Dismissed

Adarsh Developers v. Rhs Security Services

Karnataka HC7 Jun 2023COMAP/62/2023

Case brief

AI extract

What is this about?

The High Court dismissed an appeal against the Commercial Court's order rejecting an application under Section 8 of the Arbitration and Conciliation Act. The Court held that the arbitration clause was not mandatory as it offered a choice between mutual settlement and arbitration, following Wellington Associates Ltd. vs Kirit Mehta.

What did the court decide?

The Commercial Appeals Nos. 62 of 2023 is dismissed as there is no merit in the case.

Adarsh Developers Vs Rhs Security Services — Arbitration | Karnataka HC (2023)

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NC: 2023:KHC:19369-DB COMAP No. 62 of 2023

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 7^TH DAY OF JUNE, 2023

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PRESENT

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THE HON'BLE MR JUSTICE ALOK ARADHE

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AND

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THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE COMMERCIAL APPEAL NO. 62 OF 2023

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BETWEEN:

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ADARSH DEVELOPERS, A COMPANY REGISTERED UNDER COMPANIES ACT, 1956, HAVING OFFICE AT NO.2/4, LANGFORD GARDENS, RICHMOND TOWN, BANGALORE-560025, THROUGH ITS AUTHORIZED SIGNATORY.

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…APPELLANT

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(BY SRI ARJUN RAO, ADVOCATE) AND:

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Digitally signed by BELUR RANGADHAMA NANDINI Location: HIGH COURT OF KARNATAKA

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RHS SECURITY SERVICES, A PROPRIETORSHIP FIRM, HAVING OFFICE AT NO.9/51, 3^RD FLOOR, 80 FEET ROAD, 9^TH CROSS, SARAKKI, JP NAGAR, 1^ST PHASE, BENGALURU-560 078, THROUGH ITS AUTHORIZED SIGNATORY & GPA HOLDER MR.B.RAJU GOWDA S/O LATE MR.BHAGAVANTHE GOWDA

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…RESPONDENT (BY SMT. BHARMAL SHIRIN SHABBIRBHAI, ADVOCATE FOR, SRI MENTO ISSAC, ADVOCATE)

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THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13 (1-A) OF THE COMMERCIAL COURTS ACT 2015 R/W SECTION 37(A) OF THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO:

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NC: 2023:KHC:19369-DB COMAP No. 62 of 2023

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A. SET ASIDE THE IMPUGNED ORDER DATED 18.01.2023 PASSED ON IA NO.3 OF 2022 UNDER SECTION 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996 IN COM OS NO. 1307 OF 2022 PASSED BY THE LXXXIV ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT, BENGALURU (CCH-85) (ANNEXURE A).

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B. ALLOW IA NO.3 OF 2022 UNDER SECTION 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996 IN COM OS NO. 1307 OF 2022 BEFORE THE LXXXIV ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT, BENGALURU (CCH-85) (ANNEXURE E) AND ETC.

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THIS APPEAL COMING ON FOR FINAL DISPOSAL THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

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JUDGMENT

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Sri Arjun Rao, learned counsel for the appellant. Smt Bharmal Shirin Shabbirbhai, learned counsel for Sri Mento Issac for the respondent.

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This Commercial Appeal has been filed under Section 13(1A) of the Commercial Courts Act, 2015 against the order dated 18.01.2023 passed by the Commercial Court by which the application preferred by the appellant under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act' for short), has been rejected.

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3 - NC: 2023:KHC:19369-DB COMAP No. 62 of 2023

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Facts giving rise to filing of this appeal briefly stated

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are:

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that parties entered into an agreement on 01.04.2017 to provide manpower services. Clause 10(iii) of the agreement reads as under:

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" (iii) Any dispute arising out of this agreement will be resolved by taking recourse to mutual settlement or arbitration in the first instance failing which, the dispute will be subject to Bangalore jurisdiction only. In no case shall DEVELOPERS withhold payments due to the CONTRACTOR arbitrarily, without proper negotiations or without regard to the provisions contained in this agreement."

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It appears that the dispute arose between the parties and thereupon the respondent resorted to the mode of mutual settlement of dispute which did not succeed. Thereupon, the respondent filed the suit before the Commercial Court. In the proceedings before the Commercial Court, the appellant filed an application under Section 8 of the Act for reference of the dispute between the parties to the arbitration on the ground that Clause 10(iii) of the agreement between the

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4 - NC: 2023:KHC:19369-DB COMAP No. 62 of 2023

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parties stipulates resolution of dispute by arbitration. The aforesaid application has been rejected by the Commercial Court by order dated 18.01.2023.

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Learned counsel for the appellant submitted that mutual settlement which is non-arbitrable in nature is always available to the parties and the same cannot be equated with arbitration. The resolution of dispute through arbitration was agreed upon and therefore, the Commercial Court erred in rejecting the application preferred by the appellant under Section 8 of the Act. In support of the aforesaid submission, reliance has been placed on the decision of the Hon'ble Supreme Court in the case of ZHEJIANG BONLY ELEVATOR GUIDE RAIL MANUFACTURE COMPANY LIMITED vs JADE ELEVATOR COMPONENTS reported in (2018)9 SCC 774.

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On the other hand, learned counsel for the respondent submits that in view of the mandate contained in Section 7(1) of the Act, the agreement should necessarily mandate the appointment of an arbitrator. It is pointed out that in the instant case, option has been given to the parties and there is no mandate to go for arbitration and therefore, the

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- 5 - NC: 2023:KHC:19369-DB COMAP No. 62 of 2023

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learned Judge of the Commercial Court rightly rejected the application preferred under Section 8 of the Act. In support of the aforesaid submission, reliance has been placed on the decision of the Hon'ble Supreme Court on the following cases:

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(i) WELLINGTON ASSOCIATES LTD. vs KIRIT MEHTA reported in ((2000)4 SCC 272).

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(ii) N RADHAKRISHNAN vs MAESTRO ENGINEERS AND ORS. reported in ((2010)1 SCC 72).

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7 . We have considered the submissions made on both

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sides and have perused the records.

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In WELLINGTON ASSOCIATES LTD . (supra),

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Hon'ble the Supreme Court noticed Section 7 of the Act and held that Section 7(1) means an agreement by the parties to submit to arbitration, an agreement which necessarily or rather mandatory to arbitration. It was further held that Section 7 of the Act does not cover the case where parties agree that they may choose one forum or the other.

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In the instant case, from perusal of Clause 10(iii) of

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the agreement between the parties, it is evident that the same

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provides an option to the parties to resolve the dispute by either taking recourse to a mutual settlement or arbitration. In the instant case, the respondent has resorted to mutual settlement which has failed. Thereupon, the respondent has filed the suit before the Commercial Court. Clause 10(iii) of the Agreement does not mandatorily require the parties to refer the dispute for adjudication to arbitration. Therefore, in view of the law laid down by the Hon'ble Supreme Court in WELLINGTON ASSOCIATES LTD . (supra), learned Judge of the Commercial Court has rightly rejected the petition filed by the appellant under Section 8 of the Act.

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For yet another reason, no interference can be made with the impugned order as in the light of the mandate contained under Section 8(2) of the Act. The party is required to file the original agreement or the certified copy of the agreement. In the instant case, the original agreement was not produced before the learned Judge of the Commercial Court.

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For the aforementioned reasons, we do not find any

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merit in this appeal. Same fails and is hereby dismissed .

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Sd/JUDGE

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Sd/JUDGE

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BRN

Adarsh Developers v. Rhs Security Services

Case brief

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Adarsh Developers v. Rhs Security Services

Case brief

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