Allowed

M/S. V.K. Building Services Pvt. Ltd. v. M/S. Nitesh Housing

Karnataka HC4 Aug 2022CMP/8/2021

Case brief

AI extract

What is this about?

The High Court of Karnataka addressed a petition under Section 11 of the Arbitration Act seeking appointment of an arbitrator. The Court held that issues regarding stamp duty and the validity of the amendment clause must be decided by the arbitral tribunal. It appointed a sole arbitrator despite the contract's three-member requirement, citing delays and costs.

What did the court decide?

Appointment of Dr. Justice N. Kumar as Sole Arbitrator to resolve the dispute between the parties.

M/S. V.K. Building Services Pvt. Ltd. Vs M/S. Nitesh Housing — Arbitration | Karnataka HC (2022)

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IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 4^th DAY OF AUGUST, 2022

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BEFORE

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THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR CIVIL MISCELLANEOUS PETITION NO.8 OF 2021

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BETWEEN:

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M/S. V.K. BUILDING SERVICES PVT LTD A COMPANY INCORPORATED UNDER THE COMPANIES ACT WITH ITS REGISTERED OFFICE AT M-137, 9^TH A MAIN, LIC COLONY, JEEVAN BHIMA NAGAR, HAL 3^RD STAGE, BENGALURU - 560 075.

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REPRESENTED BY ITS DGM SALES-ELECTRICAL MR. CHANDRASHEKHAR BHAT. (BY SRI. SAMPATH A. ADVOCATE) AND:

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…PETITIONER

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M/S. NITESH HOUSING DEVELOPERS PRIVATE LIMITED 7^TH FLOOR, "NITESH TIMESQUARE", NO.8, M.G. ROAD, BENGALURU-560 001, REPRESENTED BY ITS MANAGING DIRECTOR.

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…RESPONDENT (BY SRI.UDAY SHANKAR, R.M, ADVOCATE FOR R1)

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THIS C.M.P. IS FILED UNDER SECTION11(6) OF THE ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO APPOINT AN ARBITRATOR EMPANELLED AT THE BENGALURU ARBITRATION CENTRE - KARNATAKA, KHANIJA BHAVAN, RACE COURSE ROAD, BENGALURU TO ARBITRATE THE DISPUTE ARISEN BETWEEN THE PETITIONER AND THE RESPONDENT UNDER THE ARTICLES OF AGREEMENT DATED 12/07/2013 VIDE ANNEXURE-A AND AMENDMENT TO THE CONTRACT DATED 10/11/2014 VIDE ANNEXURE-C.

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THIS C.M.P. COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:-

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ORDER

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The present petition under Section 11 of the Arbitration and Conciliation Act, 1996, has been filed by the petitioner – M/s. V.K. Building Services Pvt. Ltd., against the respondent – Nitesh Housing Developers Private Limited, seeking appointment of an Arbitrator in pursuance of Clause-15 of the Articles of Agreement vide Annexure-A dated 12.07.2013 and for other reliefs.

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The material on record indicates that the petitioner entered into an Agreement dated 12.07.2013 with the respondent. Clause - 15 of the said Agreement, which contains an arbitration clause reads as under:

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“ 15. The Agreement/Contract shall be construed and interpreted in accordance with and governed by the laws of India. In case of any disputes or differences in the terms and conditions stated in this agreement or any of the annexure, the same shall be referred to arbitration and the provisions of Clause 53 of the General Conditions of Contract shall be applicable for all disputes resolutions. Besides the forgoing, the Courts in Bangalore,

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Karnataka, India shall have exclusive jurisdiction over all matters arising out of or relating to the Agreement/Contract."

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A reading of Clause No.15 supra, will indicate that the parties had agreed to resolve the disputes by reference to arbitration and that clause No.53 of the General Conditions of Contract shall be applicable for all disputes resolution in addition to the fact that the Courts at Bangalore shall have exclusive jurisdiction over all matters arising out of or related to the agreement.

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The General Conditions of Contract referred to in Clause No.15 supra, has also been produced and Clause No.53 therein reads as under:

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“ 53.0 ARBITRATION:

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53.1 This Agreement shall be governed by, interpreted and enforced in accordance with the laws of India and each party submits to the exclusive and sole jurisdiction of competent Court at Bangalore over all matters arising out of or in relation to this agreement.

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53.2 All disputes arising out of or in connection with the interpretation of this Agreement or any clause or provision contained herein or the respective rights, duties or liabilities of the parties

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hereunder the parties shall endeavor their best to resolve it by mutual discussions.

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53.3 If the same cannot be settled amicably between the parties within thirty (30) Days, each Party shall have the right to submit the Dispute to be settled by/in conformity with the Arbitration and Conciliation Act, 1996 or any statutory amendment or re-enactment thereto. The Party aggrieved may with the consent of the Other Party refer the dispute to a Sole Arbitrator. In the event any of the parties do not agree for Arbitration by a Sole Arbitrator, then the parties would be entitled to nominate their respective Arbitrators and the said Arbitrators would appoint a Presiding Arbitrator. The place of arbitration shall be Bangalore and the Courts at Bangalore shall alone have jurisdiction and the language shall be English. The Award of the Arbitrator or Arbitrators, as the case may be shall be final and binding on the parties.

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53.4 Each party will bear its own costs and attorney's fees. The cost of the arbitrator(s) shall be evenly divided amongst the Contractor and the Employer.

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53.5 If the facts and circumstances that form the basis for the Dispute also form the basis for any dispute between either Party or a third party, the affected Party shall have the right to join such third Party in the arbitration of the extent of the common issues.

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53.6 Performance of this Agreement shall continue during arbitration proceedings unless Employer shall order suspension thereof or any part thereto.

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53.7 The provisions of this Clause shall survive the expiration or earlier termination of this Agreement.

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Subsequently, first amendment (Amendment – I) was executed between the petitioner and respondent on 10.11.2014. Clauses 8, 9 and 10 of the said amendment read as under:

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"8. This Amendment shall be read in conjunction with and considered as an integral part of the Principal Contract therein. This Amendment, including the Principal Contract & Addendum of which is the part, is a complete and exclusive statement of the agreement between the parties, which supersedes all prior or concurrent proposal, discussions or understandings between the Parties relating to this Amendment and the Agreement.

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9. Except as specifically modified herein and/or in a prior, fully-executed addendum or amendment, it is understood and agreed that all other terms and provisions of the principal Contact shall remain in full force and effect, unaltered, unchanged and binding. In the case of any inconsistencies between the Principal Contract and

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this Amendment, the terms of this Amendment together with the Exhibit's annexed hereto shall control. Nothing herein contained shall be construed as waiver or modification of existing rights under the Principal Contract, except as such rights are expressly modified hereby.

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10. The Principal Contact and this Amendment shall be governed by and construed in accordance with the governing law of the India and the Courts in Bangalore, Karnataka, India shall have exclusive jurisdiction over all matters arising out of or relating to the Principal Contract/Amendment."

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The material on record discloses that on 08.11.2019, the petitioner got issued arbitration notice nominating its arbitrator and calling upon the respondent to give consent to the said appointment in terms of the Arbitration Agreement contained in Clause-15 of the Agreement dated 12.07.2013 read with Clause-53 of the General Conditions of Contract. The said notice having been received by the respondent, who did not chose to either reply to the same nor comply with the request made therein, the petitioner is before this Court by way of the present petition.

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In addition to reiterating the various

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contentions urged in the petition and referring to the documents produced, learned counsel for the petitioner submits that in view of the Arbitration Agreement contained in Clause No.15 of the Agreement read with Clause-53 of the General Conditions of Contract, the dispute between the parties deserves to be referred to arbitration.

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7.1 It is submitted that though in the first instance, the issue regarding stamp duty was referred by this Court, since there is a dispute with regard to the valuation and stamp duty said to be payable by the petitioner on the agreement, in the light of the decision of the Apex Court in the case of N.N.Global Merchantile Private Limited vs.

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Indo Unique Flame Limited – 2021 SCC Online SC 13, even that issue has to be kept open to be adjudicated upon by the arbitral Tribunal. It is submitted that a conjoint reading of the Agreement dated 12.07.2013, General Conditions of Contract, Amendment-I dated 10.11.2014 will indicate that the arbitration agreement between the parties as embodied in Clause-15 of the Agreement dated 12.07.2013 read with Clause 53 of the General Conditions

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of Contract has not been varied, modified, altered, amended or substituted by the subsequent Amendment - I and consequently, the arbitration agreement between the parties continues to subsist and the dispute deserves to be referred to arbitration.

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7.2 It is also submitted that though Clause No.53.1 provides for the nominee arbitrators and the presiding arbitrator to be appointed from among the fellows of Indian Institute of Architects, having regard to the fact that the present petition is of the year 2018 and in the interest of both sides, it would be just and proper to refer the dispute to a sole arbitrator and merely because the said procedure contained in Clause-53.1 has not been followed, it cannot be said that this Court is not empowered to refer the dispute to a sole arbitrator to be appointed by this Court. It is therefore submitted that the present petition deserves to be allowed.

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Per contra, learned counsel for the respondent submits that in view of the Amendment – I dated 10.11.2014 to the Agreement dated 12.07.2013, the

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arbitration clause does not continue any longer and the same has ceased to exist between the parties and as such, the question of referring the dispute to arbitration does not arise. It is submitted that since the Agreement is insufficiently stamped, unless deficit stamp duty and penalty are paid by the petitioner, the dispute cannot be referred on this ground also. It is also submitted that clause – 53 of the General Conditions of Contract prescribes the procedure for reference to arbitration by appointing a three member tribunal from among the fellows of Indian Institute of Architects and under these circumstances, without following the said procedure, it is not open for the petitioner to seek reference to arbitration in the present petition, which is liable to be dismissed.

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In support of their respective contentions, learned counsel for both sides relied upon several decisions.

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I have given my anxious consideration to the rival submissions and perused the material on record.

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The question with regard to reference to arbitration in a petition under Section 11 of the Arbitration and Conciliation Act, 1996, in relation to an arbitration agreement contained in a document said to be insufficiently stamped came up for consideration before the Apex Court in N.N.Merchantile’s case (supra), wherein it was held that if there was a dispute between the parties with regard to sufficiency or otherwise of payment of stamp duty, the said issue would have to be decided by the arbitral tribunal and the same cannot come in the way of this Court referring the dispute to arbitration. Under these circumstances, I deem it just and proper to direct reference of the dispute to arbitration by leaving open the question of stamp duty to be decided by the arbitral tribunal.

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Insofar as the contention with regard to the effect of Amendment – I to the Arbitration Agreement dated 12.07.2013, having regard to the rival contentions urged by both sides, I am of the view that even this issue deserves to be adjudicated upon by the arbitral tribunal.

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13. Insofar as the issue relating to reference to

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arbitration by constituting a three member arbitral tribunal comprising of fellows of Indian Institute of Architects as agreed in Clause – 53.1 of the General Conditions of Contract is concerned, having regard to the fact that the present petition is pending for almost two years coupled with the increased expenditure to be borne by the parties by constituting a three member tribunal, in the peculiar / special facts of the instant case and with the consent of both sides, without expressing any opinion on the rival contentions in this regard, I deem it just and proper to refer the dispute to arbitration by the arbitral tribunal comprising of a sole arbitrator namely, Dr. Justice N. Kumar, Former Judge, High Court of Karnataka to resolve the dispute between the parties as per the Rules governing the Arbitration and Conciliation Centre (Domestic & International) at Bengaluru.

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Accordingly, this petition under Section 11 of the Act, 1996 is disposed of by appointing Dr. Justice N. Kumar, Former Judge, High Court of Karnataka to enter

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into the said reference and act as the Sole Arbitrator in the present case in the Arbitration and Conciliation Centre (Domestic & International), Bengaluru, as per the Rules governing in the said Arbitration Centre.

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(i) All claims and contentions of both parties including questions with regard to arbitrability, maintainability, jurisdiction, limitation, stamp duty, etc., are left / kept open to be decided by the Arbitral Tribunal.

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(ii) It is made clear that the present reference to arbitration has been made in the peculiar / special facts and circumstances of the instant case and this order shall not be treated as a precedent or having precedential value under any circumstances whatsoever.

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(iii) A copy of this order be sent forthwith to the Arbitration and Conciliation Centre, Khanija Bhavan, Bengaluru, for proceeding further in the matter, on administrative side and also to Dr. Justice N. Kumar, Former Judge, High Court of Karnataka to the address available with the said Arbitration and Conciliation Centre (Domestic & International), Bengaluru.

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