Punjab-Haryana High Court
Privilege Health Care Services vs Dlf Qutab Enclave Complex on 26 July, 2013
Author: Sanjay Kishan Kaul
Bench: Sanjay Kishan Kaul
Arbitration Case No. 151 of 2012 (O&M) 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
Arbitration Case No. 151 of 2012 (O&M)
Reserved on:- 12.07.2013
Date of decision:- 26.07.2013
Privilege Health Care Services
......Petitioner
Vs
DLF Qutab Enclave Complex
......Respondent
CORAM:-HON'BLE MR. JUSTICE SANJAY KISHAN KAUL, CHIEF JUSTICE
Present: Mr. Arun Palli, Senior Advocate,
with Mr. Mayank Mathur, Advocate,
for the petitioner.
Mr. Chetan Mittal, Senior Advocate,
with Mr. Varun Issar, Advocate,
for the respondent.
****
SANJAY KISHAN KAUL, C.J.
The question of law which arises for consideration in this case filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act) is as to whether the claim made by the petitioner arising from the Memorandum of Understanding (hereinafter referred to as the MoU) dated 30.03.2010 in respect of the dispensary site is liable to be referred for adjudication to an arbitrator or whether it is to be adjudicated in proceedings before the Civil Court.
2. The two parties to the present petition entered into the MoU dated 30.03.2010 which states that the respondent is owner and Arbitration Case No. 151 of 2012 (O&M) 2 possessed a medical site admeasuring 1.25 acres earmarked as a dispensary site bearing No. 1201, DLF City, Phase-I, District Gurgaon, Haryana for which building plans stand approved and about 25% of the FAR stands constructed with application having been made for Part Occupation Certificate to the extent of the said construction. The petitioner had evinced interest to provide medical facilities and was thus desirous of purchasing the medical site with the constructed FAR for a total consideration of ` 13,38,00,000/-. A sum of ` 3,12,50,000/- was paid as part consideration of the property at the time of execution of the MoU and the balance sale consideration of ` 10,25,50,000/- was to be paid at the time of execution and registration of the sale deed. A sum of ` 2,00,00,000/- was to be treated as earnest money for due performance of the obligations of the petitioner. The agreement imposed obligations of various natures on both parties including obtaining occupancy certificate of the constructed 25% FAR within a period of 60 days which the respondent was to intimate to the petitioner whereafter the sale deed was to be executed within 15 days from the intimation. Time was stipulated as essence of the MoU as per clause 6. The possession was to be handed over on execution and registration of the sale deed as per clause 11.
3. The consequence for the petitioner (the second party to the MoU) delaying payments was specified in clause 13 which reads as under:-
"That in the event the party of the second part makes delay in coming forward in making payment and for execution of sale Arbitration Case No. 151 of 2012 (O&M) 3 deed as stipulated in clause 5 of MoU, the party of the first part shall be entitled to cancel this MoU, by giving fifteen days notice in writing to the party of the second part to make the payment. The party of the second part agrees that if the payment is not made within the notice period of 15 days, this MoU shall automatically stand terminated without any further notice to the party of the second part and the party of the second part shall be left with no right whatsoever on the said property. The party of the second part hereby authorizes the party of the first part that it shall thereafter be free to deal with the said property in any manner whatsoever at its sole discretion. It has been specifically agreed between the parties that in the even of termination of this MoU due to the delay or default of the party of the second part, the party of the first part shall be entitled to forfeit the earnest money as mentioned in Clause 4 above. However, the party of the first part may in its sole discretion, without prejudice to its rights as set out above, waive the breach by party of the second part in not making payments as stipulated, but on the condition that party of the second part in not making payments as stipulated, but on the condition that party of the second part shall pay to the party of the first part interest at the rate of 15% for all period of delay. It is made clear and so agreed by party of the second part that exercise of discretion in the case of one delayed payment shall not be construed to be a precedent for any further delayed payment."
4. The aforesaid clause is followed by clause 14 which is the consequence flowing for the respondent (the first party to the MoU) refusing or failing to fulfill its part to the MoU by giving an option to the petitioner to either terminate the MoU in whole or institute a suit for specific performance and the monies on termination to be refunded by the respondent. This clause reads as under:-
Arbitration Case No. 151 of 2012 (O&M) 4
"In the event the party of the first part fails or refuses to fulfill its part of this MoU, the party of the second part shall be entitled to either terminate this MoU in whole or institute a suit for specific performance. In the event, the party of the second part opts to terminate this MoU due to the default of party of the first part, the party of the first part shall immediately refund the monies paid by the party of the second part to the party of the first part under this MoU."
5. The other crucial clause in so far as the present controversy is concerned is clause 23 which provides for settlement of all disputes or differences between the parties out of or in connection with/or interpretation or performance of the terms and conditions of the agreement through the board of arbitration with the designated place being at Gurgaon (Haryana). The said clause reads as under:-
"All or any disputes or differences arising between the parties out of or in connection with/or interpretation or performance of the terms and conditions of this agreement, the small shall be referred to arbitration for adjudication. The arbitration proceedings shall be governed by the provisions of Arbitration and Conciliation Act, 1996 or any statutory amendments/modifications thereto for the time being in force. The arbitration proceedings shall be held at Gurgaon (Haryana).
The Courts at Gurgaon and the Punjab and Haryana High Court at Chandigarh shall alone have the jurisdiction in all matters arising out of/touching upon and/or concerning this agreement regardless of the place of execution of this agreement."
6. There was exchange of e-mails interse the parties for finalizing the sale deed and it appears that did not reach a culmination. Arbitration Case No. 151 of 2012 (O&M) 5 The other development which took place was that the original MoU was executed with HDIL Health Care Services Pvt. Ltd., but the name of the petitioner was changed vide notification dated 30.06.2010 soon after the MoU was executed. Rather than the matter being settled, the interse differences between the parties escalated into a legal notice being issued by the respondent through counsel to the petitioner dated 12.04.2012. The allegation in the notice was that despite the Part Occupancy Certificate having been available and drafts for sale deed being exchanged the balance payment was not forthcoming as the sale deed had not been registered. Time being essence of the contract stood expired, but nevertheless in terms of clause 13 of the MoU a final opportunity was given to the petitioner to rectify the default within a period 15 days from the date of the notice failing which the MoU would automatically stand terminated without any further notice and the earnest money of ` 2,00,00,000/- would stand forfeited.
7. The petitioner sent a reply dated 24.04.2012 conveying the willingness to execute the sale deed so long as it is in consonance with the MoU and calling upon the respondent to send the final conveyance deed. This was followed by a reminder dated 07.06.2012 putting the burden on the respondent for delaying execution of the conveyance deed on account of the terms and conditions not being finalized and once again seeking for the conveyance deed.
8. The counsel for the respondent sent a letter dated 08.06.2012 stating that the conveyance deed had been forwarded as far back as on 11.07.2011 and it is the petitioner which has failed to come Arbitration Case No. 151 of 2012 (O&M) 6 forth with the balance price. MoU was, thus, stated to have been terminated and ` 2,00,00,000/- forfeited with an offer to the petitioner to claim a balance amount of ` 1,15,00,000/-.
9. The aforesaid termination of MoU elicited a legal response on 26.06.2012 from the petitioner once again referring to the earlier legal notice. There was again legal response by the respondent on 28.06.2012 replying to the earlier communications followed up by one dated 11.07.2012.
10. The aforesaid communications, thus, show that though there is in substance no dispute mentioned about the rights and obligations of the parties arising from the MoU, the allegation has been put on one or the other qua the issue of finalization of the conveyance deed, its execution and registration and thus the payment of the balance consideration as the consequence thereof.
11. The petitioner filed an Arbitration Petition No. 06 of 2012 on 20.07.2012 under Section 9 of the said Act in the Court of the Additional District Judge, Gurgaon. The petition was dismissed on 18.08.2012. The District Judge opined that the dispute was really with regard to the specific performance of the MoU dated 30.03.2010 and clause 14 would govern the parties and not clause 23. This order was assailed by the petitioner before the learned Single Judge of this Court in FAO No. 5230 of 2012 which was decided on 24.09.2012. The learned Single Judge noticed that the petitioner herein had sought recourse to arbitration by serving a legal notice dated 17.08.2012. In the meantime, the safeguard for the petitioner was provided by stating Arbitration Case No. 151 of 2012 (O&M) 7 that if the respondent herein wishes to alienate the property it should mention about the earlier agreement and the dispute having been raised by the petitioner under Section 11 of the said Act. These interim directions were to remain in force for four months and if the petitioner filed a petition under Section 11 of the said Act then the same would continue till one month after a decision on the petition whereafter the petitioner would be at liberty to approach the arbitrator for interim relief under Section 17 of the said Act. This petition under Section 11 of the said Act was not to be affected in any manner by the order passed by the Additional District Judge, Gurgaon or the learned Single Judge on the merits of the rival claims specifically the issue whether the dispute was liable to be adjudicated by an arbitrator or by a Civil Court.
12. In the aforesaid circumstances, as a consequence of the notice issued by the petitioner under Section 11 of the said Act dated 17.08.2012 and the legal response to the same by the respondent dated 12.09.2012 that the present petition has been filed.
13. The petition has been resisted by the respondent. In substance the controversy is stated to be covered by clause 14 and, thus, it is pleaded that the petitioner is liable to be relegated to a civil remedy since the petitioner in fact seeks specific performance of the MoU. The dispute qua specific performance is stated to be not forming part of clause 23 of the MoU as the parties have deliberately limited the nature of disputes to be decided by the arbitrator by putting some of them within a scope of the civil dispute to be decided by the Civil Arbitration Case No. 151 of 2012 (O&M) 8 Court as envisaged in clause 14. Time being essence of the agreement it is pleaded that the same was breached and despite an accommodation shown by the respondent the petitioner did not come-forth to make the balance payment. On the other hand, vide the communication dated 28.02.2012 they have expressed their inability to make the balance payment till July, 2012. This letter (Annexure R4) reads as under:-
"This is in reference to the captioned subject, wherein we had agreed to purchase a medical site bearing number 1201 in DLF City, Phase 1, District Gurgaon, Haryana admeasuring 1.25 acres from your goodself for a sum of Rs. 13,38,00,000/- (Rupees Thirteen Crores and Thirty Eight Lakhs only) vide a Memorandum of Understanding dated March 30, 2010 ("MoU"). Under the said MoU we have paid Rs. 3,12,50,000/- (Rupees Three Crores Twelve Lakhs and Fifty Thousand only) as part consideration vide DD No. 511 dated February 17, 2010 drawn on PMC bank.
We would like to construct and run a hospital from the aforesaid premises which would help the residents of Gurgaon and is a noble cause and social service, however due to our internal restructuring and expansion, we would like to request you to consider extension of time for payment of the balance consideration and getting the conveyance deed executed in our favour.
We would really appreciate if you could look into our request. The payment of balance consideration for the same alongwith 15% interest for the period of delay can be paid on or before July 31, 2012."
(emphasis supplied)
14. The legal notices etc. are stated to have been triggered off on account of the respondent realizing the inability of the petitioner to Arbitration Case No. 151 of 2012 (O&M) 9 pay the amount as reflected in the letter.
15. In the contour of the aforesaid factual matrix learned senior counsel for the petitioner contended that the plea of the respondent based on applicability of clause 14 was mis-placed as the MoU had already been terminated by the respondent under clause 13 even before the stage of clause 14 arose and, thus, the disputes will be governed by clause 23 through the process of arbitration. The second limb of submission advanced by him was based on a plea of stated legal position that this Court should not be called upon to decide whether particular dispute falls within the arbitration clause or not while considering an application under Section 11 of the said Act and that should be left to the arbitrator. Learned senior counsel in this behalf has relied upon the judgement of the Hon'ble Supreme Court in Reva Electric Car Company Private Limited Vs Green Mobil 2012(2) SCC 93 wherein while rejecting the plea that the arbitration clause ceased to exist with the termination of MoU and, thus, the disputes were beyond the purview of arbitration since arbitration clause did not cover disputes related to a period beyond a particular date it was held that the parties had entered into a legally valid and enforceable MoU which provided for reference of the dispute or differences arising at any time in relation to the said MoU to arbitration. The correspondence established that the MoU was extended till it was terminated later on and since the disputes pertained to MoU they were liable to be settled through arbitration.
16. In so far as the aspect of scope of the jurisdiction under Arbitration Case No. 151 of 2012 (O&M) 10 Section 11(6) of the said Act is concerned, it was held that the Supreme Court had explained the ratio of the Constitution Bench judgement in SBP & Co. Vs Patel Engineering Ltd. and another 2005(8) SCC 618 in National Insurance Company Limited Vs Boghara Polyfab Private Limited 2009(1) SCC 267. The existence and the validity of the arbitration agreement had to be decided by the Chief Justice or his designate. The relevant portion of the judgement in National Insurance Company Limited (supra) was extracted in para 27 as under:-
"In matters where the intervention of the Chief Justice of India has been sought for appointment of a sole arbitrator under Sections 11(4), (5) and (6) of the Arbitration Act, 1996, the Chief Justice or his designate will have to decide certain preliminary issues. It would be apposite to notice here the relevant observations made in para 22, which are as follows: (National Insurance Co. Ltd. case, SCC p. 283) "22... This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.
22.1 The issues (first category) which the Chief Justice/his designate will have to decide are :
(a) Whether the party making the application has approached the appropriate High Court.
(b) Whether there is an arbitration Arbitration Case No. 151 of 2012 (O&M) 11 agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement.
22.2 The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-
barred) claim or a live claim.
(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.
22.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:
(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).
(ii) Merits or any claim involved in the arbitration."
These observations were further reiterated by this Court in A.P. Tourism Development Corpn. Ltd. Vs Pampa Hotels Ltd."
17. On the other hand, learned senior counsel for the respondent pleaded that what the petitioner seeks is specific performance of the MoU. This is stated to be apparent from para 19 of the petition. It has been pleaded that the respondent had failed to perform its part of the agreement of sale by not executing the sale deed in favour of the petitioner apart from the averments contained in the reply to the termination notice sent by the counsel for the petitioner Arbitration Case No. 151 of 2012 (O&M) 12 dated 24.04.2012 and the letter dated 07.06.2012.
18. Learned senior counsel for the respondent submitted that responsibility of the petitioner to pay the balance consideration arose after receiving the Part Occupancy Certificate on 05.05.2010 which they failed to pay. The inability of the petitioner to comply with the financial obligations is stated to be apparent from the letter dated 28.02.2012 leaving no option for the respondent but to terminate the agreement.
19. Learned senior counsel for the respondent contended by reference to clauses 14 and 23 that clause 14 was an exception to clause 23 and even if two remedies are available then the remedy of the Civil Court will prevail upon the mode of arbitration. The intention of the parties is stated to be clear from clause 14 which is the remedy in respect of disputes particularly in case of the remedy claimed of specific performance.
20. Learned senior counsel relied upon the observations of the learned Single Judge of the Karnataka High Court in Dilip Bafna Vs K.S. Vasudev 2008(1) ICC 535. The petition had been filed under Section 11 of the said Act. The defence pleaded was that the relief was in the nature of specific performance where arbitration clause was not attracted and such a dispute had been agreed by the parties to be decided by a Civil Court and on account of breach of terms of the agreement they were entitled to terminate it. The two clauses in question have been recorded as under:-
"Clause 5 of the agreement reads as under:Arbitration Case No. 151 of 2012 (O&M) 13
All questions, disputes, differences and claims whatsoever which may at any time arise between the parties hereto concerning this contract and all other documents in pursuance hereof or of any clause herein contained or as to the rights, duties, obligations or liabilities of the parties hereto respectively, shall be referred to arbitration in accordance with the provisions of Arbitration and Conciliation Act, 1996 as amended from time to time. Such arbitration proceedings shall be in English language and shall be held in Bangalore only. Subject to the preceding paragraph, the courts in Bangalore shall have exclusive jurisdiction over any disputes, differences or claims arising out of this deed.
Whereas, Clause 6.2 reads as under: Both the vendors and the purchaser shall have liberty of file suit for specific performance of contract, if either of the party refuses to perform his/their the contract and complete the sale, in terms of this agreement and all the costs shall be borne by such person who fails to perform their duty in accordance with this agreement."
21. The relevant portion relied upon by learned senior counsel is reproduced hereunder:-
"14. xxx xxx xxx xxx Therefore, we have to gather the intention of the parties from the said arbitration clause to find out whether they intend arbitration to be the sole remedy and what are the disputes which they want to be resolved by arbitration, whether all disputes arising under the agreement is to be decided by the arbitration? Further it has to be found out whether they intended to oust the jurisdiction of the Civil Court completely or whether they reserved their right or liberty to approach the Civil Court also in respect of the disputes arising under Arbitration Case No. 151 of 2012 (O&M) 14 the agreement. It is only if the arbitration agreement makes it clear that the parties agree to oust the jurisdiction of the Civil Court and all the disputes referred to arbitration and they did not want any of the disputes adjudicated by the civil court, the parties agree for resolution of the disputes through arbitration mandatorily or necessarily. It is settled law that while construing the provisions which oust the jurisdiction of the Civil Court, those provisions have to be construed strictly. The exclusion of the civil court's jurisdiction should not be readily inferred.
15. If we look into the two clauses in the agreement viz., Clause 5 and Clause 6.2, Clause 5 makes it clear that all questions and claims what-so-ever shall be referred to arbitration in accordance with the provisions of Arbitration Act. In the very same clause, it is mentioned that subject to the preceding paragraph, the Courts in Bangalore shall have exclusive jurisdiction over any disputes, differences or claims arising out of this deed. Though the word used is "shall" the same word "shall" is used in conferring jurisdiction on Bangalore Courts to resolve the dispute between the parties, Clause 6.2 exclusively deals with the relief of specific performance of a contract. A right is conferred on both the parties to approach the Civil Count, by filing a suit for specific performance if the other party refused to perform his part of the contract. Here also the word used is "Shall". In those circumstances, in the absence of the word "only" in Clause-5 of the agreement and Clause 6.2 of the agreement specifically providing an opportunity to both the parties to file suit for specific performance, it cannot be said because of the arbitration clause, the dispute cannot be agitated before a competent Civil Court. At any rate, parties agree that insofar as the relief of specific performance is concerned, they shall have the liberty to approach the civil court and Arbitration Case No. 151 of 2012 (O&M) 15 to that extent the jurisdiction of the arbitrator to decide cases of specific performance of the contract is not exclusive. A cumulative reading of all these clauses, makes it clear that the parties never intended that insofar as the relief of specific performance of the contract is concerned, the parties are necessarily or rather mandatorily require to approach the arbitrator for resolution of the dispute. It is not the intention of the parties that arbitration is to be the sole remedy. A harmonious interpretation of the said clauses would only mean the parties have kept their options open either to approach the civil court or arbitration as they may choose to do so.
16. Therefore in view of express stipulation contained in Clause 6.2, reserving a right to approach civil court for the relief of specific performance this petition filed for appointment of an arbitrator is not maintainable. Hence a case for appointment of arbitrator is not made out and accordingly CMP is dismissed."
(emphasis supplied)
22. It is submitted that the factual matrix was almost identical and the said judgement would apply on all fores.
23. The other aspect emphasized by learned senior counsel for the respondent was that the plea of learned senior counsel for the petitioner for leaving this dispute to be decided by the arbitrator does not stand judicial scrutiny, as existence of an arbitration agreement and the jurisdiction to decide fall within the domain of the Chief Justice of the High Court. In this behalf, learned senior counsel referred to the judgement of the Hon'ble Supreme Court in SBP & Co. (supra) wherein the exercise of power by the Chief Justice while dealing with the petition under Section 11 of the said Act has been held to be Arbitration Case No. 151 of 2012 (O&M) 16 judicial and not merely administrative power. The majority view opined that the Chief Justice or his designate while functioning under Section 11(6) of the said Act is bound to decide whether:-
(i) he has jurisdiction, in the sense whether party making motion has approached the right High Court, (ii) the arbitration agreement is valid in terms of Section 7, (iii) person before him with the request, is a party to the arbitration agreement, and (iv) there is a dispute/live claim subsisting which is capable of being arbitrated upon (though question whether the live claim made comes under the purview of the arbitration agreement should be left to be decided by the Arbitral Tribunal on taking the evidence, alongwith merits of the claims involved). Once conclusion is reached in all these aspects, it has to be enquired if conditions for exercise of power have been fulfilled; and if arbitrator has to be appointed, who is the fit person in terms of the provision.
24. Learned senior counsel also referred to the judgement in Wellington Associates Ltd. Vs Kirit Mehta 2000(4) SCC 272. I may note that this judgement is prior to SBP & Co.'s case (supra) and, thus, proceeded to analyze the power of the Chief Justice even if the same be treated as an administrative power. The plea as to whether the clause amounted to an arbitration clause or not was held to be within the domain of the Chief Justice.
25. A reference is also made to a judgement of the Hon'ble Supreme Court in Jagdish Chander Vs Ramesh Chander and others 2007(5) SCC 719 wherein it was once again emphasized that the Arbitration Case No. 151 of 2012 (O&M) 17 arbitration agreement has to be considered by the Chief Justice under Section 11 of the said Act.
26. Learned senior counsel for the respondent by reference to the judgement in Reva Electric Car Company Private Limited (supra) submitted that assuming, though not admitting the arguments of the petitioner, in any case the issue in question would fall within the ambit of the second category and since no evidence is really required to be led, that is the matter which ought to be decided by this Court.
27. I have given thought to the rival submissions keeping in mind the factual contours and judicial pronouncements of the Courts referred to by learned senior counsel for the parties.
28. The existence of the MoU dated 30.03.2010 is not in dispute nor its validity. The communications interse the parties do not even show really any dispute about the interpretation of the terms and conditions of the agreement. The factual dispute is in narrow compass i.e. did the petitioner fail to make payment of the balance consideration the time being essence of the contract and consequently whether the decision of the respondent to terminate the agreement or forfeit the earnest money was valid. The relief the petitioner is really seeking is of specific performance of the agreement against the respondent by seeking execution of the conveyance deed.
29. In so far as the aspect of the conveyance deed is concerned, various drafts were exchanged as apparent from documents on record. However, the conveyance deed did not come to be executed although all pre-requisites of the agreement appear to have been complied with. Arbitration Case No. 151 of 2012 (O&M) 18 It is the say of the petitioner that the conveyance deed/sale deed has to be as per the usual proforma and in accordance with the MoU. Before the legal notices through counsel got triggered off the undisputed document on record (Annexure R4) shows that the petitioner expressed difficulty in making payment and sought extension of time. They offered even to pay interest on it. It is in view thereof that the respondent had pleaded that the petitioner was not ready, willing and able to perform their obligation for payment of the amount.
30. The arbitration agreement is contained in clause 23 of the MoU. This MoU contains other clauses also. Clause 14 envisages recourse to civil proceedings. Thus, construction of the agreement interse the parties based on the reading of the agreement, in my view, would have to be done by this Court or is at least to be permissible to be done by this Court so that there is no unnecessary wastage of time for adjudication of the disputes only on the question as to which would be the forum to determine the dispute i.e. the Arbitral Tribunal or the Civil Court. Clause 13 of the MoU refers to the situation where there is a delay on the part of the petitioner herein in coming forward in making payment for execution of the sale deed. In such a situation, the respondent is entitled to cancel the MoU by giving 15 days' notice in writing and if no payment is made within this period of 15 days the MoU would automatically stand terminated with the forfeiture of earnest money. The respondent herein has a right at its sole discretion to waive the breach in making payment within stipulated time subject to the petitioner herein making payment of interest at 15% per annum Arbitration Case No. 151 of 2012 (O&M) 19 for the period of delay. The communication annexure R4 dated 28.02.2012 by the petitioner is, thus, clearly within the meaning of clause 13 offering to make payment of interest on account of delay on its part in making the balance payment. However, the matter escalated and did not get resolved. The succeeding clause 14 refers to the failure of the respondent herein or refusal to fulfill the parts of the MoU and the option given to the petitioner herein to either terminate the MoU in whole or institute a suit for specific performance. In the present case, there has been no termination of MoU by the petitioner, but rather by the respondent in exercise of the rights purportedly under clause 13. The petitioner since aggrieved wants the MoU to be honoured and a deed of conveyance executed which is in fact a relief of specific performance.
31. No doubt, clause 23 of the agreement is fairly wide and envisages disputes or differences between the parties out of or in connection with interpretation or performance of terms and conditions of the agreement to be referred to arbitration for adjudication. It is this aspect of 'performance' which was emphasized by learned senior counsel for the petitioner to submit that it was wide enough to envisage a dispute of the present nature.
32. The moot point, however, remains as to what meaning has to be assigned to clause 14. It cannot be otiose and must have some meaning. Thus, in certain eventuality, the petitioner has to sue for specific performance, while in all other eventualities it is the mode of arbitration. The only eventuality in which a suit for specific Arbitration Case No. 151 of 2012 (O&M) 20 performance has to be filed is where the respondent fails or refuses to fulfill its part of the MoU and this clause follows clause 13 as it has within that context to be read and understood. Learned senior counsel for the respondent is right in his contention that the factual matrix is very close to the one in Dilip Bafna's case (supra), if one may say. In case the ratio of Dilip Bafna's case (supra) is to be applied, the parties in the present petition have to be relegated to adjudication of their disputes through a Civil Court. The arbitration clause therein was also wide, but was coupled with a clause for filing suit for specific performance. The expression 'obligation' was also used in the arbitration clause there. The learned Single Judge found that the dispute must be settled by arbitration by reference to the two clauses.
33. I find myself in agreement with the view taken in Dilip Bafna's case (supra) and see no reason to differ from the same. It is not in derogation or ignorance of any judicial pronouncement of the Hon'ble Supreme Court pointed out to me. The principle is also salutary i.e. the jurisdiction of the Civil Court would be completely ousted, the forum of settlement of disputes being arbitration, only if there is existence of arbitration clause interse the parties. If the arbitration clause is qualified then it must be given effect in that manner as all the parties agreed to it. Similarly, in the present case, though the parties did agree to reference of disputes to arbitration, they mutually carved out an exception to the same by continuing to rely on the Civil Courts for adjudication of the dispute qua the issue of specific performance as envisaged under clause 14. The communication interse Arbitration Case No. 151 of 2012 (O&M) 21 the parties shows that the present dispute is nothing but a dispute qua specific performance of the MoU which the petitioner seeks against the respondent, while the respondent pleads failure on the part of the petitioner to comply with its obligation to pay the balance amount time being essence of the contract. It is also the sum and substance of the legal notice exchanged interse the parties. Thus, even if the widest amplitude is given to the arbitration clause, it cannot encompass the relief of specific performance of the MoU as the MoU itself envisages that such a relief will be before the Civil Court.
34. It cannot be said, in my view, that this issue, thus, should have been left to the arbitrator. This issue certainly can be examined by this Court within the parameters of the judgement in Reva Electric Car Company Private Limited (supra) which in turn has relied upon the observations in National Insurance Company Limited's case (supra). It clearly falls within the definition of second category of cases where the option would be with the Chief Justice or his designate to choose to decide the matter. It calls for no evidence or material as there is no dispute that there are two clauses in the contract one envisaging certain disputes to be decided by a Civil Court and the other to be decided by an arbitration. The remedy of arbitration is all inclusive except for the relief of the specific performance by the petitioner in terms of clause 14 which immediately succeeds clause 13. Thus, the only view to be formed is that the parties envisage such a dispute to be decided by the Civil Court and not through the mode of arbitration.
35. As a result of the aforesaid, the petition is dismissed Arbitration Case No. 151 of 2012 (O&M) 22 leaving the petitioner with a liberty to initiate the appropriate civil proceedings in accordance with law before the competent Court. Parties are left to bear their own costs.
(SANJAY KISHAN KAUL) CHIEF JUSTICE 26.07.2013 Amodh