AO.348-10 with CRA.268-10 - 1 - VPH IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION APPEAL FROM ORDER NO. 348 OF 2010 Bholanath Ramjas Yadav ) of Mumbai, Aged about 68 years, ) Occupation- Business, Indian ) inhabitant, Residing at B-101, ) Shiv Shakti Apartments, Jivdaya Lane Ghatkopar (West), Mumbai 400 086 ) ... Appellant Vs 1. Kersi Jamshed Randeria, ) of Mumbai, Aged – 52 years, ) Occupation – Business, ) Indian inhabitant, Residing at ) 2nd Floor, Hormaz Building, ) Sussex Road, Byculla, ) Mumbai – 400 027. ) 2. Slum Rehabilitation Authority, ) having its office at 5th Floor, ) Grihnirman Bhavan, Bandra (E), ) Mumbai – 400 051. ) ... Respondents AO.348-10 with CRA.268-10 - 2 - WITH CIVIL REVISION APPLICATION No. 268 OF 2010 Kersi Jamshed Randeria, ) of Mumbai, Aged – 52 years, ) Occupation – Business, ) Indian inhabitant, Residing at ) 2nd Floor, Hormaz Building, ) Sussex Road, Byculla, ) Mumbai – 400 027. ) ... Applicant Vs, 1. Bholanath Ramjas Yadav ) of Mumbai, Aged about 68 years, ) Occupation- Business, Indian ) inhabitant, Residing at B-101, ) Shiv Shakti Apartments, Jivdaya ) Lane Ghatkopar (East), ) 2. Slum Rehabilitation Authority, ) having its office at 5th Floor, ) Grihnirman Bhavan, Bandra (E), ) Mumbai – 400 051. ) ... Respondents Mr. V. A. Thorat, Sr. counsel a/w Mr. Anil C. Singh & Anil D. Yadav i/b Mr. D. N. Mishra,for the Appellant in AO No. 348/2010 AND for Respondent No.1 in CRA No. 268/10. AO.348-10 with CRA.268-10 - 3 - Mr. Rohit Kapadia, Sr. counsel with Mr. Kapil Moye, Mr. L. A. Rubens & Mr. Sujit S. Suryawanshi i/b Vigil Juris, for Respondent No.1 in AO. 348/2010 and Applicant in CRA No. 268/2010. Mr. G. D. Utangale i/b M/s Utangale & Co. for Respondent No.2 SRA CORAM : R. C. CHAVAN, J. CLOSED FOR JUDGMENT ON : JUNE 30, 2010. JUDGMENT PRONOUNCED ON : JULY 27, 2010 JUDGMENT : 1. This Appeal from Order is filed by the plaintiff and the Civil Revision Application by defendant No.1, against the order below Exh. 1, dated 22nd March, 2010 passed by the learned Judge City Civil Court, Bombay in Suit No. 2752 of 2009, holding that he had no jurisdiction to decide the suit and ordering the plaint to be returned for presentation to proper authority. For the sake of convenience parties would be referred to by their original capacity in the plaint. 2. The plaintiff is aggrieved as the lower Court held that the dispute ought to be raised before the authorities under of the Maharashtra Slum Areas (Improvement, clearance & Redevelopment Act, 1971 (hereinafter referred to as the “Slum Act”), in view of provisions of section 42 of the said Act, and defendant No.1 is AO.348-10 with CRA.268-10 - 4 - aggrieved as the learned Judge failed to hold that his jurisdiction was barred as the dispute was required to be referred to arbitration. 3. Defendant No.2 is the Slum Rehabilitation Authority (hereinafter referred to as the “SRA”). . These questions have been raised in the context of following facts- . The property belongs to the State Government. On 14-12-1994 it was leased out by Government to one Dahyabhai Patel for development. He entered into a joint venture with Plaintiff and two others, all of whom formed a partnership on 23rd January, 1998 in the name & style M/s. Ambaji Constructions, in which plaintiff claims a 70% share. On 4th May 1996 Dahyabhai Patel executed a general power of attorney in favour of the plaintiff. Upon demise of Dahyabhai on 8th May, 1999, the legal heirs of Dahyabhai and deceased widow released remaining rights of Dahyabhai in favour of plaintiff, raising plaintiff’s share to 75%. His widow died thereafter on 22nd April, 2003. . Due to plaintiff’s efforts lease was revised on 20th January, 2004. 4. The plaintiff entered into a partnership agreement on 30th AO.348-10 with CRA.268-10 - 5 - October, 2007 with defendant No.1, in the same name “M/s. Ambaji Constructions”, for development of the property wherein plaintiff’s share was 25% and defendant No.1’s share was 75%. This partnership agreement contains clause 16, providing for arbitration in respect of any disputes between the partners. Plaintiff claims that by notice dated 22nd May, 2009 he dissolved the partnership. 5. According to the plaintiff, the property is declared as a slum. He has obtained necessary consents of tenants & permission from the concerned authorities. He then filed the suit for declarative & injunctive reliefs, including an injunction to restrain defendant No.2 i.e. Slum Rehabilitation Authority, from granting permission to defendant No.1, or any one other than plaintiff, to carry out construction on the suit property. 6. The defendant No.1 took out a Notice of Motion, raising a preliminary objection as to the jurisdiction of the Court – on the grounds that the suit was beyond the pecuniary jurisdiction of the Court; that the dispute had to be referred for arbitration in view of clause 16 of the Partnership Deed, dated 30th October, 2007; and that the suit was barred under section 42 of the Slum Act. AO.348-10 with CRA.268-10 - 6 - 7. After considering the rival contentions, the learned Judge passed the impugned order. I have heard the learned counsel for the parties. The learned trial Judge had held that the question raised in the suit was – whether the plaintiff or defendant No.1 was entitled to redevelop the property, and observed that the question was within the jurisdiction of the High Power Committee under the Slum Act. 8. The learned senior counsel for the appellant submitted that the learned trial Judge was not correct in reaching such a conclusion. He submitted that High Power Committee was not a creature of statute or statutory rules and did not have any powers or jurisdiction, defined by the statute. It came into existence on account of judicial directions by a Full Bench of this Court in -Tuslivadi Navnirman Coop. Housing Society & Anr. Vs. State of Maharashtra & Ors. [2008(1) Bom. C.R. 1]. The directions of the court about creation of High Power Committee and the outer markers of its jurisdiction and power, are as under- “114(c) It would be of utmost importance that the Government sets up high power committee, consisting of a person, preferably a Principal Secretary, to be nominated by the Secretary, who shall be assisted by AO.348-10 with CRA.268-10 - 7 - Chief Executive Officer /SRA, CEO/ Vice President of MHADA and CEO / Vice President of MMRDA and Commissioner of Municipal Corporation, Gr. Mumbai. 114(d) That any complaint about eligibility of slum dwellers, eligible slum dwellers being denied tenement, developers not undertaking and completing the project as per the permission and approval so also within the stipulated time frame, transit accommodation being unavailable or not provided for etc. shall be addressed to this Committee and grievances be looked into by it accordingly. The Courts cannot be approached straightway unless and until above mentioned Committee is first moved by the aggrieved person in the form of an application/complaint in writing. If the grievance is not redressed or complaint/representation is not attended to, then and in that event this Court can be approached under Article 226 of the Constitution and not otherwise. Ordinarily, no person can approach this Court directly without exhausting the above remedy.” .... “118(G) It is clarified that purely private disputes or those involving contractual rights, brought before this Court by way of writ petitions, will have to be ordinarily resolved by recourse to civil suit or arbitration and this principle would apply even to petitions where the State, AO.348-10 with CRA.268-10 - 8 - S.R.A., B.M.C., MHADA etc. are impleaded as parties.” 9. It would thus be at once clear that the dispute raised in the suit, as to who should develop the property was not intended to be resolved by the High Power Committee. Therefore, the learned trial Judge was obviously in error in holding the suit to be beyond his jurisdiction & cognizable only by the authorities under the Slum Act. 10. The learned senior counsel for the appellant/plaintiff also submitted that the plaintiff would be giving up prayers in prayer clauses (c) & (e), seeking an injunction to restrain defendant No.2 SRA from granting permission to defendant No.1 or anyone other than plaintiff from carrying out construction, and also prayer seeking directions to defendant No.2, SRA to issue stop-work notice to defendant No.1. Thus, effectively, the plaintiff would not be seeking any reliefs against defendant No. 2 SRA, with the implication that there would be no slum rehabilitation angle to the dispute. Relying on the decision of the Supreme Court in the case of – Sopan Sukhdeo Sable & Ors. Vs. Assistant Charity Commissioner & Ors. [(2004) 3 Supreme Court Cases 137], the learned Senior Counsel submitted that such a course is permissible. Therefore, the order directing the AO.348-10 with CRA.268-10 - 9 - appellant/plaintiff to take back the suit for presentation to proper authority would have to be quashed. 11. The learned senior counsel for the applicant in the revision (defendant No.1 in the suit) submitted that dispute is thus simply one arising from partnership deed, which contains an arbitration clause. Therefore, the Court could not have proceeded with the suit. The learned senior counsel for the plaintiff submitted first, that the dispute as set out in the plaint was not one which was entirely covered by arbitration clause; secondly, resolution of the dispute would require involvement of SRA, which was not subject to arbitration agreement; and lastly, defendant No.1 had not applied for referring the dispute to the arbitration. 12. I have considered these contentions. Considering the nature of dispute raised in the plaint, it is clear that the dispute is one between partners and has nothing to do with matters covered under the Slum Act. The slum redevelopment is the object for which partnership was formed and was not the subject matter of dispute. Though the SRA (defendant No.2) may be a proper party to the suit, it is not a necessary party as there is no dispute between SRA on one AO.348-10 with CRA.268-10 - 10 - hand and the plaintiff or defendant No.1 on the other. Therefore the decision of the Supreme Court in – Sukanya Holdings (P) Ltd. Vs. Jayesh H. Pandya & Anr. [(2003) 5 Supreme Court Cases 531] would have no application to the facts of the case. 13. This takes me to the last question as to whether defendant No.1 had applied for referring the dispute to arbitration, as required by section 8 of the Arbitration & Conciliation Act, 1996. The Notice of Motion No. 192 of 2010 taken out by defendant No.1, contained the following prayers - “(a) That this Hon’ble Court be pleased to frame and decide as preliminary issues (as specified in the supporting affidavit hereto, under section 9A (Maharashtra Amendment) of the Code of Civil Procedure, 1908 as to whether this Hon’ble Court has jurisdiction to entertain and/or try the above suit. (b) Alternatively and without prejudice to prayer clause (a) hereinabove, this Hon’ble Court be pleased to reject the plaint under Order VII, Rule 11 of the Code of Civil Procedure, 1908.” 14. Relevant part of the affidavit-in-support of the motion- AO.348-10 with CRA.268-10 - 11 - Paragraph 6 - reads as under- “6. I further submit that the present suit is barred under sections 6 and 8 of the Arbitration & Conciliation Act, 1996. It is noteworthy that the Deed of Partnership dated 30th October, 2007 (which is annexed to and marked as Exhibit ‘G’ to the plaint) undisputedly provides under Clause 16 thereof for Arbitration which is reproduced hereunder. ‘16. ARBITRATION if during the continuance of the partnership or at any time afterwards, any dispute or difference of opinion or question shall arise between the partners or any of them of their legal representatives touching the partnership or the account or transactions or the dissolution or the winding up thereof or the construction, meaning or effect of this Deed or anything herein contained or the rights and liabilities or partners or their representatives under the Deed or otherwise, then every such dispute, difference or question shall be AO.348-10 with CRA.268-10 - 12 - referred to the single or joint arbitration of such persons or persons as the parties to the respective disputes may mutually decide. The decision of Arbitrator or Arbitrators as the case may be shall be final and binding upon all the parties.’ I therefore submit and pray that this Hon’ble Court be pleased to frame and decide as a preliminary issue under aforesaid section 9A, as to whether this Hon’ble Court has jurisdiction to entertain and/or try the suit in light of said arbitration agreement (i.e. aforesaid clause 16) and sections 5 and 8 of the Arbitration and Conciliation Act, 1996. Alternatively and without prejudice, this Honourable Court be pleased to reject the plaint in the suit, under Order 7, Rule 11 of the Code of Civil Procedure, 1908, for being barred under said arbitration agreement (i.e. aforesaid clause 16) and section 5 and 8 of the Arbitration and Conciliation Act, 1996.” 15. In defendant No.1’s affidavit-in-reply to plaintiff’s Notice of Motion No. 2183 of 2009, an identical plea was raised in paragraph AO.348-10 with CRA.268-10 - 13 - 8. Apart from what is quoted above, defendant No.1 did not separately pray to the Court for invoking arbitration clause. 16. Before filing of the suit, in November 2009 plaintiff had issued on 2nd June, 2009 a notice of dissolution of partnership. This was replied on behalf of defendant No.1 by his advocate on 15-6-2009. The portion of the reply, where reference to arbitration is made in paragraph 9 and 10, reads as under- “9. Our client further states that Clause No. 16(c) of the said registered partnership deed provides for the consequences of the breach which is quoted as under : 16. if any partner shall : (c) “do or commit any act which would be the ground for dissolution of partnership” then, and in any such case, the partner committing such act or breach or default shall indemnify the other partners all the losses arising on account of such act, breach or default. Subsequently in clause 17 of Deed of Partnership, it has recorded that during the continuance of the said partnership any dispute or difference of opinion or question arise then the same shall be resolved to the single or joint arbitrator. AO.348-10 with CRA.268-10 - 14 - 10. In the view of the aforesaid facts and circumstances regarding the partnership and under instructions from our clients we have to call upon your client through you as under- (a) To withdraw the notice of dissolution and seek arbitration under clause 17 of the Deed of Partnership for resolution of the disputes if any, and for the said purposes appoint a single Arbitrator preferably a Retired Judge, whose name may be suggested to us for approval. (b) Continue with the dissolution of the partnership as set out in your notice referred to above, and appoint a Government approved valuer for assessing 25% share of your client to enable our client to pay the same and settle the accounts.” 17. Reference to clauses 16 & 17 is possibly mistaken and clauses 15 & 16 were possibly intended to be referred to. Thus, it will be clear that defendant No.1 had not categorically invoked arbitration clause, but had asked the plaintiff to seek arbitration by preferably a retired High Court Judge. AO.348-10 with CRA.268-10 - 15 - 18. In the context of these facts, it has to be found out if requirements of law are complied, Sections 5 & 8 of the Arbitration & Conciliation Act, 1996 which are material for deciding this aspect may be usefully reproduced for ready reference as under- “5. Extent of judicial intervention – Notwithstanding anything contained in any other law for the time being in force, in matters, governed by this Part, no judicial authority shall intervene except where so provided in this part. ... 8. Power to refer parties to arbitration where there is an arbitration agreement – (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending AO.348-10 with CRA.268-10 - 16 - before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.” 19. The learned counsel for the plaintiff submitted that question of ouster of jurisdiction of civil court on account of existence of an arbitration clause would arise only if defendant No.1 shows that he had applied in writing before submitting his first statement on the substance of dispute and pointed out that the defendant had not done so. Reliance is placed on a decision in the case of – Garden Finance Ltd. Vs. Prakash Inds. Ltd. & Anr. [2002(1) Bom. C.R. 64]. The relevant observations of the Court in paragraph 8 and 9 may be usefully quoted as under - “8. It is clear from the perusal of section 8 that a party who claims that the suit which is pending before the Court is the subject of an arbitration agreement, has to make an application to the Court not later when submitting his first statement on the substance of the dispute for referring the parties to arbitration. Sub- section (2) of section 8 further lays down that an application under sub-section (1) for referring the parties to arbitration shall not be entertained unless it is accompanied by the original arbitration agreement or AO.348-10 with CRA.268-10 - 17 - duly certified copy thereof. In my opinion, the provisions of sub-section (2) of section 8 indicate that the application that is contemplated by sub-section (1) is a written application and not merely on oral application. The Supreme Court by its judgment in case of [P. Anand Gajapathi Raji v. P.V.G. Raju (dead) & Ors. (7.200(4) Supreme Court Cases 539] has alid down the requirements that have to be satisfied before the Court. Paragraph 5 of the judgment of the Supreme Court in P. Anand case reads as under:- The conditions which are required to be satisfied under sub-sections (1) and (2) of section 8 before the Court can exercise its powers are- (1) there is an arbitration agreement; (2) a subject to the agreement brings an action in the Court against the other party; (3) subject-matter of the action is the same as the subject-matter of the arbitration agreement; (4) The other party moves the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. 9. ..... In the present case, though the defendants has been served with this suit long back, there is no written application made. During the course of hearing, yesterday, when this aspect was pointed out, the AO.348-10 with CRA.268-10 - 18 - learned Counsel stated that he should be given one day’s time to make an application. Though the hearing the matter did not conclude yesterday, and the defendant got time which he was seeking to make an application, even today no such application has been made. Thus, there is no application made under section 8 for referring the dispute to the arbitration and therefore as there is no application made for referring the dispute to the arbitration, provisions of section 5 do not come into play and do not operate.” 20. The learned senior counsel for defendant submitted that in Vijay Kumar Vs. Karim Mohd. [2004(1) Mh.L.J. 966] this Court was considering an exactly similar situation and had ruled that a plea in the reply that matter of the suit is covered by arbitration clause could be treated as an application contemplated by section 8. Observations in the said judgment, relevant for the purpose, may be usefully quoted as under- “2. The suit thereafter came to be filed on 19th August, 2003. Some of the relevant prayer clauses in the suit are as under :- (a) that this Honourable Court may be pleased to dissolve the suit partnership firm i.e. Sagar Builders AO.348-10 with CRA.268-10 - 19 - with immediate effect and/or with effect from such date as this Honourable Court may deems fit; (b) in the alternative to prayer (a), this Honourable Court may be pleased to declare that the suit partnership firm i.e. Sagar Builders stands dissolved in pursuance of plaintiff’s Advocate Notice dated 10th July, 2003 with effect from such date as may be fixed by this Honourable Court.” It is not necessary to advert to the other prayers. Suffice it to say that in support of the prayer clause (a) in paragraph 8 of the plaint the averments are as under :- “It is imminently just and equitable that the said firm should be dissolved and unless this Honourable Court intervenes ....” This Motion thereafter was taken out on 2nd September, 2003 wherein various reliefs have been sought including appointment of Receiver as well as injunction. . The defendants have filed their reply and in paragraph 3 have raised the plea that the subject matter of the suit is covered by an Arbitration Clause. This Court, therefore, considering section 8 may direct parties to arbitration. The relevant averments in para 3 of the affidavit are that the Court be pleased to dismiss the above suit as per the provisions of section 8 of the Arbitration and Conciliation Act, 1996. It is averred that this should be treated as an application for AO.348-10 with CRA.268-10 - 20 - invocation of the arbitral clause in arbitration agreement. The subject matter of the suit is covered by the arbitral agreement which is wide enough to include disputes as to dissolution. It is, therefore, prayed that the suit in view of the Arbitration Agreement between the parties be stayed or rejected. ... 4. Having regard the learned Counsel the first question is whether the averments in the affidavit in reply by the defendants can be treated as an application under section 8 of the Arbitration and Conciliation Act, 1996. Under section 8 of the Arbitration and Conciliation Act, 1996 to invoke jurisdiction a party seeking to rely on the said provisions must apply not later than then submitting his first statement on the substance of the dispute. In the instant case in reply to the Motion having knowledge of the arbitration clause the defendants have so applied. In other words they have satisfied the first predicate of the said section. Section 8 would require that the application shall not be entertained unless accompanied by the original arbitration agreement or a duly certified copy thereof. In the instant case the plaintiff himself has filed and relied on the arbitration agreement. The defendants do not dispute the correctness of the said Arbitration Agreement. In other words there is substantial compliance by the defendants insofar as the second requirement of section 8 of the Act of 1996 is concerned. AO.348-10 with CRA.268-10 - 21 - Section 8 contemplates that it must be an application by any of the parties to the arbitral agreement. In the instant case the affidavit in reply itself can be treated as an application by the defendants considering the specific averments in para 3 of the affidavit in reply. ... 7A. Having said so in my opinion the reliefs being covered by the arbitral clause and considering section of the Arbitration and Conciliation Act, 1996 the parties are directed to proceed to arbitration, of the disputes as set