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Arbitrators like Courts, are legally bound to resolve the disputes in accordance with public policy of the law: Bombay High Court

There is no inherent lack of jurisdiction of the Arbitral Tribunal in considering a claim for specific performance of the MOU. The Arbitral Tribunal has jurisdiction to entertain, try and adjudicate upon such claims arising out of not in action in rem. In the case of Arbitration Agreement, claims could only be adjudicated upon by Arbitral Tribunal and not barred expressly or by necessary implication. Thus, no question of inherent lack of jurisdiction in the Arbitral Tribunal to decide those claims will arise. This remarkable judgment was passed by the Bombay High Court in the matter of TIRUPATI SHOPPING CENTRE PREMISES V SHABAYESHA CONSTRUCTION COMPANY PRIVATE LIMITED [WRIT PETITION (STAMP) NO. 9105 OF 2021] by Honourable Justice R. D. Dhanuka and Honourable Justice V. G. Bisht.

By this Writ Petition filed under Articles 226, the petitioner has challenged the order dated 19 January 2021 which was passed by the learned Arbitrator wherein the Application filed by the petitioner under Section 16 of the Arbitration and Conciliation Act, 1996 was dismissed.

The respondent had executed agreements for sale with the unit purchasers in the year 1995 and agreed to form a society within the timeline prescribed under Rule 8 of the Maharashtra Ownership Flats. The respondent had also covenanted that it would execute a conveyance of the property within four months of the registration of the society. The petitioner submitted that the respondent did not disclose any further construction that was proposed to be carried out on the said property at the time of entering into the agreements for sale with various unit purchasers, though, under Clause 6 of the agreement for sale, the respondent had expressly covenanted that the residential FSI from the property would be available only to the society after its registration.

Since the respondent failed to execute a Deed of Conveyance in favour of the petitioner society in spite of receiving full consideration from the flat purchasers even after expiry of eight years after the execution of the MOU.  The petitioner filed an application before the Competent Authority under Section 11 of the Maharashtra Ownership Flats Act, 1963 for a unilateral Deemed Conveyance. The dispute was then referred to Arbitration under the Arbitration clause forming part of the Agreement entered into between the parties. 

The HC observed that “the Arbitral Tribunal has jurisdiction to decide all the claims which can be decided by a Civil Court unless the same is specifically barred either expressly or by necessary implication. The Arbitral Tribunal has rightly held that parties are neither stopped nor there is a bar under the provisions of law to establish its right, title, or interest, independent of such Deemed Conveyance Certificate. Such certificate will have no bar in the matter where the right, title, and interest of any party is adjudicated before a forum which is conferred with such jurisdiction to adjudicate and deal with after perusing the oral and documentary evidence and decide the dispute between the parties. Such adjudication is clearly independent of the Act performed under Section 11 of the MOFA.

Also, the proceedings under Section 11 of the MOFA are filed in view of the default committed by the promoter to execute a Deed of Conveyance in favour of the society by complying with its application under the provisions of the MOFA by executing a Deed of Conveyance. The Competent Authority is thus empowered to pass an order of Deemed Conveyance ex-parte. Thus, the Court stated, “Such order passed by the Competent Authority does not create a title in respect of such property conclusively in favour of the society. Such an order of Deemed Conveyance is subject to the final adjudication of title in the appropriate Civil proceedings either before the Civil Court or by Arbitral Tribunal in case of their being an Arbitration Agreement between the parties. There is no such provision under MOFA that the order passed by the Competent Authority under Section 11 of the MOFA is final in all respect including on the issue of title in the property and bars the Civil Court or the Arbitral Tribunal from deciding the issue of title independently.

Thus, the HC held that the petition is a gross abuse of the process of law and has been filed with a view of delaying the outcome of the arbitral proceedings thus the writ petition is dismissed.

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