Arbitration Reference Can Be Declined If Dispute In Question Does Not Correlate To Arbitration Agreement

Case title

DLF Home Developers Limited vs. Rajapura Homes Private Limited

Key Takeaways

• The case was heard by the bench of Chief Justice of India NV Ramana and Justice Surya Kant.
• Two separate arbitration petitions were filed in this case by the petitioner.
• The Ridgewood Holding Limited invested in Rajapura Homes Private Limited and the Begur Company to develop real estate projects in different cities of India.

Background of the case

• DLF is involved in business of providing development, management and investment services regarding the real estate projects.
• The petitioner and Ridgewood Holding Limited started a joint venture. The Ridgewood Holding Limited invested in Rajapura Homes Private Limited and Begur OMR homes private limited (herein both referred as respondent no.1) for developing residential projects in various cities of India.
• The Rajapura homes private limited developed “DLF Maidan Heights” and DLF Woodlands Heights” which are known as “Rajapura project” and the Begur company developed “DLF Garden City” and “DLF Westend Heights” which is known as the Southern homes project.
• The Ridgewood holdings limited transferred its stake of joint venture to Resimmo PCC (herein referred to as respondent no.2).
• As per the negotiation in this case the respondent no. 2 was entitled to acquire the sole ownership of Rajapura home private limited and Begur company.
• For the change of the ownership a share purchase agreement was made between the petitioner and Rajapura homes private limited, Begur company (respondent no. 1) and respondent no. 2.
• In clause 9 of such agreement, it was stated that all the disputes arising out of contract shall be submitted for the arbitration at the request of the parties and that such arbitration shall be conducted with the rules of Singapore International Arbitration Centre and the venue of arbitration will be in Singapore.
• The petitioner’s agreement with the Rajapura homes private limited and the Begur company also had the arbitration clause. Clause 11 of such agreements stated that the venue and seat of the arbitration shall be in new Delhi and this shall be governed by the Arbitration and the Conciliation Act 1996.
• The petitioner filed two separate arbitration petitions under section 11(6) and 11(12) of Arbitration and Conciliation Act 1996. The petitioner requested to appoint a sole arbitrator for the resolution of all the disputes arising from DLF- southern homes construction management service agreement (SCMA) and DLF- Rajapura homes construction management service agreement (RCMA).
• The petitioner in his arguments stated that the Rajapura homes private limited and the Begur company were not accepting the notice of completion and the reason for rejection of such notice by them was to avoid the fee which is payable by the respondent no. 2 to the petitioner. The petitioner further stated that since there was no dispute between the parties on the arbitration agreement, the dispute should be referred to the arbitration.
• The respondent contended that such instant disputes could only be resolved as per the arbitration agreement and as per the clause 9 of the agreement the venue and seat of arbitration shall be Singapore and the dispute shall be governed by the rules of Singapore International Arbitration Centre. The respondent further submitted that the application under section 11(6) of the Arbitration and Conciliation act 1996 shall not be maintainable as the venue and seat is outside India.

Findings of the court

• The Court held that as the parties did not deny about the arbitration clause and they didn’t challenge the arbitration clause then the dispute can be adjudicated by the arbitration proceedings.
• After hearing both the parties the Court held that even if there is arbitration agreement between the parties the court can decline the prayer for the reference if the dispute which is in question does not correlate with the agreement.
• The court allowed the arbitration petition and appointed the former judge of Supreme Court of India as a sole arbitrator to resolve the disputed between the parties.

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Question
1) What is Section 11(6) and Section 11(12) of the Arbitration and Conciliation Act 1996?
2) What are your views on the judgement given by the Hon’ble Supreme Court of India?