Telangana High Court
Mrs. Akashdeep Kaur Sethi vs M/S. Sai Constructions on 15 April, 2025
Author: B. Vijaysen Reddy
Bench: B. Vijaysen Reddy
THE HONOURABLE SRI JUSTICE B. VIJAYSEN REDDY
ARBITRATION APPLICATION No.303 OF 2024
JUDGMENT:
1.1. The applicant and her two sisters Mrs. Sukhdeep Kaur Mehta and Mrs. Gagandeep Kaur Anand are joint owners of the property bearing Municipal House No.8-2-699/1 (Old) and 8-2-699/1/A (New) consisting of Ground and First Floor, admeasuring 554 square yards, forming part of Survey No.346 situated at Bhola Nagar, Road No.12, Jubilee Hills (presently Banjara Hills) Hyderabad (hereinafter referred to as 'schedule property').
1.2. The applicant along with her two sisters has entered into a registered Development Agreement cum General Power of Attorney bearing document No.3778 of 2014 dated 01.10.2014 (DAGPA) with the respondent for construction of a commercial complex in the schedule property.
1.3. As per the terms and conditions of the DAGPA, it was agreed that the parties will share built up area in the ratio of 35% : 65% i.e., 35% to the owners and 65% to the developer. Grievance of the applicant is that the respondent obtained permission for construction of a building on the schedule property vide Permit No.53569/HO/C2/CIR-10/2016 dated 2 BVRJ, AA No.303 of 2024 14.08.2019 from the Greater Hyderabad Municipal Corporation, Hyderabad, (GHMC) for construction of two cellars for parking, ground and four upper floors. But, the respondent constructed ground and three upper floors only raising the height of the ground floor and has failed to construct the fourth floor as per the sanctioned plan. It is stated that the construction was to be completed by the respondent within a period of twenty four (24) months with a grace period of six (6) months i.e., 30 months in total, from the date of approval by the GHMC. In case, the respondent fails to complete the building and fails to deliver their built up area share to the applicant and her sisters within the stipulated period, the respondent will be liable to pay Rs.2,00,000/- (Rupees two lakhs only) per month to the applicant and her two sisters who are entitled to 1/3rd each i.e., Rs.66,666.66 paise.
1.4. It is submitted that as per Clause 4 of the DAGPA, the respondent is liable to pay an amount of Rs.36,66,666.30 paise (Rupees thirty six lakhs sixty six thousand and six hundred and sixty six and thirty paise only) to the applicant for delay of 55 months i.e., from 14.08.2019 till May 2024 in completing the construction and the liability of payment of 3 BVRJ, AA No.303 of 2024 Rs.6,.666.66 per month continues from 01.06.2024 onwards till construction of fourth floor.
1.5. The case of the applicant is that (i) there was delay by the respondent in obtaining the sanctioned plan, and (ii) the respondent has not handed over 65% of the fourth floor to the applicant and her sisters.
1.6. It is submitted that the respondent has entered into supplementary agreement on 07.06.2018 to which the applicant is not a signatory. Signature of the applicant in the said supplementary agreement dated 07.06.2018 is a forged one, as such, the same is not binding her. By forging signature of the applicant in the supplementary agreement dated 07.06.2018, the respondent caused mental agony, anxiety and disturbance to the applicant, as such, the respondent is liable to pay Rs.1.00 crore to the applicant towards damages. In addition to that the respondent is liable to pay property tax in respect of the subject building.
1.7. The applicant has issued legal notice dated 06.05.2024 to the respondent invoking arbitration clause and nominated Justice Vilas V. Afzulpurkar, Former Judge of the erstwhile High Court for the State of Telangana and the State of Andhra Pradesh, as Arbitrator for deciding the 4 BVRJ, AA No.303 of 2024 disputes between the applicant and the respondent. Even after service of notice, the respondent neither replied nor agreed for appointment of Arbitrator. Hence, this application.
2.1. The case of the respondent is that the subject building was constructed in accordance with the sanctioned plan and Occupancy Certificate (OC) was issued by the GHMC in respect of the subject building comprising of cellar, sub-cellar, ground floor, mezzanine floor and three upper floors; thus, five (5) floors have been constructed which is as per the sanctioned plan and OC was accordingly issued.
2.2. The applicant has filed suit in O.S. No.310 of 2024 on the file of the Hon'ble XXVI Additional Chief Judge, City Civil Court, Hyderabad, for partition and separate possession of the subject property and the same is pending adjudication. The suit has been filed making a false claim of partition, even though the subject property was partitioned between the builder and the applicant and her sisters by virtue of registered Supplementary Development Agreement bearing document No.2109 of 2023 dated 27.03.2023 wherein respective shares of all the parties have been demarcated. The applicant approached this Court with unclean hands. 5
BVRJ, AA No.303 of 2024 The applicant is not entitled to any relief, much less, compensation at the rate of Rs.66,666.66/- per month as alleged in the application.
2.3. This respondent was exclusively given 2963 square feet in the first floor instead of giving shares in each individual floors. The respondent opted exclusive share in the first floor, as such, there is no need for any separate demarcation in the second and third floors. The sisters of the applicant do not have any dispute with the respondent so far as their shares are concerned. The applicant has not made her sisters as party respondents to this application which shows that she has not approached this Court with clean hands. The respondent has paid property tax to the extent of his share as per Clause 15 of the DAGPA.
2.4. The allegation that fourth floor is not completed is incorrect. In fact, if additional floor is constructed, respondent would stand to benefit as he will be entitled to 33% share in the additional floor. However, the respondent cannot construct additional floor as it will be in deviation of the sanctioned plan. The applicant having filed suit in O.S. No.310 of 2024 and chosen to go before the civil Court, cannot seek reference to the Arbitrator as she has waived her right to pursue arbitral proceedings. Thus, the instant arbitration application is not maintainable. 6
BVRJ, AA No.303 of 2024
3. Heard Mr. Ashok Kumar Agarwal, learned counsel, representing M/s. Lex Arjava LLP, learned counsel for the applicant, and Mr. V.S. Sudhakar, learned counsel for the respondent, and perused the material on record.
4. The learned counsel for the applicant submitted that maintainability of arbitral proceedings is a point to be decided by the learned Arbitrator. The dispute before the Civil Court and the claim under arbitration notice are distinct and separate. The DAGPA contains arbitration clause. As dispute has arisen between the parties, arbitration clause has been validly invoked and thus this Court having limited jurisdiction under Section 11(6) of the Arbitration and Conciliation Act 1996 (for short 'Act') has to allow the arbitration application leaving the contentious issues open to be decided by the learned Arbitrator.
5. The learned counsel for the respondent placed reliance on the decision of the Hon'ble Supreme Court in Sukanya Holdings (P) Ltd. V. Jayesh H. Pandya 1 and also the High Court of Delhi in Shree Cement Limited v. Trehan Farms Pvt. Ltd., 2 and submitted that merely because there is arbitration agreement between the parties, it cannot be said that the 1 (2003) 5 SCC 531 2 2016 231 DLT 90 7 BVRJ, AA No.303 of 2024 suit per se is not maintainable. Even if the parties agreed for arbitration, when one party institutes civil suit, if the other party does not raise objection of arbitration as required under Section 8(1) of the Act, the arbitration agreement is deemed to have been waived. The suit for partition was instituted by the applicant herself and though the relief therein is for partition and separate possession in substratum, the claim in the partition suit and in the arbitration notice is one and the same. Assuming that the claim in the suit and arbitration notice are distinct and separate, still the instant application is not maintainable as the provisions of the Act does not permit splitting of claims. Therefore, the arbitration application is liable to be dismissed.
6. Section 8 of the Act reads as under:
"8. Power to refer parties to arbitration where there is an arbitration agreement.--
(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration 8 BVRJ, AA No.303 of 2024 unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
7. In Shree Cement Limited's case (Supra 2), the High Court of Delhi held as under:
"8. I have hereinabove observed that the impugned order is patently illegal, inasmuch as the Arbitration Act, though a law within the meaning of Order 7 Rule 11 (d) of CPC but is not an absolute bar to the maintainability of a suit. The said Act, vide Section 8 thereof mandates the Judicial Authority 9 BVRJ, AA No.303 of 2024 before which an action is brought in a matter which is the subject matter of an arbitration agreement to refer the parties to arbitration, only if a party to the arbitration agreement or any person claiming through him or under him applies, not later than when submitting his first statement on the substance of the dispute. If no such application under Section 8 is filed, at the stage provided therefor, the suit will proceed notwithstanding the arbitration agreement between the parties and the Civil Court would not be denuded of its jurisdiction to try the suit. Save for Section 8, there is no other provision in the Arbitration Act, for it to be said that the very existence of an arbitration clause is a bar to the maintainability of the suit. What follows is, that the existence of an arbitration clause does not come in the way of institution of the suit and only if the defendant(s), upon being served with the summons of the suit, apply under Section 8, would be question of the non- maintainability of the suit and referring the party to arbitration would arise.
9. ... ... ...
10. I have, dealing with the said subject in Roshan Lal Gupta v. Parasram Holdings Pvt. Ltd. held-
"It is not as if the civil court per se does not have jurisdiction to entertain a suit emanating from a transaction subject matter of arbitration agreement. A civil court cannot dismiss a suit instituted before it, even though found to be subject matter of an arbitration agreement, at the threshold. It 10 BVRJ, AA No.303 of 2024 is always open to the defendant to the suit to waive, give up and abandon the plea of arbitration and if that were to happen then the suit will continue before the civil court. The manner in which the defendant in a suit which is the subject matter of an arbitration agreement is to set up the plea of arbitration has been prescribed in Section 8 of the Act. Such a plea has to be raised not later than when submitting the first statement on the substance of the dispute. If such a plea is not raised while submitting the first statement on the substance of the dispute, the defendant is thereafter barred from raising such a plea and if that be the position then it cannot be argued that even though the plea is not raised in the manner prescribed in Section 8 of the Act, it is open to the defendant thereafter also to contend that the suit is barred by virtue of Section 5 of the Act.""
8. In Sukanya Holdings' case (Supra 1), the Hon'ble Supreme Court held as under:
"12. For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part I of the Act, the judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Further, the matter is not required to be referred to the Arbitral Tribunal, if: (1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed 11 BVRJ, AA No.303 of 2024 before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that the Arbitration Act does not oust the jurisdiction of the civil court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under sub-sections (1) and (2) of Section 8 of the Act.
13. Secondly, there is no provision in the Act that when the subject-matter of the suit includes subject-matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject-matter of the suit to the arbitrators.
14. Thirdly, there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the arbitration agreement. As against this, under Section 24 of the Arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the court may refer the same to arbitration provided that the same can be separated from the rest of the subject-matter of the suit. The section also provided that the suit would continue so far as it related to parties who have not joined in such application
15. The relevant language used in Section 8 is:
"in a matter which is the subject of an arbitration agreement".
The court is required to refer the parties to arbitration. 12
BVRJ, AA No.303 of 2024 Therefore, the suit should be in respect of "a matter" which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words "a matter" indicate that the entire subject-matter of the suit should be subject to arbitration agreement.
16. The next question which requires consideration is - even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act. In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action, that is to say, the subject-matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject- matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed
17. Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and the other to be decided by the civil court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing 13 BVRJ, AA No.303 of 2024 the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums."
9. From a reading of Section 8 of the Act and the decisions referred supra, it is clear that filing of suit in connection with a dispute having arbitration agreement per se is not barred. When a proceeding is initiated before a Forum or a Civil Court, the contesting party is required to raise objection as regards existence of arbitration clause at the time of filing first statement under Section 8(1) of the Act. In the present case, filing of application under Section 8(1) of the Act does not arise as the respondent did not file any suit as such so as to give scope to the applicant to raise objection under Section 8(1) of the Act. Interestingly, the applicant herself has filed the suit. Thus, on the analogy of waiver of arbitration clause under Section 8(1) of the Act, the applicant having herself instituted the suit has waived her right to seek reference of dispute to arbitration.
10. The suit is filed alleging that the builder - defendant, who is respondent herein, has constructed ground + three floors instead of ground + four floors. It is further stated in paragraph No.4 of the plaint that the applicant is proceeding with arbitration for which separate legal notice has 14 BVRJ, AA No.303 of 2024 been issued. It was also contended in the suit that supplementary agreement dated 07.06.2018 was not signed by the applicant and her signature on it was a forged one. The subsequent supplementary agreement bearing document No.2109 of 2023 dated 27.03.2023 was executed suppressing the earlier supplementary agreement dated 07.06.2018. The applicant has hurriedly asked to sign the subsequent supplementary agreement dated 27.03.2023 wherein shares of the parties have not been demarcated by metes and bounds. The applicant issued legal notice dated 06.05.2024 calling upon defendant Nos.1 to 3, who are sisters of the applicant and the respondent herein, to execute supplementary agreement to partition the suit schedule properties. Assuming that the claim in the suit and that arbitration are distinct and separate, bifurcation of claims / cause of action is not permissible in view of the law laid down by the Supreme Court in paragraph Nos.13 to 17 in Sukanya Holdings' case (Supra 1). Further, the applicant has also not chosen to make her sisters as parties to this application and even on this ground also, the application is liable to be dismissed.
11. For the aforesaid reasons, the arbitration application is dismissed. No order as to costs.
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BVRJ, AA No.303 of 2024 As a sequel thereto, miscellaneous applications, if any, pending in the arbitration application stand closed.
______________________ B. VIJAYSEN REDDY, J April 15, 2025.
NOTE: L.R. COPY TO BE MARKED (BO) PV