IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF JULY, 2019 BEFORE THE HON’BLE MR. JUSTICE B. VEERAPPA C.M.P. No.366/2018 BETWEEN:
1. M/S VIVA PROPERTIES, A PARTNERSHIP FIRM HAVING ITS OFFICE AT:
NO.12/3, ALEXANDRIA STREET RICHMOND TOWN, BANGALORE 560 025 BY ITS PARTNERS:
2. MOHAMMED SHARIFF S/O HUSSAIN SHARIFF AGED ABOUT 38 YEARS R/AT FLAT NO.F-2, 1ST FLOOR VIVA GARDENIA NO.22 WELLINGTON STREET RICHMOND TOWN, BANGLAORE 560 025.
3. MOHAMMED IBRAHIM SHARIFF S/O HUSSAIN SHARIFF AGED ABOUT 26 YEARS R/AT FLAT NO.102, 1ST FLOOR FARAH GARDEN, NO.17 WELLINGTON STREET, RICHMOND ROAD BANGALORE 560 025.
... PETITIONERS (BY SRI S. R. KRISHNAKUMAR, ADVOCATE FOR MS. AATHIRA MENON, ADVOCATE) AND:
1. M/S ELEGANT PROPERTIES, A PARTNERSHIP FIRM HAVING ITS OFFICE AT: NO.1 ELEGANT DESIRE, COLES ROAD, FRAZER TOWN, BANGALORE 560 005 BY ITS PARTNERS:
MR.B. RAJASHEKAR & MRS. R. VIJAYA CHAMUNDI 2. MR. R. GANDHI S/O LATE R. CHINNAPPA CHETTY AGED ABOUT 74 YEARS 3. MRS. KAMALA GANDHI W/O MR. R. GANDHI AGED ABOUT 67 YEARS 4. MR. VINOD GANDHI S/O MR. R. GANDHI AGED ABOUT 45 YEARS 5. MRS. SHILPA GANDHI D/O MR. R. GANDHI AGED ABOUT 42 YEARS 6. MR. SANTHOSH GANDHI S/O MR. R. GANDHI AGED ABOUT 36 YEARS ALL R/AT: NO.7, RAILWAY STATION ROAD RANIPET, VELLORE DISTRICT TAMIL NADU 623 401.
... RESPONDENTS (BY SRI SYED KHAMRUDDIN, ADVOCATE FOR R1; R2 TO R6 ARE SERVED BUT UNREPRESENTED) ***** THIS CMP IS FILED UNDER SECTION 11(5) OF THE ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO APPOINT ANY COMPETENT PERSON AS AN ARBITRATOR TO ADJUDICATE UPON THE DISPUTE ARISEN BETWEEN THE PETITIONERS AND THE RESPONDENT COMPANY AS STIPULATED UNDER CLAUSE 20, OF THE MEMORANDUM OF UNDERSTANDING CUM AGREEMENT OF SALE DATED: 15.03.2014 VIDE ANNEXURE ‘C’, BEING THE ARBITRATION CLAUSE;
THIS CMP COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R The petitioners have filed the present Civil Miscellaneous petition under the provisions of Section 11(5) of the Arbitration and Conciliation Act, 1996 (‘the Act’ for short) to appoint the sole Arbitrator to adjudicate the dispute between the petitioners and the respondent – company as stipulated under Clause-20 of the Memorandum of Understanding-cum-agreement of sale dated 15.3.2014 as per Annexure-C.
2. It is the case of the petitioners that the Respondent Nos.2 to 6 are the absolute owners of the immovable property bearing Re-survey No.37/2 and 38/B2, Old NO.37 & 38/2, Hennur village, Kasaba hobli, Bangalore north taluk and presently under the BBMP and assessed to taxes as Khatha No.748/418-37/2B & 38/2B2, Hennur Main Road, Ward No.24, Bangalore, having purchased the same from their previous owners. Being desirous of developing the same, the said Respondent Nos.2 to 6 entered into an initial Memorandum of Understanding dated 18.3.2013 and that thereafter also entered into a registered Joint Development Agreement (‘JDA’ for short) and further Power of Attorney dated 12.12.2013 was also executed in favour of the 1st respondent setting down the various terms of the developmental scheme for putting up a Multi-storied residential/commercial complex. Under the said JDA, the 1st respondent has 46% share in the developed property. The Respondent No.1 executed a Memorandum of Understanding-cum-Agreement of Sale favouring the applicants on 15.3.2014 in respect of the commercial space to be constructed to an extent of 5,000 square feet out of his 46% share in the said property mentioned in the JDA for a total sale consideration of Rs.3,19,00,000/-. That the said respondents did not commence any construction despite receipt of majority of the amounts from the petitioner. Totally, the petitioners have paid a sum of Rs.2,34,00,000/- to the respondents in respect of the said commercial space as mentioned in the said Memorandum of Understanding-cum-Agreement of Sale subject to certain terms and conditions as specified therein.
3. It is further case of the petitioners that on 7.8.2018 the petitioners have filed an application in AA No.308/2018 and sought for an interim order not to put up and not to make unauthorized construction. The learned Judge granted the order of status quo. Despite this, there was no compliance of the terms and that the respondents are still going on with the alleged constructions much against the sanctioned plan.
4. It is further case of the petitioners that as per Clause-20 of the Memorandum of Understanding-cum- Agreement of Sale dated 15.3.2014, the entire dispute that arises between the parties requires to be solved through Arbitration Proceedings by sole Arbitrator. Therefore legal notice was issued to the respondents on 31.10.2018 in respect of appointment of the Arbitrator. The said notice was duly served on respondents, but they have neither replied nor accepted the appointment of the sole Arbitrator as per the request made by the petitioners. Hence the petitioners are before this Court for the reliefs sought for.
5. The respondents have filed objections and denied the averments made in the Civil Miscellaneous Petition and contended that Memorandum of Understanding-cum- agreement of sale dated 15.3.2014 provided for arbitration as the remedy for resolution of all the disputes. As per Clause 20 of the Memorandum of Understanding, any dispute between the parties shall be referred to arbitration or specific performance, as the case may be and the jurisdiction shall be City of Bangalore. Thus, Clause 20 of the agreement dated 15.3.2014 contemplates arbitration or specific performance. It is clear that the relief of specific performance is alternative to arbitration and that the parties did not intend the relief of specific performance to be adjudicated by an arbitrator. It is settled law that while construing the provision which oust the jurisdiction of the Court, those provisions have to be construed strictly. The exclusion of the Civil Court’s jurisdiction should not be readily inferred. It is further contended that by reading of the agreement, it is clear that the parties never intended for the relief of specific performance in terms of the agreement of sale entered into between the parties. Therefore sought to dismiss the civil miscellaneous petition.
6. I have heard the learned counsel for the parties to the lis.
7. Sri S.R. Krishnakumar, learned counsel for the petitioners reiterating the averments made in the civil miscellaneous petition has contended that Arbitration Clause No.20 of the agreement dated 15.3.2014 clearly depicts that any dispute between the parties shall be referred to Arbitration or Specific Performance as the case may be and the jurisdiction shall be the City of Bangalore. By reading of the said clause, the 1st prayer shall be arbitration and the 2nd prayer may be specific performance. He would further contend that agreement is not in dispute. He submits that the petitioners have issued arbitration notice to the respondents as contemplated under the provisions of Section 11(5) of the Arbitration and Conciliation Act, 1996. Admittedly the respondents have not issued any reply inspite of receipt of the legal notice. Therefore he sought to allow the Civil Miscellaneous Petition.
8. In support of his contention, learned counsel for the petitioners relied upon the judgment of the Hon’ble Supreme Court in the case of Zhejiang Bonly Elevator Guide Rail Manufacture Company Limited v. Jade Elevator Components reported in (2018)9 SCC 774, wherein the Hon’ble Supreme Court observed that Clause-15 of the agreement therein refers to arbitration or Court and thus there was an option i.e., either to go for arbitration or for litigation in a Court of law and the petitioner therein invoked the arbitration clause and therefore the sole Arbitrator was appointed to arbitrate upon the disputes between the parties, in terms of the provisions of Clause-15 of the agreement entered into between the parties to the said lis.
9. Per contra, Sri Syed Khamruddin, learned counsel for the Respondent NO.1 reiterating the objections filed, has contended that a reading of the agreement of sale, it is clear that the parties did not intend the relief of specific performance to be adjudicated by an Arbitrator and the parties never intended to approach the Arbitrator for the relief of specific performance of the agreement of sale dated 15.3.2014. Therefore, he sought to dismiss the civil miscellaneous petition.
10. In support of his contentions, learned counsel for the Respondent No.1 relied upon the judgment of this Court in the case of Dilip Bafna vs. K.S. Vasudeva reported in (2007)6 Kant LJ 554 to the effect that parties agree that in so far as the relief of specific performance is concerned, they are at liberty to approach the Civil Court and the Arbitrator cannot decide the cases of specific performance. Therefore, learned counsel sought to dismiss the Civil Miscellaneous Petition.
11. Having heard the learned counsel for the parties, it is an undisputed fact that the parties to the lis have entered into agreement of sale dated 15.3.2014. Clause 20 of the agreement reads as under:
“Any dispute between the parties shall be referred to Arbitration or Specific Performance as the case may be and the jurisdiction shall be the City of Bangalore.”
12. A careful reading of the agreement of sale, it is clear that the parties were of the intention that in order to enforce the agreement of sale, they incorporated the arbitration clause stated supra. Ultimately, the petitioners who entered into agreement with the respondent want to enforce the agreement to execute the sale deed, in terms of the agreement. It is nothing but a specific performance on the part of both the parties in terms of the agreement. From a reading of Clause-20 of the agreement of sale, it is clear that the relief of specific performance was alternative to arbitration and that parties did not intend the relief of specific performance to be adjudicated by an Arbitrator. It is also well settled that in the enforcement of the agreement, while construing the provision which oust the jurisdiction of the Civil Court, those provisions have to construed strictly and the jurisdiction of the Civil Court to entertain the suit for specific performance cannot be negated.
13. In the judgment relied upon by the learned counsel for the petitioners in the case of Zhejiang Bonly stated supra, there was an option either to go to arbitration or for litigation in a Court of law as per Clause-15 of the agreement referred to therein and the petitioner therein invoked the arbitration clause. In the present case, in terms of the clauses mentioned in the agreement of sale, there was no option either to go to arbitration or litigation. The wordings used in the arbitration clause clearly depict that “any dispute between the parties shall be referred to arbitration or specific performance as the case may be and the jurisdiction shall be City of Bangalore”. Therefore, the judgment relied upon by the learned counsel for the petitioners in the case of Zhejiang Bonly stated supra has no application to the facts and circumstances of the present case.
14. In the circumstances, the intention of both the parties in terms of Clause - 20 of the Agreement has to be gathered to find out as to whether they intend arbitration to be the sole remedy and what are the disputes which they want to be resolved by arbitration, whether all the disputes arising under the agreement 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 competent Civil court also in respect of the disputes arising under the Agreement. 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. This Court in the case of Dilip Bafna vs. K.S. Vasudeva reported in (2007)6 Kant LJ 554 while considering the provisions of Section 11 of the Arbitration and Conciliation Act, 1996 on appointment of the Arbitrators, has held at paragraphs 18 and 24 as under:
18. Point No. 3.—Next it is contended that on a reading of the two clauses in the agreement whether the Civil Court jurisdiction is completely ousted to entertain the matter arising under the said contract.
19. Clause 5 of the agreement reads as under:
“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”.
20. Whereas, Clause 6.2. reads as under:
“Both the vendors and the purchaser shall have liberty to file suit for specific performance of contract, if either of the party refuses to perform his/their 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”
24. 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 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. 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 whatsoever 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 Court 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 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. In view of the above, it is not the intention of the parties that the Arbitration is to be the sole remedy. A reading of Clause-20 of the agreement of sale would only to mean that the parties have kept their option open to approach the arbitration or the Civil Court as they choose. Therefore in terms of Clause 20 of the agreement dated 15.3.2014, liberty is reserved to the petitioners to approach the competent Civil Court for the relief of specific performance and the present Petition filed before this Court under Section 11(5) of the Arbitration and Conciliation Act, 1996 for appointment of the sole Arbitrator is not maintainable. In view of the above, the petitioners have not made out any ground to entertain the present petition.
17. Accordingly, the Civil Miscellaneous Petition is dismissed. However, liberty is reserved to the petitioners to approach the competent Civil Court to enforce the Memorandum of Understanding-cum-Agreement of Sale dated 15.3.2014 as per Annexure-C, in accordance with law.
All the contentions of both the parties are left open.
Sd/-
JUDGE Gss/-