Case: M/S AVINASH HITECH CITY 2 SOCIETY Vs. BODDU MANIKYA MALINI

the owners, pro-rata to their respective shares in the build-up space in the project after addressing the liabilities towards loans. Therefore, the dispute between the respondents and the appellants with respect to the sharing of the rent with respect to the leased space can be said to be related to the Addendum and/or in connection with or relating to the Addendum.7. Clause 19 of the Addendum, which is the arbitration clause and provides how to settle the dispute between the parties, reads as under:?The owners agree that any dispute between the Owners, including the dispute relating to this Addendum and all questions relating to its interpretation shall be construed in accordance with the laws of India, without reference to its principles of conflicts of law. Except as otherwise specifically provided in this Agreement, the following provisions apply in the event of any dispute or difference arising among the Parties out of, in connection with or relating to the Agreement (The ‘Dispute?).(a) The Dispute shall be deemed to have occurred, when one Party serves on the other Party/ies a notice stating the nature of the Dispute (‘Notice of Dispute?).(b) The Parties hereto agree that they will use all reasonable efforts to resolve among themselves, any Dispute between them through negotiations.(c) Any Dispute and differences whatsoever arising between the Owners which could not be resolved by Parties through negotiations, within a period of thirty (30) days from the service of the Notice of Dispute, the same shall be referred to and shall finally be settled by arbitration in accordance with the (Indian) Arbitration and Conciliation Act, 1996, and all the proceedings shall be conducted in English and a daily transcript in English shall be prepared.(d) In the event of any dispute which involves two or more Societies or Owners who are the members of two different Societies, the arbitral tribunal shall comprise of three or more arbitrators. In such a situation, each party to the dispute shall appoint one arbitrator, who shall be from the office bearers of their respective Societies and the two or more arbitrators so appointed shall appoint a presiding arbitrator, who shall be one of the office bearers of the Hitech City¬2 Owners Welfare Association (HOWA) and the Chairman of the arbitral tribunal; and the venue of arbitration shall be in Hyderabad, India.(e) In the event of any dispute which involves two or more Owners of the space in the same building, the arbitral tribunal shall comprise of the sold arbitrator. In such a situation, each party to the dispute shall refer the matter to the office bearers of their respective Society which shall be the arbitral tribunal; and the venue of arbitration shall be in Hyderabad, India.(f) The Parties are debarred from exercising any right or filing any application to any court or tribunal having jurisdiction in connection with matters involving substantial questions of law arising during any arbitration.(g) The Parties here by submit to the Arbitrator?s award and the award shall be enforceable in any competent court of law.? 7.1 On reading Clause 19 of the Addendum as a whole, it appears that in the event of dispute or difference among the parties out of, in connection with or relating to the agreement, the same shall be referred to arbitration. However, sub-clauses (c), (d) and (e) provide for different procedure in the event of any disputes and differences between the owners; between two or more societies or owners who are the members of two different societies and between two or more owners of the space in the same building. Sub-clause (c) of Clause 19 provides that any disputes or differences whatsoever arising between owners, which could not be resolved by the parties through negotiations, within a period of 30 days from the service of the notice of dispute, the same shall be referred to and shall finally be settled by the arbitration in accordance with the (Indian) Arbitration and Conciliation Act, 1996. Sub-clause (d) of Clause 19 provides that in the event of any dispute which involves two or more societies or owners who are the members of two different societies, the arbitral tribunal shall comprise of three or more arbitrators. It further provides, ?who shall be appointed as a presiding arbitrator; who shall be the Chairman of the arbitral tribunal and the venue of the arbitration? . Sub-clause (e) of Clause 19 provides that in the event of any dispute which involves two or more owners of the space in the same building, the arbitral tribunal shall comprise of the sole arbitrator and, in such a situation, each party to the dispute shall refer the matter to the office bearers of their respective Society which shall be the arbitral tribunal and the venue of arbitration shall be in Hyderabad.7.2 As observed hereinabove, Clause 19 shall be applicable in the event of any dispute and difference arising among the parties out of, in connection with or relating to the agreement. As observed hereinabove, the developers, owners, societies and the original owners and even subsequent societies formed are parties to the agreement and the Addendum. It is also required to be noted and, as observed hereinabove, the dispute is with respect to sharing of the rent of the leased space and it can be said that the respondents are also claiming the share relying upon the Development Agreements; Supplementary Development Agreements and the Addendum. Therefore, the dispute can be said to in connection with or relating to the Agreements also.7.3 Considering the above facts and circumstances, both the High Court and the learned District Judge have committed grave error in not referring the dispute between the appellants and the respondents to the arbitration. We are of the opinion that Clause 19 of the Addendum to the Supplementary Development Agreement shall be squarely applicable and therefore the disputes between the respondents and the appellants for which the respondents initiated proceedings under the Societies Registration Act, are required to be referred to the Arbitration and/or to the Arbitral Tribunal.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]At the outset, it is required to be noted that the dispute between the parties for which the respondents have initiated proceedings under Section 23 of the Societies Registration Act is with respect to sharing of the rent of the leased space. It is required to be noted that appellant no. 1 Society claims to be the co-developer. It cannot be disputed and it is not in dispute that owners, societies and developers are the parties to the Development Agreements, Supplementary Development Agreements and the Addendum. According to appellant no. 1-co-developer, after execution of the Development Agreements, Supplementary Development Agreements and the Addendum, a cold shell in building H1B was completed by the developer and appellant no. 1 Society (as co-developer), converted the same to warm shall by setting up the air conditioning facilities, back-up generators and back-up power implementation, building management system implementation, electrical works and civil works and the funds for the same were raised by appellant no. 1 Society by way of bank loans. That, thereafter, various spaces in building H1B were leased out to HCL Technologies Limited and one other and they recovered the rent from the lessee. As per Clause 13 of the Addendum/Agreement which sets out that the societies would be the ?sole authorities? to collect/receive the lease rents in respect of the extends leased out in a given building earmarked as the share of the owners in the completion and pool the entire revenue generated from each of the buildings by way of lease rents and distribute the same to the owners, pro-rata to their respective shares in the build-up space in the project after addressing the liabilities towards loans. Therefore, the dispute between the respondents and the appellants with respect to the sharing of the rent with respect to the leased space can be said to be related to the Addendum and/or in connection with or relating to theAs observed hereinabove, Clause 19 shall be applicable in the event of any dispute and difference arising among the parties out of, in connection with or relating to the agreement. As observed hereinabove, the developers, owners, societies and the original owners and even subsequent societies formed are parties to the agreement and the Addendum. It is also required to be noted and, as observed hereinabove, the dispute is with respect to sharing of the rent of the leased space and it can be said that the respondents are also claiming the share relying upon the Development Agreements; Supplementary Development Agreements and the Addendum. Therefore, the dispute can be said to in connection with or relating to the Agreements also.7.3 Considering the above facts and circumstances, both the High Court and the learned District Judge have committed grave error in not referring the dispute between the appellants and the respondents to the arbitration. We are of the opinion that Clause 19 of the Addendum to the Supplementary Development Agreement shall be squarely applicable and therefore the disputes between the respondents and the appellants for which the respondents initiated proceedings under the Societies Registration Act, are required to be referred to the Arbitration and/or to the Arbitral Tribunal.