Allowed

A.B.K.. Dubash and 3 Ors. v. Petit Towers Cooperative and 5 Ors.

Bombay HC19 Nov 2010ARBP/112/2008

Case brief

AI extract

What is this about?

In an arbitration petition filed under Section 8 of the Arbitration and Conciliation Act, 1996, the Bombay High Court distinguished earlier precedents involving government authorities not being parties to arbitration agreements. The Court held that the binding arbitration clause in the sale agreement prevailed over the respondents' allegations of breach. Consequently, the Court allowed the petitio

What did the court decide?

The petition to refer the parties to arbitration in respect of disputes raised in Suit No. 445 of 2008 was allowed. All disputes arising from the agreement were referred to an arbitrator.

A.B.K.. Dubash and 3 Ors. Vs Petit Towers Cooperative and 5 Ors. — Arbitration | Bombay HC (2010)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL JURISDICTION ARBITRATION PETITION NO.112 OF 2008 IN

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SUIT NO.445 OF 2008

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A. B. K. Dubhash

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F. N. Petit,

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Lady Laila Petit

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D.S. Cambatta

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all are Indian inhabitants,

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being Trustees of the Framjee Dinshaw Petit Parsee Sanitorium having office at: UCO Bank Building, 359, Dr. D. N.Road, MUMBAI 400 001.

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.. Petitioners.

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-versus

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Petit Towers Co-Operative Housing Society Limited a registered society having its office at: Petit Towers, C.S. No.597 and 598, of Malabar Hill and Cubballa Hill Division, August Kranti Marg, Bomabji Petit Road, Mumbai 400 036.

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Pushpa C. Jain Indian inhabitant, residing at 901 Petit Towers, C.S. No.597 and 598, of Malabar Hill and Cubballa Hill Division, August Kranti Marg, Bomabji Petit Road, Mumbai 400 036.

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Municipal Corporation of Greater Mumbai,

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Mahapalika Marg, Mumbai 400 001.

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Sir Dinshaw M. Petit.

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K. N. Suntook,

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Sir Cawasji Jehangir

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.. Respondents.

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Mr. E. P. Bharucha, Senior Counsel with Mr. Sarosh Bharucha with Ms Ferzana Behram Kamdin i/b FZB and Associates , advocates for Petitioners.

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Mr. Snehal Shah a/w Deepti Panda i/b Raval Shah & Co for respondent Nos l & 2.

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CORAM: ANOOP V. MOHTA, J. DATED: 19^th November, 2010

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Oral Judgment

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By consent of the parties, Rule made returnable forthwith. Heard finally. The others are formal parties.

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The petition is u/s 8 of the Arbitration and Conciliation Act, 1996 (for short “the Act”), filed by the petitioners, who are the owners of the land on which a building for respondent No.1 a Housing Society (for short “the Society”), has been constructed. All the members of the Society have been occupying the respective flats, based upon a occupation certificate, granted in their favour. The prayers in the petition are as under:

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a) That this Hon’ble Court be pleased to refer the parties

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to arbitration in respect of the disputes raised in Suit No. 445 of 2008, under Section 8 of the Arbitration and Conciliation Act, 1996.

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b) that pending the hearing and final disposal of this petition the proceedings in Notice of Motion No.603 of 2008 and Suit No.445 of 2008 pending before this Hon’ble Court be stayed.

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c) For interim and ad interim reliefs in terms of prayer clause (b) above.

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Suit No.445 of 2008 is filed by the society and one member basically against the petitioners/owners for specific performance based upon an agreement for sale (for short “the agreement”) dated 15.5.2002 between them.

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This agreement in question provides following clauses.

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The Promoters shall construct the said building consisting of basement, stilt floor, plenum floor and 24 upper floors on the said property, in accordance with the plans, designs and specifications approved and sanctioned by the concerned local authority and which have been seen and approved by the Purchaser/s with only such amendments, alterations, variations, modifications and/or additions thereto therein as the Promoters may consider necessary or as may be required by the concerned government/local authorities to be made in them or any of them.

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All disputes or differences whatsoever (subject to the provisions of clause 13 herein) which shall at any time hereafter (whether during the continuance of this

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Agreement or upon or after its discharge or determination) arise between the parties hereto or their respective heirs, legal representatives, successors-intitle, transferees and assigns (as the case may be), touching or concerning this Agreement or its construction or effect, or as to the rights, duties, obligations, responsibilities or liabilities of the parties hereto or any of the, under or by virtue of this Agreement or otherwise, or as to any other matter, in any way connected with or arising out of or in relation to the subject matter of this Agreement, shall be referred to arbitration in accordance with and subject to the provisions of the Arbitration and Conciliation Act, 1996, or any statutory modification or re-enactment thereof for the time being in force. The reference shall be made to one arbitrator if the parties concur in the appointment of a single arbitrator, failing which each party shall appoint one arbitrator. In the even of there being an even number of arbitrators, the arbitrators shall before entering upon the reference, in turn appoint a presiding arbitrator. The award of the arbitrator/s shall be final and binding on the parties to the reference. The arbitration proceedings shall be held in Mumbai only.

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The main prayers of the suit are as under.

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a) That this Hon’ble Court be pleased to grant specific performance of the said agreement at Exhibit “A” hereto as well as enforce the obligation under Section 10 of the Maharashtra Ownership Flats Act, l963 for an order and decree and direction to the Defendants to specifically perform the said agreement and comply with the obligation under Section

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11 of the Maharashtra Ownership Flats Act, l963 for the purpose of conveying the building and grant necessary lease of that portion of the land app.6000 sq. mts. , which is necessary for the purpose of covering the FSI which is also consumed by the Defendants/Promoters for construction of the said building.

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b) That this Hon’ble Court be pleased to direct the Defendants to enforce the obligations which are contained under various provisions of the Maharashtra Ownership Flats Act, l963 as well as under the contract entered into by and between the parties being Exhibit “A” hereto.

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c) That this Hon’ble Court be pleased to cancel the said so called condominium constituted by the Defendants in respect of the 8 flats and 32 parking spaces and a declaration filed under Section 2 of the Maharashtra Apartment Ownership Act, l970 be declared as null and void and cancel the same.

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d) That this Hon’ble Court be pleased to pass an order and decree in favour of the Plaintiffs and against the Defendants directing the Defendants by mandatory permanent order and injunction to hand over possession of the entire recreational ground and area in accordance with the provisions of the sanctioned plan.

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e) that this Hon’ble Court be pleased to issue a permanent mandatory injunction directing the defendant No.8 to enforce the sanctioned plan and direct the defendant nos 1 to7 to comply with the requisition contained inthe said letter dated 30.7.2005 (being Exhibit H hereto).

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The learned counsel, appearing for the respondent has strongly relied upon the Supreme Court Judgment in Sukanya

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Holdings Pvt. Ltd -vs- Jayesh H. Pandya and anr (AIR 2003 SUPREME COURT 2252) and a judgment of this Court, in Bombay Isle Developers Pvt. Ltd -vs- Kamladevi Jagdish Diwan and anr (2006 (4) Mh L. J. 115) , contending that in view of the prayer clauses itself and in view of the averments made in the suit, it is difficult to dissect these averments as well as the prayer clauses so made. The reliefs are not only against the petitioners but also against the Municipal Corporation, a local sanctioning authority, respondent No.3, who can only direct or take action against the petitioners for non compliance or breaches of the clauses and no-one else, though there exists the agreement of arbitration between the parties. Therefore, the petition as filed is liable to be dismissed.

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Clause (1) of the agreement as reproduced above itself provides the obligations of the petitioners to get the building constructed in accordance with the plan, design and specifications, approved and sanctioned by the concerned authorities. The averments in the suit itself show alleged breaches of the agreement. Therefore, the main reliefs for the specific performances are sought. If there are breaches of agreement clauses, the clear clause of arbitration as reproduced above, which is binding not only to the parties to the agreement but also to the successors-in-title, transferees, as agreed by them, as reflected in

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clause 40 of the agreement and same should be resorted to first. I see there is no reason to allow respondent Nos l & 2/original plaintiffs to continue with the suit in view of these agreed and binding clauses .

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It is settled that the mandate of section 8 of the Act, needs to be respected by all the parties to the arbitration agreement. It is mandatory. There is no dispute about the existence of arbitration clause in the agreement between the parties. The arbitration agreement is annexed to the petition. The arbitrator is competent and empowered to decide the issues arising out of the contract between the parties. The parties cannot ignore such clauses without getting their disputes/issues settled through the arbitration proceedings. The arbitration agreement is valid, binding, operative and enforceable. In these background and as subject matters of the suit are covered by the arbitration agreement, it is necessary to refer the matter to the arbitrator. The arbitration must go on first. In my view, it is in consonance with the object of the Act for encouraging resolution of disputes expeditiously.

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The breaches, if any, fall within the ambit of the agreement which provides to settle such differences, whatsoever, by the process of arbitration. The basic reliefs and even otherwise after considering the merits of the matter, and considering the

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rival disputed questions and facts, the Arbitrator can decide and/or give specific order or direction accordingly. Even otherwise, the Arbitrator is empowered to grant specific performance. Such suit by joining Municipal Corporation as respondent No.3 as party and seeking same relief or direction against the petitioners upon the clauses of the agreement, in my view is nothing but to overlook the mandate of section 8 of the Act. Let the Arbitrator decide and/or resolve the dispute if any first. The overall and the totality of the pleadings and prayers need to be considered to decide all the aspects of Section 8 of the Act. The third party to the suit and the arbitration agreement itself cannot be the sole criteria to reject petition under section 8 of the Act. In the agreement with the builder or owner, the society or its member, by joining local authority or third person, wants to frustrate the object of arbitration process though specifically agreed by them to follow the same in case of disputes.

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The prayer clause (a) even if considered as a basic relief which the society and the member are seeking against the local authority for enforcement of the sanctioned plan and direction against the petitioners, still that itself cannot be the reason to permit such members or the society, who are admittedly in occupation of the respective flats, based upon the occupation certificate granted by the local authority by its letter dated 30^th July,

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2005, to continue with the suit. The demand/representation was already made by the society for compliances of agreement and specially of the clause (1) as produced above. All the pleadings and prayers revolve around the agreement between the parties. The petitioners may able to comply with the given directions and/or settle the grievances or conflicts, even by negotiations. There is no reason that the suit at the instance of such members or the society be permitted to continue, as done in the present case, to settle their personal grudges or conflicts. Their intent and purpose should be the completion of the building as agreed.

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The case of Bombay Isle Developers Pvt.Ltd (supra), was of termination of development agreement itself. Admittedly, the Corporation was not a party to the same and as such arbitration clause could not have been utilized, the learned Single has passed the order by observing as under:

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“Having considered the rival submissions, I have no hesitation in taking the view that this Appeal is devoid of merits. I am in agreement with the conclusion reached by the Trial Court that all the issues raised in the plaint are not governed by the arbitration agreement between the plaintiff and the defendant No.1; and that the cause of action for instituting the suit against defendant No.2Corporation who is not party to the Arbitration agreement is inseparable”.

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In that case there was non compliance of conditions of

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I.O.D., and inspite of that commencement certificate was issued by the Corporation. The construction was commenced based upon the same. Therefore, the arbitrator could not have passed any order with that regard in the arbitration proceedings. The facts and circumstances are totally different. In the present case the respondent members after construction of the building, which they have been occupying, want the specific performance of the agreement, by alleging breaches. The arbitrator in the present case can direct the parties to perform their part of the contract. There is no question of ‘stop work notice’ and/or a prayer to revoke the commencement certificate, at the instance of the society and its members, who are admittedly enjoying the possession since long.

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The parties, therefore, if approached the Arbitrator and place their submissions and documents and in a given case the compliances can be directed, I see, there is no reason for such society and its members to agitate such issues further, except to see that the other party comply with the basic requirement. Any such action or permitting the suit to be filed or continue will be contrary to the scheme of the arbitration act.

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The law laid down in case of Sukanya Holdings Pvt. Ltd (supra), needs no discussion. The submissions so made by the learned counsel appearing for the respondent opposing the present

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petition are unacceptable in view of the facts and circumstances of the present case.

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In view of above, the submission so raised by the learned counsel for the respondents referring for the local authority being third party to the agreement and on that ground itself such dispute/differences cannot be agitated before the Arbitrator even though there is clear arbitration clause is unacceptable. If basic averments read with the agreement between parties, itself is sufficient to consider the case of referring the matter to the Arbitrator in view of the agreed clauses between the parties which is mandate of the act, I see, there is no reason that such arbitration clause need not be resorted to first. The matter needs to be decided by the Arbitrator in accordance with law and in view of the agreed clause itself. Making some third person or party to such suit and by overlooking the basic facts and the agreement between the parties, the respondent society wants to frustrate the whole purpose of such arbitration agreement. I am of the view that the present petition needs to be allowed in terms of prayer clause (a) which reads thus:

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(a) that this Hon’ble Court be pleased to refer the parties to arbitration in respect of the disputes raised in Suit No. 445 of 2008, under Section 8 of the Arbitration and Conciliation Act, l996;”

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All the points/issues are kept open.

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All disputes/issues arising out the agreement are referred to the Arbitrator.

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The parties to appoint arbitrator by consent and take steps accordingly.

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Admittedly in a suit after hearing both parties there is a interim relief granted against the petitioners, that interim order to continue till the Arbitrator modify or pass appropriate order. Liberty is also granted to the parties to take out an appropriate application before the Arbitrator including for amendment and/or modification of interim relief if any.

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The Parties and the arbitrator to take steps in view of above, within reasonable time to complete the arbitration proceedings. The petition is allowed in terms of prayer clause (a), No costs.

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(ANOOP V. MOHTA, J.)

A.B.K.. Dubash and 3 Ors. v. Petit Towers Cooperative and 5 Ors.

Case brief

What is this about?

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A.B.K.. Dubash and 3 Ors. v. Petit Towers Cooperative and 5 Ors.

Case brief

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What did the court decide?

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