1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF JULY, 2018 BEFORE THE HON'BLE MR. JUSTICE B. VEERAPPA CIVIL MISCELLANEOUS PETITION NO.18 OF 2018 BETWEEN: 1. D.B. JATTI S/O. LATE B.D. JATTI, AGED ABOUT 71 YEARS, RESIDING AT VILLA NO.7, DWARAKAMAI ECC ROAD, WHITEFIELD, BENGALURU. 2. JATTI ENGINEERING INDIA PVT. LTD. A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING ITS REGD. OFFICE AT SY. NO.51, PATTANDUR AGRHAHARA, BEHIND LOURDES CHURCH, OUTER CIRCLE, WHITEFIELD, BENGALURU, REPRESENTED BY ITS MANAGING DIRECTOR, MRS. LAKSHMI D. JATTI. PETITIONERS (BY PROF. RAVIVARMA KUMAR, SENIOR COUNSEL FOR SRI CHETHAN A.C.) AND: 1. SRI S. SUBRAMANI S/O. SRINIVAS, AGED ABOUT 35 YEARS. 2 2. SMT. ANURADHA S. W/O. SUBRAMANI, AGED ABOUT 30 YEARS. RESPONDENTS ARE RESIDING AT VILLA NO.10, DWARAKAMAI ECC ROAD, WHITEFIELD, BENGALURU. RESPONDENTS (BY SRI S. SRIRANGA, ADV.) THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER SECTION [SECTION](6) OF THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO APPOINT KUKKAJE RAMAKRISHNA BHAT, RETIRED DISTRICT JUDGE, AS AN ARBITRATOR AS PER THE AGREEMENT TO SELL DATED 19-[SECTION]-2014, OR IN THE ALTERNATIVE, APPOINT ANY OTHER ARBITRATOR AS PER THE AGREEMENT TO SELL DATED 19-[SECTION]-2014. THIS CIVIL MISCELLANEOUS PETITION IS COMING ON FOR ADMISSION, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER
The petitioners filed the present Civil Miscellaneous Petition under the provisions of [SECTION] of the [ACT], (for short, 'the Act') to appoint sole Arbitrator to adjudicate the dispute between the parties in respect of agreement of sale dated 19-[SECTION]-2014.
2. It is the case of the petitioners that on 19-[SECTION]-2014, the respondents entered into an agreement to sell with the petitioners for purchase of Villa No.10 in Dwarakamai Layout developed by the petitioners.
3. In pursuance to the agreement, on 14-1-2015, the petitioners executed sale deed in favour of the respondents conveying Villa No.10 in Dwarakamai Layout. On 10-7-2017, the petitioners sent a letter demanding the respondents for payment of arrears of maintenance amounting to Rs.4,03,100/-. On 22-7-2017, the respondents replied refusing to pay the arrears of maintenance charges. Thereafter, on 9-9-2017, the petitioners issued a statutory notice/arbitral notice to appoint sole Arbitrator by proposing the name of Arbitrator. By reply dated 4-10-2017, the respondents denied the applicability of arbitration clause and refused to accept the arbitration. Therefore, the petitioners are before this Court.
4. I have heard the learned counsel for the parties to the lis.
5. Prof. [ENTITY], the learned senior counsel appearing for the petitioners, has contended that existence of agreement to sell dated 19-[SECTION]-2014 entered into between the parties and Arbitration Clause 25 is not in dispute. He would further contend that in compliance of provisions of [SECTION] of the Act, on 9-9-2017, a legal notice was issued to the respondents. He pointed out that the respondents have filed counter and have not disputed the existence of the agreement at paragraph No.4. He also pointed out that the parties have not entered into any other mode of arbitration agreement stipulated under [SECTION] of the Act. He would further contend that as per Annexure-C, dated 10-7-2017, a demand notice was issued to the respondents to pay the maintenance charges due to the petitioners company in respect of Villa No.10, Dwarakamai Layout, giving details therein, the same was replied on 22-7-2017. However, the respondents have not at all whispered about Association in the said reply.
6. He would further contend that Association was formed only on 22-7-2017 and there was no demand against the Association for maintenance. Therefore, question of impleading the Association for the present proceedings in respect of dispute arose between the parties on the basis of agreement of sale would not arise. He would further contend that in view of the amended provisions of [SECTION] of the Act, even assuming that there is a dispute between the petitioners and Association is only injunction that will not come in the way of enforcing the existence of an arbitration agreement. Therefore, the learned senior counsel for the petitioner sought to allow the petition.
7. Per contra, Sri [ENTITY], the learned counsel for the respondents, has contended that the very dispute raised in the present petition is not arbitrable in terms of Annexure-E, where legal notice is issued on 9-9-2017 without impleading Association as a party. He would further contend that Registrar of Societies, by an order dated 19-10-2017, registered the Association and further directed the Association and the petitioners to resolve the disputes which may arise between the members of the Association and the petitioners under the agreement to sell through competent authority/civil Court. He further contended that Original Suit is pending between the petitioners and Association. Therefore, the present petition is not maintainable. In support of his contentions, he relied upon the judgments of Hon'ble Supreme Court in the case of [PRECEDENT] especially paragraph Nos.16 and 17 and in the case of [PRECEDENT]. He further contended that in response to Annexure-C dated 10-7-2017, the reply - Annexure-D dated 22-7-2017, there is reference to form an Association. Therefore, he sought to dismiss the civil miscellaneous petition.
8. Having heard the learned counsel for the parties, it is undisputed fact that the petitioners relied upon the existence of agreement of sale dated 19-[SECTION]-2014. Clause 4 refers that the Schedule 'B' property shall be registered at the cost of the PURCHASERS upon receiving the entire sale consideration including charges for amenities and all other costs. Physical possession of the Villa shall be delivered within 4 (Four) months from the date of completion of sale transaction. The DEVELOPERS shall be entitled to a grace period of 3 (Three) months thereafter. The DEVELOPERS shall not be held responsible if it is unable to deliver possession by the aforesaid date by reason of any Act of God or if the delay is as a result of any Rule, Notification of the Government, Municipal Authority, any Court and/or any other public or Competent Authority or for reasons beyond the control of the DEVELOPERS.
9. Clause 7 refers that if the PURCHASERS voluntarily choose to rescind the agreement, the DEVELOPERS shall within 30 days of entering into a fresh agreement with the prospective PURCHASERS shall refund the amount paid by the PURCHASERS after forfeiting 10 percent of the total cost of the Villa as damages.
10. Clause 9 refers that the DEVELOPERS reserves easementary rights in perpetuity in the roads and other passages leading to each of the Villa and other development/s in the neighbouring EXTENSIONS and it is a restrictive covenant of a perpetual easementary right which runs with the 'B' Schedule Property and is irrevocable under any circumstances. Further, the PURCHASERS shall have no right to question such use and enjoyment of the roads and passages in Schedule 'A' Property by the DEVELOPERS and its nominees/transferees.
[SECTION]. Clause [SECTION] refers that the name of the layout on the Schedule-A Property shall be known as "DWARAKAMAI" which shall not be changed/altered even after the Association is formed.
12. Clause 18 refers that PURCHASERS shall also pay advance Maintenance charges to be fixed by the DEVELOPERS before registration of the Schedule 'B' Property in their favour. In addition, he shall pay maintenance and amenities charges at the prevailing rate.
13. Clause 19 refers that the DEVELOPERS after the development of the Layout shall maintain the Villas constructed on Schedule 'A' Property along with the other common areas and amenities for a period of three years at the cost of the PURCHASERS and thereafter the Developers shall assign the maintenance work to the Owners Association to be formed and the said Association will manage the common areas and facilitates of the Layout on cost to cost basis.
14. In Clause 23, in unequivocal terms, it is stated that all such terms and conditions, clauses of this agreement to sell, in so far as they are not repugnant or covered, or inconsistent with the terms of a registered sale deed or deed of conveyance, executed in future by the DEVELOPERS in favour of PURCHASERS shall subsist, valid and remain in force between the parties.
15. The main clause, with regard to arbitration, is Clause 25. It clearly refers that "in the event of any dispute or difference arising between the parties hereto in regard to any matter relating to or concerned to or connected with Agreement to sell or sale deed, the same shall be first referred for arbitration of a sole arbitrator and the arbitration proceeding shall be in accordance with the Provisions of the [ACT] and decision of the Arbitrator shall be final and binding on both parties. The venue of Arbitration shall be Bangalore."
16. Material on record clearly depicts that subsequently after sale deed dated 14-1-2015 came to be executed, on 10-7-2017, the petitioners sent a letter mentioning subject as regarding amended Rules in Jatti - Dwarakamai and reminder to pay the maintenance charges due to the company. As on that date, the Association alleged to have been formed by the respondents was not in existence. Admittedly, Association came to be formed only on 22-7-2017. Though in the reply dated 22-7-2017, the respondents have stated to disclose all back office facility and service to Villas Owner, otherwise, the company is liable for all maneuver of amount collected in the name of common service to 'Dwarkamai Villa Onwers', if not, the villa owners are constrained to legally form an Association to manage the same. In arbitration notice dated 9-9-2017, it is specifically stated that the project is yet to be completed in all aspects, there are about seven villas which are under construction and from 2010, petitioners maintaining and managing the project and all the villa owners are making part payments towards monthly maintenance to the petitioners. It is specifically stated that even though some of the villa owners were default in paying the monthly maintenance promptly, the petitioners have made every endeavour to maintain the property in very good condition and also maintain the supply of water, electricity, etc. without any interruption. Petitioners called upon the respondents to give consent and concur the name of Arbitrator to adjudicate all the pending issues between the petitioners and the respondents with regard to Villa No.10 in Dwarakamai project and all the matters connected with common areas, amenities, etc. within thirty days from the date of issuance of legal notice.
17. In view of the aforesaid admitted facts that there is existence of agreement entered into between the parties dated 19-[SECTION]-2014 and existence of arbitration clause, the contention of learned counsel for the respondents that the agreement has been wiped up by virtue of sale deed being executed cannot be accepted. At the same time, the respondents have admitted that they have not entered into any other mode of arbitration agreement stipulated under [SECTION] of the Act. It is not the case of the respondents that either in the reply to the letter or counter to the legal notice, there is no existence of agreement of sale between the parties. Whether the issues raised is triable or not has to be adjudicated by the Arbitrator alone. Therefore, the contention of the learned counsel for the respondents that dispute is not arbitrable in terms of Annexure-E (legal notice from the petitioners) cannot be accepted. Other contention raised by the learned counsel for the respondents that without impleading Association, petition is filed cannot be accepted. For the simple reason that as on the demand notice issued by the petitioners on 10-7-2017 for maintenance charges in respect of Villa No.10, Association was not in existence and it is not the case of the petitioners that after the formation of the Association, they are demanding for maintenance charges, but petitioners are demanding in terms of the agreement entered into between the parties.
18. In so far as judgment relied by learned counsel for the respondents in the case of [PRECEDENT], where a suit for dissolution of the partnership firm and accounts and inter-alia challenging the conveyance deed executed by the partnership firm in favour of third party. On the same day, an arbitration petition under [SECTION] of the Act was filed by another partner in the firm. Therefore, the High Court rejected the petition taking the view that in the suit apart from the relief of dissolution and accounts, the plaintiff has prayed for other reliefs and all the defendants to the suit are not parties or partners in the partnership firm. The said judgment is not applicable to the facts and circumstances of the present case.
19. The provisions of [SECTION] and [SECTION] of the Act are entirely different. My view is fortified by the Hon'ble Apex Court in the case of BOOZ ALLEN AND HAMILTAN INC. v. SBI HOME FINANCE LIMITED AND OTHERS reported in (20[SECTION]) 5 SCC 532 has held as under;
"The nature and scope of issues arising for consideration in an application under [SECTION] of the Act for appointment of arbitrators, are far narrower than those arising in an application under [SECTION] of the Act, seeking reference of the parties to a suit to arbitration. While considering an application under [SECTION] of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of `arbitrability' or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under [SECTION] of the Act, relying upon sub-section 2(b)(i) of that section."
Therefore, the contention of the learned counsel for the respondents cannot be accepted.
20. Further, in the case of [PRECEDENT], referred by the respondents, it was a case where the agreement was wiped up as soon as sale deed has been executed. In the present case, the terms and conditions specifically stated that even after execution of sale deed, terms and conditions entered into between the parties, still exists with regard to payment of 'B' Schedule property. The said judgment is also not applicable to the facts and circumstances of the present case.
21. The Hon'ble Apex Court, while considering the provisions of [SECTION] and [SECTION], in the case of [PRECEDENT] at paragraph No.48 held as under;
"48. [SECTION] added by the 2015 Amendment, reads as follows:
"[SECTION]. (6-A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement."
From a reading of [SECTION], the intention of the legislature is crystal clear i.e. the Court should and need only look into one aspect - the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple - it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement."
22. In view of the aforesaid dictum of the Hon'ble Apex Court and the admitted facts, the contention of the respondents cannot be accepted.
23. In view of the aforesaid material clearly depicts the existence of clause 25 for arbitration in the agreement entered into between the parties dated 19-[SECTION]-2004 and the petitioners have complied the provisions of [SECTION] of the Act, there is no impediment for this Court to appoint sole arbitrator to adjudicate the dispute arisen between the parties.
24. For the reasons stated above, the petition is allowed. Sri [ENTITY], Former District Judge, is appointed as sole Arbitrator to adjudicate the dispute in terms of Clause 25 of the agreement dated 19-[SECTION]-2004 entered into between the parties.
Registry is directed to send a copy of this order to the learned Arbitrator and the Arbitration Centre for reference.
JUDGE kvk