Case: DLF Home Developers Limited Vs. Rajapura Homes Private Limited &amp; Anr

the main agreement itself. 29. The nature of arbitration clauses in the present case are substantially different when compared with the dispute resolution clause of the main agreement in Olympus Superstructure (Supra). The arbitration Clause 9 of the Rajapura SPA/Southern Homes SPA does not have any overriding effect and is in no way broader or wider when compared to Clause 11 of the RCMA/SCMA. Therefore, even if we were to assume that the present differences between the parties are incidental to the terms of the Share Purchase Agreements, it is difficult to construe that Clause 9 of Share Purchase Agreements contemplates adjudication of the issues that are connected with or are in relation to the subject matter of the Share Purchase Agreements. 30. Further, if the Respondent(s) plea, that present dispute(s) should be arbitrated only under the Rajapura SPA/Southern Homes SPA is accepted at face value, the eventual result would be that any and all disputes relating to the Petitioners construction obligation would be arbitrable under the provisions of the Share Purchase Agreements only. But then, what would be the purpose of having a separate arbitration clause 11 under the RCMA/SCMA? The parties do not seem to have rendered the arbitration clause in RCMA and SCMA as redundant, more so when these are the agreements later in time. It, thus, appears to us that the scope of the arbitration clause in Rajapura SPA/Southern Homes SPA is limited to issues relating to the agreements primary subject matter, i.e., any dispute arising out of the transaction of sale and purchase of shares. The provisions of the RCMA/SCMA, and the arbitration clause therein, would as a logical corollary then be applicable to any dispute/difference concerning the performance of the construction related obligations and deposit of agreed amount by Respondent No.2 or payment thereof to the Petitioner-DHDL. 31. The Petitioner has not once alleged in these Petitions that the dispute sought to be referred to Arbitration emanates from the Share Purchase Agreements. As far as the share transactions between the Petitioner and Respondent No.2 is concerned, learned Senior Counsel for the Petitioner has unequivocally submitted that the purchase of shares by Respondent No.2 has been duly completed. There is nothing on record to suggest that Respondent No.2 is aggrieved by non-compliance, deviation or breach of promise to sell its shares by the Petitioner-DHDL. On the contrary, the counter-affidavit filed by the Respondent(s) indicates that the sale of the shares of Respondent No.1 and the Begur Company have been completed. Still further, it is not the case that Ressimo PCC has already invoked Clause 9 of the Rajapura SPA or of the Southern Homes SPA. Thus, when neither party has pleaded the infringement of the core provisions of the Share Purchase Agreements, it is difficult to accept outrightly that the subject-controversy falls within the ambit of Clause 9 of the said agreements and can be adjudicated only under the rules of SIAC, with seat and venue at Singapore. 32. At the cost of repetition, we may re-iterate that the Parties have neither denied that there is no arbitrable dispute between them nor have they challenged the existence of the arbitration clause(s) in the Construction Management Service Agreements. Considering that the primary twin-test envisioned under Section 11(6) of the Act has been satisfied by the Petitioner-DHDL, we are of the view that the instant application(s) are maintainable. The nature of disputes that have arisen between the parties, thus, can be adjudicated in the arbitral proceedings under Clause 11 of the RCMA and SCMA. 33. It goes without saying, that if on appreciation of the facts and law, the arbitrator finds that the real dispute between the parties stems from the Share Purchase Agreements dated 08.07.2016 and 25.01.2017, the arbitrator shall be free to wind up the proceedings with liberty to the Parties to seek redressal under the rules of SIAC. 34. We may now briefly deal with the question whether the disputes should be referred to a consolidated and composite tribunal or should there be two different arbitral tribunals to resolve the same. It was urged on behalf of the Petitioner that since the RCMA and SCMA are inextricably interlinked to each other, the dispute/difference cannot be segregated into two separate proceedings. It was pointed out that the obligation of computation/determination and payment of Fee to the Petitioner arises out of the SCMA, the RCMA and the Fee Agreement, and under the Fee Agreement, the parties have to calculate the DLF Receivables. Such DLF Receivables have to be computed taking into account financial components/accounts of both, the Southern Homes Project and the Rajapura Homes Projects. It was thus submitted that in order to avoid multiplicity of proceedings which may result in conflicting awards, the sum of disputes may be referred to a single and composite arbitral tribunal. 35. The fact remains that the RCMA and SCMA, though interlinked and connected, are still two separate agreements. We also cannot lose sight of the fact that the case of the Respondent(s) is that the Petitioner has committed breaches under both RCMA as well as SCMA, and that the genesis of the disputes lies in separate and distinct facts. Save where the parties have resolved to the contrary, it would be inappropriate to consolidate the proceedings originating out of two separate agreements. However, since the Fee Agreement provides that the Fee can only be calculated after taking into consideration various financial components of both the Rajapura Homes Projects and the Southern Homes Project, it would be necessary for the sake of avoiding wastage of time and resources, and to avoid any conflicting awards, that the disputes under Arbitration Petition No.17 and Arbitration Petition No.16 are referred to a sole Arbitrator. We leave it to the wisdom of the sole arbitrator to decide whether the disputes should be consolidated and adjudicated under one composite award or otherwise. The modalities and manner in which the two separate arbitral proceedings shall be conducted shall also be resolved by the sole arbitrator. CONCLUSION

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]18. The jurisdiction of this Court under Section 11 is primarily to find out whether there exists a written agreement between the parties for resolution of disputes through arbitration and whether the aggrieved party has made out a prima facie arbitrable case. The limited jurisdiction, however, does not denude this Court of its judicial function to look beyond the bare existence of an arbitration clause to cut the deadwood. A three-judge bench in Vidya Drolia (Supra), has eloquently clarified that this Court, with a view to prevent wastage of public and private resources, may conduct prima facie review at the stage of reference to weed out any frivolous or vexatious claims. In this context, the Court, speaking through Sanjiv Khanna, J. held that:154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.154.3. The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-competence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of second look on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act.154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably non-arbitrable and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism.N.V. Ramana, J. (as His Lordship then was) in his supplementary opinion further crystalised the position as follows:244. Before we part, the conclusions reached, with respect to Question 1, are:244.1. Sections 8 and 11 of the Act have the same ambit with respect to judicial interference.244.2. Usually, subject-matter arbitrability cannot be decided at the stage of Section 8 or 11 of the Act, unless it is a clear case of deadwood.244.3. The court, under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie (summary findings) case of non- existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. when in doubt, do refer.244.5. The scope of the court to examine the prima facie validity of an arbitration agreement includes only:244.5.1. Whether the arbitration agreement was in writing? Or244.5.3. Whether the core contractual ingredients qua the arbitration agreement were fulfilled?244.5.4. On rare occasions, whether the subject-matter of dispute is arbitrable?19. To say it differently, this Court or a High Court, as the case may be, are not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen Arbitrator. On the contrary, the Court(s) are obliged to apply their mind to the core preliminary issues, albeit, within the framework of Section 11(6-A) of the Act. Such a review, as already clarified by this Court, is not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement.25. The Share Purchase Agreements as well as the Construction Management Agreements are subsisting and have not been repudiated by the Parties. Both sets of agreements contain arbitration clauses that are not similar to one another. We are, therefore, of the considered opinion that in order to determine the nature of arbitral proceedings, the two groups of agreements will have to be read in harmony and reconciled so as to avoid any head on collision, and thereafter a conclusion as to which of the clauses would be applicable in the present case, needs to be drawn.26. Upon perusing the Share Purchase Agreements, it is clear that the primary purpose of these agreements is to effectuate the change of ownership of Respondent No.1 and the Begur Company from DHDL to Resimmo PCC. No doubt, the Rajapura SPA and the Southern Homes SPA as per their Clause 6.1 and 6.2, do provide for the completion of the respective residential projects as a post- closing obligation, however, these construction obligations had to be fulfilled in accordance with the terms of the Construction Agreements. The very purpose of the RCMA and SCMA was, on the other hand, to operationalise the manner in which the Petitioner- DHDL would achieve the said construction related obligations. The construction agreements not only contemplate the scope of services to be provided by the petitioner but also lays down the obligation on Respondent No.2 to pay Fee to the Petitioner-DHDL upon completion of the residential projects. A prima facie reading of `Share Purchase Agreements and `Construction Management Agreements, does suggest that notwithstanding certain overlaps between these agreements, their object and field of operation is different and distinct in nature. It is therefore difficult for us to accept it outrightly that the respective Share Purchase Agreements are the principal agreements governing the transaction between the parties or that the present disputes can be resolved solely under the arbitration clause contained therein.27. The dispute sought to be referred to arbitration by the Petitioner DHDL pertains to non-deposit of agreed amount by Respondent No.2 and resultant payment thereof as `Fee which the Petitioner claims in terms of clause 4 of RCMA/SCMA. Whether or not the Petitioner has complied with the condition precedent under Rajapura SPA and thus has become entitled to `fee as per clause referred to above, is purely a question of fact to be determined by the Arbitral Tribunal.28. We may at this stage also briefly refer to the judgment of this Court in Olympus Superstructure (Supra), wherein this Court faced two different arbitration clauses in two related agreements between the same parties. The main agreement therein was concerned with the selling of certain flats, and the related agreement was an Interior Design Agreement, both of which contained an arbitration clause that was not similar to each other. Since two valid arbitration clauses existed and the parties were relying upon the different arbitration clauses, this Court harmonised both the clauses and viewed that the arbitration clause in the main agreement was worded in wide terms and specifically contemplated issues that were in any way connected with, arising out of or in relation to the subject matter of the arbitration agreement. This Court, therefore, aptly held that since the disputes arising from the Interior Design Agreement were intrinsically connected with the disputes and differences arising out of the main contract, such dispute could also be adjudicated under the main agreement itself.29. The nature of arbitration clauses in the present case are substantially different when compared with the dispute resolution clause of the main agreement in Olympus Superstructure (Supra). The arbitration Clause 9 of the Rajapura SPA/Southern Homes SPA does not have any overriding effect and is in no way broader or wider when compared to Clause 11 of the RCMA/SCMA. Therefore, even if we were to assume that the present differences between the parties are incidental to the terms of the Share Purchase Agreements, it is difficult to construe that Clause 9 of Share Purchase Agreements contemplates adjudication of the issues that are connected with or are in relation to the subject matter of the Share Purchase Agreements.30. Further, if the Respondent(s) plea, that present dispute(s) should be arbitrated only under the Rajapura SPA/Southern Homes SPA is accepted at face value, the eventual result would be that any and all disputes relating to the Petitioners construction obligation would be arbitrable under the provisions of the Share Purchase Agreements only. But then, what would be the purpose of having a separate arbitration clause 11 under the RCMA/SCMA? The parties do not seem to have rendered the arbitration clause in RCMA and SCMA as redundant, more so when these are the agreements later in time. It, thus, appears to us that the scope of the arbitration clause in Rajapura SPA/Southern Homes SPA is limited to issues relating to the agreements primary subject matter, i.e., any dispute arising out of the transaction of sale and purchase of shares. The provisions of the RCMA/SCMA, and the arbitration clause therein, would as a logical corollary then be applicable to any dispute/difference concerning the performance of the construction related obligations and deposit of agreed amount by Respondent No.2 or payment thereof to the Petitioner-DHDL.There is nothing on record to suggest that Respondent No.2 is aggrieved by non-compliance, deviation or breach of promise to sell its shares by the Petitioner-DHDL. On the contrary, the counter-affidavit filed by the Respondent(s) indicates that the sale of the shares of Respondent No.1 and the Begur Company have been completed. Still further, it is not the case that Ressimo PCC has already invoked Clause 9 of the Rajapura SPA or of the Southern Homes SPA. Thus, when neither party has pleaded the infringement of the core provisions of the Share Purchase Agreements, it is difficult to accept outrightly that the subject-controversy falls within the ambit of Clause 9 of the said agreements and can be adjudicated only under the rules of SIAC, with seat and venue at Singapore.32. At the cost of repetition, we may re-iterate that the Parties have neither denied that there is no arbitrable dispute between them nor have they challenged the existence of the arbitration clause(s) in the Construction Management Service Agreements. Considering that the primary twin-test envisioned under Section 11(6) of the Act has been satisfied by the Petitioner-DHDL, we are of the view that the instant application(s) are maintainable. The nature of disputes that have arisen between the parties, thus, can be adjudicated in the arbitral proceedings under Clause 11 of the RCMA and SCMA.33. It goes without saying, that if on appreciation of the facts and law, the arbitrator finds that the real dispute between the parties stems from the Share Purchase Agreements dated 08.07.2016 and 25.01.2017, the arbitrator shall be free to wind up the proceedings with liberty to the Parties to seek redressal under the rules of SIAC.35. The fact remains that the RCMA and SCMA, though interlinked and connected, are still two separate agreements. We also cannot lose sight of the fact that the case of the Respondent(s) is that the Petitioner has committed breaches under both RCMA as well as SCMA, and that the genesis of the disputes lies in separate and distinct facts. Save where the parties have resolved to the contrary, it would be inappropriate to consolidate the proceedings originating out of two separate agreements. However, since the Fee Agreement provides that the Fee can only be calculated after taking into consideration various financial components of both the Rajapura Homes Projects and the Southern Homes Project, it would be necessary for the sake of avoiding wastage of time and resources, and to avoid any conflicting awards, that the disputes under Arbitration Petition No.17 and Arbitration Petition No.16 are referred to a sole Arbitrator. We leave it to the wisdom of the sole arbitrator to decide whether the disputes should be consolidated and adjudicated under one composite award or otherwise. The modalities and manner in which the two separate arbitral proceedings shall be conducted shall also be resolved by the sole arbitrator.