP.No.288/2017
M/s. Smart Asset Services India Pvt. Ltd.,
vs. Trishul Developers & Ors.
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ORDER
Sri. Shivaprasad Shantanagoudar, Adv. for the petitioner Mr. K.B.S.Manian, Adv. for R1, R3, R4 AND R5.
Petitioner-M/s.Smart Asset Services India Pvt.Ltd., Bangalore has filed this petition under Section 11(5) and (6) of the Arbitration and Conciliation Act seeking appointment of Arbitrator by this Court against the respondent M/s.Trishul Developers- A Partnership Firm.
2. The petitioner entered into a bulk purchase agreement for residential units to be constituted by the respondent-firm M/s.Trishul Developers on the land provided by the third party, viz., the land owners, namely Mr.R.Narayana Swamy and others as mentioned in the series of Agreements and one of them being produced before this Court vide Annexure-A dated 01.02.2013.
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3. A dispute is said to have arisen between these parties on account of respondent-1 M/s.Trishul Developers failing to develop the said property in full and hand over the requisite number of the residential units to the petitioner as per the Agreements in question. The Agreement between the parties contains an Arbitration Clause in Clause No.10.2 and Clause 8.2 of Construction Agreement of Sale both dated 01.02.2013. They are quoted below for ready reference:
10.2: The parties shall amicably resolve any and all disputes arising out of or in connection with this agreement, failing which the disputes shall be settled in accordance with provisions of the Arbitration and Conciliation Act, 1996. The parties shall mutually appoint a sole arbitrator to conduct the arbitration proceedings. The venue for arbitration shall be Bangalore and the language for arbitration shall be English.
8.2.The parties shall amicably resolve any and all disputes arising out of or in connection with this Agreement, failing which the dispute shall be Date of Order 12.01.2018 CMP.No.288/2017 M/s. Smart Asset Services India Pvt. Ltd., vs. Trishul Developers & Ors.6/16
settled in accordance with provisions of the Arbitration and Conciliation Act, 1996. The parties shall mutually appoint a Sole Arbitrator to conduct the arbitration proceedings. The venue for arbitration shall be Bangalore and the language for arbitration shall be English."
4. The Petitioner served a notice upon the respondent partnership Firm M/s.Trishul Developers for the appointment of Arbitrator in terms of said clause vide Notice Annexure-H dated 22.6.2017. However, the parties thereafter have failed to appoint an agreed person as an Arbitrator to resolve the dispute between the parties. Hence, the present petition u/s 11 of the Act of 1996.
5. While the learned counsel for the petitioner, Mr.Shivaprasad Shantanagoudar has submitted that a former Judge of this Court may be appointed under Section 11 of Arbitration and Conciliation Act, 1996, the learned counsel for the respondent has raised certain objections which are dealt with hereunder:
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6. Mr.K.B.S.Manian, learned counsel for respondents has drawn the attention of the Court towards a substituted agreement between the parties which is produced on record vide Annexure-G executed on 8.9.2014 with the title "Addendum to the Supplemental Agreement" according to which, as the learned counsel submitted, the parties had agreed to settle their dispute by payment of certain amount as compensation which the learned counsel submitted that it was partly paid but, some of the cheques given under the said Agreement bounced. He has further drawn the attention of the Court towards Clause.5 of the said Supplemental Agreement dated 8.9.2014 which stipulates that, "the terms of this Addendum will prevail over the Definitive Agreements, Supplemental Agreements and any other documents executed between the parties only with respect to the terms herein contained."
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7. The learned counsel for respondents, therefore submitted that since the said last Supplemental Agreement dated 8.9.2014 does not specifically either provide for an Arbitration Clause, nor does it refer or incorporate any of the earlier Arbitration Clause like 10.2 quoted above, therefore, there is no Agreement between the parties to this effect and therefore, the Arbitrator cannot be appointed under Section 11 of the Arbitration and Conciliation Act, 1996. He has also submitted before the Court that no Notice for appointment of Arbitrator has been served on the Land Owners, namely R.Narayanaswamy and others and therefore, for this reason also, the appointment of Arbitrator by resort to Section 11 of the Arbitration and Conciliation Act, 1996 cannot be made. He has relied upon a decision of the Hon'ble Supreme Court in the case of DURO FELGUERA S.A. vs. GANGAVARAM PORT LTD., reported in (2017) 9 SCC 729.
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8. I have heard the learned counsel for the parties and perused the record and the citation.
9. In the opinion of this Court, the objection raised by the learned counsel for the respondents are not sustainable in law and deserves to be over ruled and, an Arbitrator under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 deserves to be appointed by this Court.
10. Firstly, the execution of the Addendum to the Supplemental Agreement on 8.9.2014 between the parties vide Annexure-G was only for the limited purpose and Clause.5 thereof restricted its operation only with respect to the terms contained therein. The said Addendum to the said Supplemental Agreement was not substitute wholly, the pre-existing Definitive Agreements between the parties, which admittedly include an Arbitration Clause viz., Clause 10.2 quoted above. It has limited the operation of the said Agreement only to the specific agreed terms between the parties.
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10/16Therefore, the Arbitration Clause agreed between the parties earlier, does not get wiped out by the said Addendum to the Supplemental Agreement between the parties.
11. The decision of Hon'ble Supreme Court relied upon by the learned counsel for the respondents is distinguishable from the facts of the present case inasmuch as, in the case before the Hon'ble Supreme Court, the Arbitration Clause between the parties who had entered into by five different contracts for split up packages with different works namely New Package with foreign company M/s.Dura Felguera and Packages and two for international commercial arbitrations involving the Spanish Company and four for domestic company, were involved. In that context, the Hon'ble Supreme Court observed that the terms contained in Original Package No.4 TD including the arbitration clause could not have priority over the special conditions of contract of the split up later on contracts entered into between Date of Order 12.01.2018 CMP.No.288/2017 M/s. Smart Asset Services India Pvt. Ltd., vs. Trishul Developers & Ors.
11/16the parties. No such facts exist in the present case before this Court and therefore, the said decision is not applicable to the facts of the present case.
12. The second argument of the learned counsel for the respondents, is that Notice of Arbitration was not served upon the original land owners, namely, Mr.R.Narayana Swamy and others, is also of no substance inasmuch as, the dispute between the petitioner and the respondent-parties is said to have arisen under the Agreements entered into between them of identical in nature on 1.2.2013 and 24.5.2013 initially for purchase of bulk units of residential flats to be developed and constructed by respondent - Trishul Developers.
13. This Court need not go into the merits of the claim or precise nature of the dispute between the parties particularly with the amendment to law by Act No.6 of 2016 with effect from 23.10.2015 whereafter, the Court, while dealing with a petition under Section Date of Order 12.01.2018 CMP.No.288/2017 M/s. Smart Asset Services India Pvt. Ltd., vs. Trishul Developers & Ors.
12/1611 of the Act are only expected to verify the existence of an arbitration agreement between the parties and failure of the parties to appoint the Arbitrator within the stipulated time frame, as per the Notice served upon the opposite party.
14. The amendment of this law has been discussed by this Court in detail in its decision rendered in C.M.P. No.98/2008 in the case of N.K. DEVELOPERS PVT. LTD., vs. CONCORD INDIA LTD., relevant portion of which is reproduced hereunder:
"13. In view of the aforesaid legal position, this Court is of the view that the objections raised by the learned counsel for the Respondent are not maintainable and sustainable. Not only because no such objections have been pleaded and raised before this Court either in the Statement of Objections or otherwise in the reply to the notice served by the petitioner on the respondent seeking an appointment of the Arbitrator, but also in view of the recent amendment in law by insertion of sub-
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sections (6-A) and (6-B) in Section 11 of the Act, which not only confers positive and over-riding powers upon this Court but also at the same time an obligation to confine their examination of the existence of a valid Arbitration Agreement between the parties and to see that the arbitration proceedings are not unnecessarily delayed on the basis of such technical objections.
14. The failure on the part of the Respondent-Company itself to take the petitioner through the arbitration proceedings to the ICA, now does not entitle it to raise this objection at the fag end after eight years of pendency of the present application before this Court under Section 11 of the Act and it can be inferred therefore that the said procedure agreed between the parties to approach ICA had failed and which itself has largely defeated the very purpose of expeditious disposal of the disputes through the mechanism of Alternative Dispute Resolution (ADR) provided under the Act and agreed to by the parties.
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15. Sub-sections (6-A) and (6-B) now not only mandate the Court while dealing with application filed under Section 11 of the Act to confine its examination to the existence of a valid Arbitration Agreement which undisputedly exists in the present case and thus, the jurisdiction of this Court to appoint the Arbitrator in view of agreed Arbitration Agreement is not ousted at all. The failure of parties to appoint ICA or any other Arbitrator through the Institution of Indian Arbitration Centre can certainly be construed to be the failure of the parties, enabling any one of them to apply to this Court under Section 11(6) of the Act. Therefore, the said objection of the Respondent-Company deserves to be over-ruled and this Court is of the opinion that this Court has the jurisdiction to appoint the Arbitrator under Section 11 of the Act in the present case, at this stage.
16. The judgments relied upon by the learned counsel for Respondent on the provisions as they existed prior to the amendment of Act No.3 of 2016 w.e.f. 23.10.2015 are therefore of no Date of Order 12.01.2018 CMP.No.288/2017 M/s. Smart Asset Services India Pvt. Ltd., vs. Trishul Developers & Ors.15/16
help to the Respondent-Company. Those judgments only delineate that the procedure agreed upon between the parties for appointment of Arbitrator should be followed. That legal position, even if held applicable in the present case, has exhausted itself and the agreed mode of approaching the Indian Council of Arbitration at this belated stage is not an option for which this Court should either relegate the parties or refuse to appoint Arbitrator under Section 11(6) of the Act. Moreover, the amendment in law removes the rigour of those precedents."
15. Thus, the objections raised on behalf of the respondent are unsustainable and therefore, hereby overruled. An Arbitrator under Clause 11 of the Act deserves to be appointed by this Court.
16. Both the learned counsel for the parties fairly agree to the name of Mr.Justice R.Gururajan, a Former Judge of this Court. The petition is therefore disposed Date of Order 12.01.2018 CMP.No.288/2017 M/s. Smart Asset Services India Pvt. Ltd., vs. Trishul Developers & Ors.
16/16of by appointing Mr.Justice R.Gururajan, the former Judge of this Court, to act as the Arbitrator in the present case with a request to him to proceed with the arbitration in the matter in accordance with the provisions of the Arbitration and Conciliation Act, 1996.
17. All the contentions and claims/counter claims on merits by both the parties are kept open, to be determined by the learned Arbitrator.
18. A copy of this order be sent to the Arbitration Centre, Khanija Bhavan, Bengaluru, for proceeding further in the matter on administrative side and also to Mr.Justice R.Gururajan,, on the address available with the said Arbitration Centre, Bengaluru.
The petition filed under Section 11 of the Act is accordingly disposed of. No costs.
Sd/-
JUDGE Sk/-
CT-HR