DATE OF JUDGMENT:
22/09/2021
CORAM:
CJI NV Ramana
Justice Surya Kant
PARTIES:
Petitioner: DLF Home Developers Limited.
Respondent: Rajapura Homes Private Limited &Anr.
SUBJECT
This judgement talks about petitions filed under Section 11 seeking for reference of arbitration. The Supreme Court has held that such a prayer can be declined if the dispute in subject does not corelate to the agreement made for arbitration. In this particular case, after analysing the core issues at length, the Court concluded that the parties have neither denied nor challenged the existence of an arbitration clause in Construction Management Service Agreement, and due to the nature of the disputes, it can be adjudicated by arbitral proceedings.
OVERVIEW
- The DLF HDL, in 2007, entered into a joint venture wherein an investment was made in special purpose vehicles, including Raja Pura Homes Pvt Ltd, for the development of residential projects in India.This company is engaged in the development and construction of residential projects, collectively called as the Raja Pura project.
- In 2015, the parties reached a settlement regarding the acquisition of the sole ownership and control of two special purpose vehicles, namely, Begur Company and respondent No.1.
- In 2016-2017, two share purchase agreements were made,one between the petitioner and the two respondents and another between the petitioner, Begur Company and the Respondent No.1. to transfer the entire holding in the Begur Company to Respondent 1. The transaction implied transfer of the petitioner's entire shareholding.
- As per clause 9, all disputes relating to the contract should be submitted for arbitration and the venue for any arbitration would be New Delhi. The Act would apply to all disputes.
- The petitioner certified the completion of the Southern Home Project. The Begur Company refused to accept the notice as a valid completion.
- The petitioner invoked the arbitration notice that involved referring to a common and composite Arbitrary Tribunal. The respondents, however, refused to appoint a sole Arbitrator. The petitioner filed two petitions under Section 11(6) of the Arbitration and Conciliation Act.
RELEVANT PROVISIONS
- Section 11(6) of Arbitration and Conciliation Act- It talks about appointment of an arbitrator where, under an appointment procedure agreed upon by the parties, — a party fails to act as required under that procedure, fails to reach an agreement expected of them under that procedure; ora person, fails to perform any function entrusted to him or it under that procedure,unless the agreement on the appointment procedure provides other means for securing the appointment.
- Section 11(12)- Where the matters arise in an international commercial arbitration, the reference to ‘‘Chief Justice'' in those sub-sections shall be construed as a reference to the ‘‘Chief Justice of India''.
ISSUE
- Can the Court appoint a sole Arbitrator for this dispute?
JUDGEMENT ANALYSIS
- The respondents claimed that the petitions should not be referred to arbitration as the agreements between the parties are governed by the Southern Homes SPA and the Raja Pura SPA, and not RCMA/SCMA agreements. Those were executed only to operationalise the manner in which the petitioner would fulfil its construction obligation.
- On behalf of the petitioner, it was argued that the Begur Company, as well as the other respondents, acted unreasonably in not taking the notice of completion.
- The notice rejecting the certification of the Southern Homes Project and the Rajapura Homes Project was allegedly done to avoid the obligation of the respondents to pay the fee to the petitioner. Since the parties have not disputed that the arbitration agreement or core ingredients of SCMA/RCMA, the present dispute should be referred to arbitration under the settled law.
- The Bench noted that while considering the petition under Section 11(6) of the Arbitration Act, it is not expected to act mechanically to merely deliver a dispute resolution based on the objections raised by an applicant. They are obliged to consider the core issues of the case within the framework of Section 11(6 A) of the Act.
- The Court held that parties have neither denied nor challenged the existence of an arbitration clause in any of the construction management service agreements. Thus, due to the nature of disputes, they can be adjudicated in arbitral proceedings.
CONCLUSION
Even if an agreement exists, the Court would not decline a prayer for reference if the dispute in question does not relate to the said agreement. The court then appointed R.V. Raveendran as the sole Arbitrator to resolve all the disputes.
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