Dismissed

Mrs Vidya Hari Sinhji R Rana v. Mesers Jade Inc.

Karnataka HC19 Jan 2023WP/48364/2016

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed two writ petitions challenging orders that rejected applications for appointment of arbitrators under Section 8 of the Arbitration and Conciliation Act, 1996. The Court held that disputes regarding project performance and encroachment arising from commercial agreements were arbitrable.

What did the court decide?

The writ petitions were dismissed; orders of the trial courts staying the civil proceedings and referring parties to arbitration were affirmed.

Mrs Vidya Hari Sinhji R Rana Vs Mesers Jade Inc. — Arbitration | Karnataka HC (2023)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19^TH DAY OF JANUARY 2023

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BEFORE

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THE HON’BLE MR. JUSTICE R.NATARAJ

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WRIT PETITION NO.55928 OF 2015 (GM-CPC) C/W WRIT PETITION NO.48364 OF 2016(GM-CPC)

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IN W.P.NO.55928/2015:

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BETWEEN:

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HARIYANA STEEL AND POWER (DIVISION OF HARIYANA SHIP BREAKERS LTD.,) A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND HAVING OFFICE AT 206, BARTON CENTRE, NO.84, M.G. ROAD, BANGALORE-560001. REPRESENTED HEREIN BY ITS CHIEF EXECUTIVE OFFICER / DIRECTOR AND AUTHORIZED SIGNATORY MR. SANJEEV RENIWAL AGED 42 YEARS

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...PETITIONER

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(BY SRI. BIMBADHAR M. GOWDA, ADVOCATE)

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AND:

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INDURE PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING OFFICE AT INDURE HOUSE, DLF COMMERCIAL COMPLEX, GREATER KAILASH-II, NEW DELHI,

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REPRESENTED HEREIN-110048 BY ITS MANAGING DIRECTOR, MR. NARENDRA PRAKASH GUPTA

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MR. NARENDRA PRAKASH GUPTA MANAGING DIRECTOR, INDUS PRIVATE LIMITED, INDUS HOUSE, DLF COMMERCIAL COMPLEX, GREAT KAILASH-II, NEW DELHI-110 048.

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MR. ANANT GUPTA DIRECTOR, INDUS PRIVATE LIMITED INDUS HOUSE, DLF COMMERCIAL COMPLEX GREAT KAILASH-II, NEW DELHI-110 048.

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MR. SUNIL SHARMA VICE-PRESIDENT INDUS PRIVATE LIMITED INDUS HOUSE DLF COMMERCIAL COMPLEX GREAT KAILASH-II NEW DELHI-110 048

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MRS. NIDHI GUPTA DIRECTOR INDUS PRIVATE LIMITED INDUS HOUSE DLF COMMERCIAL COMPLEX GREAT KAILASH-II NEW DELHI-110 048

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MRS. BHAVANA GUPTA DIRECTOR INDUS PRIVATE LIMITED INDUS HOUSE DLF COMMERCIAL COMPLEX

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GREAT KAILASH-II NEW DELHI-110 048.

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…RESPONDENTS

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(BY SRI. S.R. KAMALACHARAN, ADVOCATE FOR RESPONDENT NOS.1, 3 TO 6 (VAKALATH NOT FILED FOR RESPONDENT NOS.3 TO 6)

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NOTICE IS SERVED ON RESPONDENT NO.2)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER IMPUGNED AT ANNEXURE-A DATED 19.08.2015 PASSED BY THE LEARNED PRINCIPAL SENIOR CIVIL JUDGE, HASSAN ON I.A.NO.III IN O.S.NO.115/2014 BY DISMISSING THE INTERIM APPLICATION NO.III DTD.13.02.2015, FILED BY THE RESPONDENTS UNDER SECTION 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996.

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IN W.P.NO.48364/2016:

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BETWEEN:

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MRS. VIDYA HARI SINHJI R. RANA WRONGLY MENTIONED AS MRS. VIDYA HARISH SINHJI R. RANA, AGED ABOUT 56 YEARS, W/O C.V.S. RAVI, NO.1/3-2, "ESHAAN", CHICO SQUARE, HUCCHINS ROAD, ST. THOMAS TOWN, BENGALURU-560 084.

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...PETITIONER

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(BY SRI. ABHINAV R., ADVOCATE)

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AND:

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MESERS JADE INC A PARTNERSHIP FIRM REGISTERED UNDER THE INDIAN PARTNERSHIP ACT HAVING ITS PLACE OF WORK AT

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NO.201, "A" BLOCK, CENTURY PARK APARTMENTS, 48, RICHMOND ROAD, BENGALURU-560 025 REPRESENTED BY IT MANAGING PARTNER MR. DEVENDRANATH

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MR. DEVENDRANATH AGED ABOUT 52 YEARS S/O R. BALAJI RAO RESIDING AT NO.201, "A" BLOCK, CENTURY PARK APARTMENTS, 48, RICHMOND ROAD, BENGALURU-560 025.

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…RESPONDENTS (BY SRI. G.S. VENKAT SUBBARAO, ADVOCATE FOR RESPONDENT NOS.1 AND 2)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 05.01.2016 PASSED BY THE X ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU IN O.S.NO.1343/2012 AT ANNEXURE-D TO THE WRIT PETITION AND CONSEQUENTLY REFER THE PARTIES HEREIN TO ARBITRATION BY ALLOWING THE APPLICATION [I.A.NO.2] FILED BY THE PETITIONER HEREIN AGAINST THE RESPONDENT, BY ALLOWING THE PRESENT PETITION.

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THESE PETITIONS HAVING BEEN HEARD AND RESERVED FOR ORDER ON 21.10.2022 AND COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, THE COURT MADE THE FOLLOWING:-

ORDER

W.P. No.55928/2015

The plaintiff in O.S. No.115/2014 on the file of the Principal Senior Civil Judge, Hassan (for short, the 'Trial Court') has filed this writ petition assailing the correctness of the Order dated 19.08.2015, by which, the Trial Court allowed I.A. No.III filed by the respondent No.1 herein under Section 8 of the Arbitration and Conciliation Act, 1996 (for short, 'the Act of 1996') and referred the parties to arbitration.

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The parties in this petition will henceforth be referred to as they were arrayed before the Trial Court. The petitioner herein was the plaintiff while the respondent Nos.1, 2, 3, 4, 5 and 6 herein were defendant Nos.1, 2, 3, 4, 5 and 6 respectively before the Trial Court.

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Facts in W.P.No.55928/2015:

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The plaintiff had placed an order dated 08.04.2005 with the defendant No.1 for construction of 10 MW Captive Power Plant at its steel plant at Hassan for

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Rs.24,50,00,000/-. The purchase order contained a clause for settlement of disputes through arbitration. The plaintiff had paid an advance of Rs.3,67,50,000/- to defendant No.1 and due to alleged change in specifications, the supply and commissioning of the equipment was delayed and culminated in the termination of the purchase order. The plaintiff issued a notice dated 20.08.2011 calling upon the defendant No.1 to repay the interest free advance consideration amounting to a sum of Rs.3,67,50,000/within 15 days from the date of receipt of the notice. The defendant No.1 replied on 16.11.2011 denying its liability to refund the advance and refused to participate in the arbitration. Consequently, the plaintiff filed O.S. No.115/2014 against the defendants for the following reliefs:

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"(i) To direct the defendants to pay the Plaintiff a sum of Rs.3,67,50,000/(Rupees Three Crores Sixty Seven Lakhs Fifty Thousand Only) along with interest that may be quantified by this Hon'ble Court;

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(ii) To grant costs, and

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(iii) To grant such other relief/s as this Hon'ble Court may deem fit to grant under the

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circumstances of the case, in the interest of justice and equity."

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The defendant No.1 filed an application (I.A.No.III) under Section 8 of the Act of 1996 before filing their first statement of defence.

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The plaintiff opposed this application.

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The Trial Court after considering the material on record, held that the parties were indeed bound by the clause No.1.8 of the General Terms and Conditions of the Contract stated in Schedule-F to the Purchase Order dated 08.04.2005 providing for settlement of disputes through arbitration and hence, allowed the application (I.A. No.III) filed under Section 8 of the Act of 1996 and referred the parties to arbitration.

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Being aggrieved by the same, this writ petition

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is filed.

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Learned counsel for the plaintiff / petitioner submitted that the defendant No.1 / respondent No.1 in terms of the reply dated 16.11.2011, refused to participate

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in arbitration and therefore, the Trial Court committed an error in allowing the application (I.A. No.III) under Section 8 of the Act of 1996 and referring the parties to arbitration. The learned counsel contended that when the defendant No.1/respondent No.1 itself refused to participate in the arbitration, no purpose would be served again in directing the parties to arbitration. He further contended that the suit was not only against the defendant No.1 but also against defendant No.2 – Managing Director, defendant No.4-Vice President and defendant Nos.3, 5 and 6 – Directors who were responsible for compelling the plaintiff to take further steps for implementation and commissioning of the Project. The learned counsel invited the attention of this Court to para Nos.30 and 31 of the plaint and contended that the suit was therefore maintainable against defendant Nos.2 to 6 as Directors of the defendant No.1 as arbitration proceedings against non-parties i.e., defendant Nos.2 to 6 was not maintainable. He, therefore, submitted that the suit was maintainable against the defendants. He further contended

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that if the parties had agreed for settlement of disputes by arbitration, then the Trial Court ought to have identified an arbitrator as per the agreement entered into between the parties rather than directing the parties to again take recourse to Section 11 of the Act of 1996. The learned counsel relied upon the judgment of the Hon'ble Apex court in the case of Pravin Electricals Private Limited

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v. Galaxy Infra and Engineering Private Limited [(2021) 5 SCC 671] and contended that the mandate of a valid arbitration agreement should be read into mandate of Section 11 of the Act of 1996. He also relied upon the Judgments of the Hon'ble Apex Court in the following cases:

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i. Ayyasamy v. A. Paramasivam and Ors. [Civil Appeal Nos.8245-8246 of 2016];

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ii. Vidya Drolia and Ors. v. Durga Trading Corporation [(2021) 2 SCC 1];

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iii. N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited and Others [(2021) 4 SCC 379];

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iv. Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd. [Civil Appeal No.3631 of 2019 decided on 10.04.2019];

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v. Intercontinental Hotels Group (India) Pvt. Ltd. & Anr. v. Waterline Hotels Pvt. Ltd., [Arbitration Petition (Civil) No.12 of 2019 decided on 25.01.2022];

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Per contra, the learned counsel for the respondent No.1/defendant No.1 submits that the genesis of the dispute between the parties was the purchase order dated 08.04.2005. He contended that communications / correspondences inter se between the plaintiff and defendant Nos.2 to 6 were all based on the purchase order dated 08.04.2005 and hence, a suit was not maintainable against any of the defendants. The learned counsel further contended that it is the plaintiff who was responsible for the delay and that the defendant No.1 had completed substantial work to cover the advance paid by the plaintiff. The defendant No.1 was perforced to stop the work since the plaintiff refused to pay additional sum to defendant

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No.1 in terms of the purchase order. The learned counsel contended that since the delay in execution of the purchase order was due to reasons attributable to the plaintiff, there was no dispute to be resolved between the parties and therefore, it was in that context that the defendant No.1 had refused to participate in the arbitration. Nonetheless, he contended that the arbitration clause provided in the purchase order was clear and categoric and did not admit of any contra interpretation and therefore, a suit for recovery of the advance paid by the plaintiff to the defendant No.1 was not maintainable. In so far as the contention that the defendant Nos.2 to 6 were responsible for keeping the proceedings alive by addressing communications, the learned counsel contended that defendant No.2 was Managing Director, defendant No.4 was Vice President and defendant Nos.3, 5 and 6 were Directors of the defendant No.1 and therefore, they were not acting in their individual capacity but were acting on behalf of defendant No.1 as its servants. Therefore, he contends that a separate suit is not

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maintainable against defendant Nos.2 to 6. Even otherwise, he contends that if the proceedings before the Civil Court are not maintainable against defendant No.1, then defendant Nos.2 to 6 who are its agents cannot be proceeded against since the amount of Rs.3,67,50,000/was paid not to defendant Nos.2 to 6 but to defendant No.1. Therefore, he contends that the relief against defendant Nos.2 to 6 is inseparable and a stand alone suit against defendant Nos.2 to 6 is not maintainable.

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W.P. No.48364/2016

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This writ petition is filed by the defendant in O.S.No.1343/2012 on the file of the X Additional City Civil and Sessions Judge, Bengaluru, (for short, 'the Trial Court') challenging the correctness of the Order dated 05.01.2016 passed therein by which an application (I.A. No.2) filed by the defendant under Section 8(1) of the Act of 1996 was rejected.

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The parties in this petition will henceforth be referred to as they were arrayed before the Trial Court.

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The petitioner herein was the defendant while respondent Nos.1 and 2 were the plaintiff Nos.1 and 2 respectively before the Trial Court.

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Facts in W.P. No.48364/2016

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The suit in O.S. No.1343/2012 was filed for the relief of perpetual injunction to restrain the defendant and their agents from interfering and more specifically from doing any act in the common area / setback area of the residential condominium, in violation of the co-ownership rights of the plaintiff and other owners of the flats in the apartment complex. The plaintiffs also sought for a perpetual injunction to restrain the defendant from excavating or constructing or laying any structure of whatsoever nature or create an easement in the setback area exclusively for the defendant or otherwise, either in the area lying adjacent to flat No.3 owned by the plaintiff No.1 or any portion of the setback area / common area of the residential condominium.

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The plaintiff No.1 had entered into a Joint Development Agreement with the defendant on 06.10.2004 and contemporaneously, the defendant executed a power of attorney in favour of the plaintiff No.2 to perform the functions mentioned therein. The plaintiff No.1/plaintiffs completed the construction and entered into a formal agreement with the defendant on 29.09.2009 sharing the apartments as per the Joint Development Agreement. Consequent thereto, the 1^st plaintiff owned flat Nos.2, 3, 6, 8 and 9 while the 2^nd plaintiff possessed the right to sell the flat Nos.1, 4, 5, 7 and penthouse Nos.1 and 2. The defendant who possessed flat No.3 on the ground floor therefore had access to garden space which is nothing but a setback area which is held commonly by all the residents of the residential condominium. Nonetheless, the defendant was attempting to dig a huge pit on the north-western corner of the residential condominium in the plaint schedule property which threatened the retaining compound wall and the basement wall. The plaintiffs therefore were compelled to inform the

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defendant to stop the activity which was arrogantly refused by the defendant. The plaintiffs therefore filed the suit for the reliefs mentioned above.

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The defendant after entering appearance filed an application under Section 8(1) of the Act of 1996 contending that the Joint Development Agreement dated 29.09.2009 contained a clause providing for settlement of disputes through arbitration.

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The said application was opposed by the plaintiffs who contended that after the completion of the construction, the Joint Development Agreement had been executed and therefore, the dispute between the parties did not relate to any issue arising out of the Joint Development Agreement.

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The Trial Court after considering the contentions urged by the parties, rejected the application in I.A. No.2 filed by the defendant in terms of the order dated 05.01.2016 holding that the dispute between the parties concern the setback area and therefore was beyond

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the clause providing for settlement of disputes through arbitration in the Joint Development Agreement.

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Being aggrieved by the said finding, the defendant has filed this writ petition.

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The learned counsel for the defendant / petitioner contended that the dispute arose out of the aforesaid Joint Development Agreement and therefore, was arbitrable. He submitted that the non-arbitrability of the dispute is to be left to the arbitrator to decide. He also relied upon the judgment of the Hon’ble Apex Court in Vidya Drolia (referred supra), as well as the Judgment of the Hon’ble Apex Court in Mohammad Masroor Shaikh

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v. Bharat Bhushan Gupta and others [(2022) 4 SCC 156]. He further contended that the defendant too had filed O.S.No.25138/2014 where an application under Section 8 of the Act of 1996 was entertained. He therefore, submitted that there cannot be double standards regarding the reference to arbitration.

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Per contra, the learned counsel for the plaintiffs / respondents contended that the suit did not relate to any terms under the Joint Development Agreement but related to the unauthorised use of the setback area by the defendant.

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I have considered the contentions urged by the learned counsel for the respective learned counsel for the plaintiff and defendant No.1 in O.S. No.115/2014 as well as the respective learned counsel for the defendant and plaintiffs in O.S. No.1343/2012.

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The object and purpose behind section 8 of the Act of 1996 is to compel the parties to abide by their contractual understanding to resolve any dispute arising out of an agreement through the process of arbitration. The only exception for the non-application of Section 8 of the Act of 1996 is when the Court finds prima facie that an arbitration agreement does not exist. The Hon’ble Apex Court in the case of Vidya Drolia (referred supra) held in para No.134 as follows:

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" Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straightforward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. Only when the court is certain that no valid arbitration agreement exists or the disputes/subject-matter are not arbitrable, the application under Section 8 would be rejected. At this stage, the court should not get lost in thickets and decide debatable questions of facts. Referral proceedings are preliminary and summary and not a mini trial. This necessarily reflects on the nature of the jurisdiction exercised by the court and in this context, the observations of B.N. Srikrishna, J. of "plainly arguable" case in Shin-Etsu Chemical Co. Ltd. [(2005) 7 SCC 234] are of importance and relevance. Similar views are expressed by this Court in Vimal Kishor Shah [(2016) 8 SCC 788] wherein the test applied at the pre-arbitration stage was whether there is a “good arguable case” for the existence of an arbitration agreement."

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It further held at para 154.4 as follows:

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"154.4 Rarely as a demurrer the court may interfere at the Section 8 or 11 stage when it is manifestly

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and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are nonarbitrable, though the nature and facet of nonarbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably ‘non-arbitrable’ and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the arbitral tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism."

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W.P. No.55928/2015

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In W.P. No.55928/2015, the plaintiff as well as

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the defendants do admit that the purchase order dated 08.04.2005 did provide for clause No.1.8 of the General Terms and Conditions of the Contract stated in Schedule-F

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therein enabling the parties to settle the dispute through the process of arbitration and the same is extracted below:

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"1.8 ARBITRATION:

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In the event of any disputes or differences at any time arising between the parties hereto relating to interpretation of any aspects of this proposal or any clause or thing herein contained of the work or services to be hereunder performed or the rights or liabilities of parties hereto under this proposal or otherwise, however in relation to the premises, such disputes or differences shall be referred to two Arbitrators, one or be appointed by each party to the dispute or difference, and in case of disagreement between the two arbitrators, one to be appointed by each party to the dispute or difference, and in case of disagreement between the two Arbitrators, a referee shall be appointed in accordance with and subject to the provisions of the Amended Indian Arbitration and Conciliation Act 1996 or by any statutory modifications thereof for the time being in force. Award to be final and binding on both parties. The remuneration of the arbitrators will be borne equally by the parties to the Agreement the venue of arbitration will be mutually decided later.

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The suit filed in O.S. No.115/2014 discloses that the plaintiff had established a facility for manufacture of sponge iron, power rolling mill, furnace etc. It claimed that it spent a sum of Rs.10,50,48,938/- towards electricity for the period from 2004 to 2013. During the year 2005, defendant No.1 claiming to be proficient in establishing power plants approached the plaintiff to erect a Captive Power Plant at the factory of the plaintiffCompany. Consequent to the negotiations that ensued, a purchase order dated 08.04.2005 was placed by the plaintiff with the defendant No.1 which was valued at a sum of Rs.24,50,00,000/-. The plaintiff paid a sum of Rs.3,67,50,000/- to defendant No.1 as advance amounting to 15% of the total contract price for the implementation of the project, against a corresponding bank guarantee of Rs.3,67,50,000/- from Syndicate Bank, Corporate Finance Branch, the receipt of which was acknowledged by the defendant No.1. The plaintiff alleged that it took steps to obtain approvals / consents / no objections from various authorities of the State Government and also dedicated

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some of its persons for ensuring the commissioning of the project as per schedule. It also claimed that it had raised financial assistance of Rs.50,00,00,000/- from Punjab National Bank. It alleged that the defendants sought release of 5% of the purchase price as the second advance. The plaintiff addressed a letter dated 12.11.2005 informing the defendants that the total cost of civil construction was Rs.2.7 crores and that it was then crossing Rs.3.8 crores and therefore called upon the defendants to justify the increase. Nonetheless the defendants without explaining the increase in the cost of civil construction insisted upon release of the second advance. The plaintiff alleged that since the cost of the project had gone up, it had decided to reduce the capacity of the power plant from 10 MW to a lesser capacity to match the cost of the estimated budget. The plaintiff alleged that the defendants agreed to reduce the project to less than 10 MW and forwarded proposals for the construction of a 4 MW Captive Power Plant with 6 MW TG instead of the earlier 10 MW. The plaintiff alleged that the

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reduction in the project capacity did not really serve its purpose. It alleged that the defendants had agreed that the initial advance amount of Rs.3,67,50,000/- would be held in trust and that it would be adjusted as and when the parties entered into a fresh contract. It therefore claimed that the defendants had always assured to return the money if the project was not implemented. Following this, the plaintiff called upon the defendants to submit a comprehensive proposal for 6 MW Captive Power Plant or to return the advance sum of Rs.3,67,50,000/-. Since nothing concrete happened thereafter, the plaintiff in terms of the letter dated 17.02.2011 cancelled the project and requested the defendants to return the advance sum of Rs.3,67,50,000/-. Since the defendants refused to return the advance amount, the present suit is filed.

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In the application filed by the defendant No.1 under Section 8 of the Act of 1996, the defendant No.1 contended that it had completed enough work to cover the advance paid by the plaintiff and that one of the reasons

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for stopping the work was that the plaintiff refused to pay the further sums to defendant No.1. It contended that it had initiated various activities for the project such as designing, detailed engineering, negotiating and placing of orders on various vendors for procuring various equipments for the project etc. It also claimed that the suit itself is filed belatedly after eight years and therefore, the suit was barred by the law of limitation.

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A careful examination of the arbitration clause incorporated in the purchase order dated 08.04.2005 referred supra, indicates that the parties had, with eyes wide open, entered into an agreement to settle their disputes through arbitration. The dispute related to the installation and commissioning of a Captive Power Plant at the behest of the plaintiff. While the plaintiff alleged that the cost of civil construction of the Captive Power Plant exceeded the initial cost mentioned in the purchase order, the defendant No.1 alleged that the escalation of the cost was due to the delay on the part of the plaintiff in

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releasing the contracted amount. Therefore, the dispute necessarily related to performance of mutual obligations under the purchase order.

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A perusal of the purchase order placed on record discloses that the specifications and terms were to be as per the offer, discussions and letter of intent dated 18.03.2005. Schedule 'F' to the purchase order dated 08.04.2005 which contained the General Terms and Conditions of the contract prescribed that the plant would be engineered, supplied and constructed within fourteen months from the date of receipt of the letter of intent and the terms of payment prescribed that 15% of the purchase price would be released against bank guarantee and 5% against submission of boiler foundation and TG hall foundation. The dispute arose when the defendant No.1 laid a claim for the release of the next 5% advance as per the purchase order and the plaintiff allegedly procrastinated, resulting in the project being delayed and ultimately, ended in cancellation of the purchase order. The question therefore was who was responsible for the

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delay in implementation of the project? Therefore, this question arose out of the purchase order and had to be resolved only through the process of arbitration as provided under Section 11 of the Act of 1996. The Trial Court has appreciated the facts and the law and has rightly held that the suit for recovery of Rs.3,67,50,000/- was not maintainable and was justified in allowing I.A. No.III filed by defendant No.1 by referring the parties to arbitration.

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In so far as the contention of the learned counsel for the petitioner that the Trial Court ought to have appointed an arbitrator, the power to appoint an arbitrator is not vested in the civil Court and not even in the District Court but it is by the Chief Justice of the High Court or the designated Judge. Therefore, the contention of the plaintiff/petitioner is liable to be rejected.

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W.P. No.48364/2016

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In so far as W.P. No.48364/2016 is concerned, the arbitration clause in the Joint Development Agreement dated 29.09.2009 reads as follows:

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"37. If any question, dispute or difference whatsoever shall arise between the Parties hereto or their respective legal representatives or between any of the Parties hereto and the legal representatives of the other of them touching this Understanding or any matter or things contained or construction thereof or as to any matter in any way connected therewith or arising there from or the operation thereof or the rights and liabilities of either of the parties then, the parties shall enter, in good faith, into negotiations aimed at finding an amicable solution. If such question, dispute or difference could not be resolved in a satisfactory manner, either party may refer the matter to arbitration of a Sole Arbitrator. The decision of the Arbitrator shall be binding and final. The provisions of the Arbitration and Conciliation Act, 1996 or any other statutory amendment or re-enactment thereof for the time being in force, shall apply. The venue of arbitration shall be Bangalore and Courts in Bangalore alone shall have exclusive jurisdiction in respect of all the matters arising out of or incidental to this Agreement. Arbitration proceedings shall be conducted in English language and any award or awards shall be rendered in English. The procedural law of the arbitration shall be Indian Law. The costs of the arbitration shall be jointly borne by both the disputing parties."

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It is not in dispute between the parties that the construction of the building is completed in accordance with the Joint Development Agreement and therefore, the same is completely executed which culminated in the execution of a sharing agreement. The issue between the parties did not relate to any dispute arising out of the Joint Development Agreement but necessarily arose out of the defendant/petitioner attempting to usurp the setback area in the condominium. This dispute did not arise out of the Joint Development Agreement and therefore, a civil suit to restrain the defendant from encroaching into or laying any construction upon such setback area fell outside the Joint Development Agreement which contained the arbitration clause and therefore, a suit was maintainable. The contention that a suit filed by the defendant against the plaintiff No.1 in O.S. No.25138/2014 was halted and the parties were referred to arbitration is inconsequential as the reliefs in the said suit did arise out of the Joint Development Agreement dated 29.09.2009. Hence, the Trial Court was justified in rejecting the application in I.A.

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No.2 filed by the defendant under Section 8(1) of the Act of 1996 to refer the parties to arbitration.

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In view of the above, both these writ petitions lack merit and are dismissed .

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It is open for Sri. Kamalacharan, learned counsel for respondent No.1 in W.P.No.55928/2015 to file vakalath for respondent Nos.3 to 6 within two weeks.

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Sd/JUDGE

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sma

Mrs Vidya Hari Sinhji R Rana v. Mesers Jade Inc.

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Mrs Vidya Hari Sinhji R Rana v. Mesers Jade Inc.

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