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Case Title: Sushma Shivkumar Daga & Anr. v. Madhurkumar Ramkrishnaji Bajaj & Ors.

Case No: C.APL.No.1854/2023

Dated on: 15 December 2023

Coram: Hon’ble JUSTICE ANIRUDDHA BOSE and JUSTICE SUDHANSHU DHULIA

FACTS OF THE CASE

M/s Emerald Acres Private Limited (respondent no. 2) was incorporated by Late Mr. Shivkumar Daga and his wife, Mrs. Sushma Shivkumar Daga (appellant no.1) on 18.04.2006 to carry 3 on the business of real-estate development. Subsequently, two Tripartite Agreements were signedcontaining broad arbitrary clauses between Shivkumar Daga, Madhurkumar Ramakrishnaji Bajaj & Ors. and M/s. with a clause stating that further acquisitions would be made through a Special Purpose Vehicle (SPV) where equity would be shared in the proportion of 90:10. Shivkumar Daga died on 08.05.2011, bequeathing his assets through a will dated 10.02.2011 to his wife and his son. The appellants then filed a suit seeking, inter alia, a declaration that the Deed of Conveyance dated 17.12.2019 be declared null and void, and that the Development Agreements entered into pursuant to the two Tripartite Agreements be declared validly terminated. The respondents/defendants moved an application under Section 8 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as “Arbitration Act”) for referring the matter to arbitration by relying upon the arbitral clause in the two agreements dated 31.03.2007 and 25.07.2008. It was contended that the aforesaid agreements formed the basis of the Conveyance Deed and the Development Agreements which are subject matter of the suit. The Trial Court allowed the application of the defendant and referred the matter for arbitration, vide its order dated 13.10.2021. This order was challenged in Writ Petition No.8836 of 2021 by the appellants / plaintiffs before the Bombay High Court, which was dismissed vide order dated 10.12.2021. Aggrieved by these two orders, the appellants / plaintiffs are now before this Court.

ISSUES

• whether the Trial Court and the High Court have rightly referred the matter to arbitration or the dispute is of such a nature that it is not liable to be referred to arbitration, as there was no arbitration clause in the Conveyance Deed dated 17.12.2019 or if there was, yet the matter in any case is such that it is not arbitrable.

LEGAL PROVISIONS

Section 5 of the Arbitration and Conciliation Act, 1996:

This section states that in matters governed by Part I of the Act, no judicial authority shall intervene except where provided in the Act. It emphasizes minimal judicial interference in arbitration matters.

Section 8 of the Arbitration and Conciliation Act, 1996:

This section mandates that a judicial authority must refer the parties to arbitration if there is a valid arbitration agreement, unless it finds that prima facie no valid arbitration agreement exists.

Section 11 of the Arbitration and Conciliation Act, 1996:

This section deals with the appointment of arbitrators and includes provisions to minimize judicial intervention in the appointment process, ensuring that arbitration proceeds smoothly.

Section 16 of the Arbitration and Conciliation Act, 1996:

This section grants the arbitral tribunal the power to rule on its own jurisdiction, including any objections to the existence or validity of the arbitration agreement.

Section 34 of the Arbitration and Conciliation Act, 1996:

This section provides the grounds on which a party can apply to a court to set aside an arbitral award, which includes situations where the arbitration agreement is found to be invalid or the subject matter of the dispute is not arbitrable.

CONTENTIONS OF THE APPELLANTS

The appellants contended that there was no arbitration clause in the Conveyance Deed dated 17.12.2019 and the development agreements. The appellants argued that their suit for the cancellation of a document related to immovable property (land) amounts to an action in rem. They contended that since it was an action in rem, arbitration was not the appropriate remedy. The appellants raised the plea of fraud as an objection to the Section 8 application for referring the matter to arbitration. They argued that the presence of fraud should makes their case ineligible for the jurisdiction of the arbitrator.

CONTENTIONS OF THE RESPONDENT

The respondents contended that there were valid arbitration clauses in the Tripartite Agreements dated 31.03.2007 and 25.07.2008. These agreements formed the basis for all subsequent agreements, including the development agreements and the Conveyance Deed dated 17.12.2019. The arbitration clause in the Tripartite Agreement covered “any dispute in relation to these agreements or in relation to any matter touching or arising from this Agreement,” thus the disputes raised by the appellants also came within it’s purview. Since the dispute arose from agreements that contained arbitration clauses, the matter should be referred to arbitration. They emphasized that the scope of judicial intervention in arbitration matters is minimal, as mandated by Section 5 of the Arbitration and Conciliation Act, 1996. The respondents highlighted Section 16 of the Arbitration Act, which allows the Arbitral Tribunal to rule on its own jurisdiction, including the validity of the arbitration agreement. They argued that the Arbitral Tribunal should decide on any jurisdictional issues, including the existence and validity of the arbitration clause. The respondents contended that the objections raised by the appellants regarding non-arbitrability were not valid. They referred to Supreme Court precedents, such as Deccan Paper Mills v. Regency Mahavir Properties, which clarified that suits for cancellation of documents are actions in personam and therefore arbitrable. Regarding fraud, they argued that the appellants’ allegations were not substantiated and did not meet the criteria for ousting the jurisdiction of the arbitrator as established in Rashid Raza v. Sadaf Akhtar.

COURT’S ANALYSIS AND JUDGEMENT

The court emphasized the limited role of judicial authorities in arbitration matters as outlined in Section 5 of the Arbitration and Conciliation Act, 1996, which seeks to minimize judicial interference. The court noted that under Section 8, a judicial authority must refer parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. The court found that both the 2007 and 2008 Tripartite Agreements contained a broad arbitration clause, covering any disputes related to the agreements or arising from them. The court rejected the appellants’ contention that the dispute raised in the civil suit was non-arbitrable. The court referred to previous judgments, such as Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and Vidya Drolia v. Durga Trading Corpn., to outline the categories of disputes that are non-arbitrable. It concluded that the present case did not fall into those categories. The court found that the appellants’ allegations of fraud were unsubstantiated. It referred to Rashid Raza v. Sadaf Akhtar, which set criteria for when allegations of fraud can oust the jurisdiction of an arbitrator. The court determined that the fraud alleged by the appellants did not meet these criteria. The Supreme Court upheld the findings of the trial court and the High Court, which had both referred the matter to arbitration. The court dismissed the appellants’ appeal, finding no merit in their objections regarding the absence of an arbitration clause, the nature of the suit as an action in rem, and the allegations of fraud. The appeal was dismissed with no order as to costs.

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Judgement Reviewed by – PRATYASA MISHR

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