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

2. DHDL is a limited liability involved in the business of providing development, management, and investment services concerning real estate projects. The Petitioner and one Ridgewood Holdings Limited entered into a joint venture, in the year 2007-2008, wherein Ridgewood Holdings Limited invested in four Special Purpose Vehicles, including Rajapura Homes Private Limited (Respondent No.1 in Arbitration Petition No.17 of 2020; hereinafter, Respondent No.1) and Begur OMR Homes Private Limited (Respondent No.1 in Arbitration Petition No.16 of 2020; in short Begur Company), for developing residential projects in various cities across India. Respondent No.1 is a company engaged in the construction, development, operations, and maintenance of residential projects, namely, DLF Maiden Heights and DLF Woodland Heights, both of which are in Bangalore, Karnataka (collectively called Rajapura Project). Similarly, the Begur Company is engaged in the business of construction, development, operations, and maintenance of residential projects, namely, DLF Garden City situated at Kanchipuram District, Tamil Nadu, and DLF Westend Heights situated in Bengaluru District, Karnataka (collectively called Southern Homes Project).3. In June 2008, Ridgewood Holdings Limited transferred its stake in the joint venture to its affiliates, Resimmo PCC (in short, Respondent No.2) in both the Petitions and Clogs Holding BV (hereinafter, Clogs). Thereafter, in terms of the arrangement, upon expiry of the exit period, Respondent No.2 and Clogs were inter alia entitled to a put option on the Petitioner, which they exercised from January to May 2014. However, the Petitioner was unable to provide an exit to Respondent No.2 and Clogs. Subsequently, in 2015, the parties agreed to a negotiated settlement, in terms of which, Respondent No.2 was to acquire sole ownership and control of two Special Purpose Vehicles, namely, Respondent No.1 and the Begur Company. It may be noted that Respondent No.2 is a company incorporated under the laws of Mauritius and is engaged in the business of providing investment management services.4. To effect the change of ownership of the First Respondent, the Petitioner, Respondent No.1, and Respondent No.2 executed a Share Purchase Agreement dated 08.07.2016 (hereinafter, Rajapura SPA) for the transfer of Petitioners entire shareholding in Respondent No.1 to Respondent No.2. Likewise, a Share Purchase Agreement dated 25.01.2017 was also executed between the Petitioner, the Begur Company and Respondent No.2 to transfer the Petitioners entire holding in the Begur Company to Respondent No.2 (hereinafter, Southern Homes SPA). While the primary subject matter of the Share Purchase Agreements was the transfer of shares from the Petitioner – DHDL to Respondent No.2, both the Share Purchase Agreements also stipulated certain additional obligations that would have to be undertaken by the Petitioner. Clause 3.1 read with Schedule-II of the agreements contemplated that the parties were to execute a construction management agreement as a condition precedent to the closing of the transactions. Further, in terms of Clause 6 of the respective agreements, the Petitioner had to undertake certain construction related obligations, which were to be performed in accordance with the terms of the Construction Agreement. We may note that both the Share Purchase Agreements also contained an arbitration clause which are identical. Clause 9 of the agreements contemplate that all disputes arising out of the contract shall be submitted for arbitration at the request of the parties. The arbitration is to be conducted in accordance with the rules of the Singapore International Arbitration Centre (hereinafter, SIAC), with the seat and venue of the arbitration being Singapore.5. Thus, in terms of the agreement and in pursuance of the construction obligations under the Rajapura SPA and the Southern Homes SPA, the Parties on 25.01.2017 executed the DLF-Rajapura Homes Construction Management Services Agreement (hereinafter, RCMA) and the DLF-Southern Homes Construction Management Services Agreement (hereinafter, SCMA). Under the RCMA, the Petitioner was to provide, inter alia, construction management services to Respondent No.1 for completion of the Rajapura Homes Project and in connection with the handover of sold units of the Rajapura Homes Project. Likewise, under the SCMA, the Petitioner had to provide similar services to the Begur Company for the completion of the Southern Homes Project and in connection with the handover of the sold units. It is pertinent to mention that both the aforementioned Agreements also contained selfsame arbitration clauses. Clause 11 of the Agreements contemplate that the seat and venue of Arbitration would be New Delhi, and the arbitration would be governed by the Arbitration and Conciliation Act, 1996.6. As a consideration for the construction management services to be provided by it under the SCMA and the RCMA, the Petitioner - DHDL in terms of Clause 4 of the respective agreement, was entitled to a Fee. Clause 4.1 and 4.2 of the SCMA and RCMA, stipulated that upon concluding its construction obligations, DHDL would submit a written notice of completion to Respondent No.1 and the Begur Company. Thereafter, Respondent No. 1 or the Begur Company, as the case may be, shall have the right to reject or confirm the completion of the Rajapura Homes Project and the Southern Homes Project. The agreements further specify that once Respondent No.1 and the Begur Company accepted the notice of completion, Ressimo PCC would be obligated to invest a sum of Rs.75 crores (75,00,00,000/-) in the Begur Company. The said amount is to be dealt with in the manner prescribed under the SCMA and RCMA. It is not in dispute that petitioner-DHDL intended to be the indirect beneficiary of the said Rs.75 crores. To further clarify the modalities of the Fee payable to DHDL under the SCMA and RCMA, a Fee Computation Agreement dated 25.01.2017 was also executed between Respondent No.1, the Begur Company and Respondent No.2 (hereinafter, Fee Agreement).7. The Petitioner-DHDL issued a written notice dated 16.08.2019 certifying the completion of the Southern Homes Project pursuant to Clause 4.2 of the SCMA and called upon the Begur Company to fulfill its subsequent obligation. However, the Begur Company vide reply dated 30.08.2019, refused to accept it as a Valid Notice of completion under clause 4.2 of the SCMA. The Begur Company alleged that there had been a delay in completing the construction projects and that the Petitioner had not complied with the Information Covenant contemplated in Clause 3.1 of the SCMA. The Begur Company further stated that the notice was incomplete and lacked the necessary documents. Hence, while refusing to accept the notice, the Begur Company called upon the Petitioner to provide the required information and documents.8. The Petitioner also issued written notice dated 26.10.2019, certifying the completion of the Rajapura Project pursuant to Clause 4.2 of the RCMA. Respondent No.1 vide its reply dated 27.01.2020 again refused to accept it as a valid notice of completion and cited reasons of delay and non-completion of the Rajapura Homes Project, incomplete notice, amongst others. The record reveals that after the rejection of the notices dated 16.08.2019 and 26.12.2019, there were several communications between the parties; however, they were unable to resolve their differences.9. The Petitioner subsequently vide letter dated 26.05.2020 issued a notice invoking arbitration under Clause 11 of the SCMA and RCMA. The Petitioners case was that the notice of completion dated 16.08.2019 and 26.12.2019, which were issued pursuant to Clause 4.2 of the SCMA/RCMA, were unreasonably rejected by the Respondent(s). The Petitioner-DHDL alleged that the refusal of the Respondent Companies to accept the notice of completion was a breach under the SCMA and RCMA and was aimed at avoiding Respondent No.2s obligation to invest Rs.75 crores in the Begur Company as contemplated under the SCMA, RCMA and the Fee Agreement. The Petitioner further referred all disputes arising out of the RCMA and SCMA to a common and composite Arbitral Tribunal comprising a sole arbitrator. The Petitioner also proposed two names, for one of them to be appointed as the sole arbitrator.10. The Respondents (i.e. Respondent No.1, the Begur Company and Respondent No.2) vide two separate emails, both dated 12.06.2020, however, refused to appoint a sole arbitrator. They stated that the dispute between the parties was not whether Respondent No.2 had any obligation after accepting the respective notice of completions but whether or not completion in respect of the Rajapura Project and the Southern Homes Project has been achieved, which is an obligation on DHDL under Clause 6 of the Rajapura SPA and Southern Homes SPA. It was thus claimed that the differences between the parties have arisen under the Rajapura SPA and Southern Homes SPA and not under the RCMA/SCMA. The Respondents further refused to have the disputes consolidated into a common and composite tribunal and instead asserted that the same would have to be resolved under separate arbitration proceedings. Thereafter, on 13.06.2020, the Respondents issued two more letters through their Counsel, Freshfields Bruckhaus Deringer Singapore Pte. Ltd., reiterating that the disputes between the parties do not fall within the terms of the SCMA and RCMA. Further, the Respondent(s) reserved their right to invoke the dispute resolution provisions under the Southern Homes SPA and Rajapura SPA, respectively by instituting arbitral proceedings under the rules of SIAC.11. Aggrieved by the refusal of the Respondent(s) to appoint an Arbitrator under the RCMA and SCMA, the Petitioner has preferred these two separate petitions under Section 11(6) read with Section 11(12) of the Act, praying for appointment of a sole arbitrator for resolution of all disputes arising from the SCMA and RCMA. It may be highlighted that since Respondent No.2 is not a body incorporated in India, the arbitration between the Parties falls within the ambit of international commercial arbitration as defined under Section 2(1)(f) of the Act.

Reasoning:
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.