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

3. The facts leading to the present appeals in nutshell are as under:3.1 That the original land-owners of the land admeasuring 25 acres and 68 cents in aggregate forming part of Survey Nos. 30, 34, 35 and 38 situated at Gachibowli Village, Serilingampally, Rangareddy District executed 17 development agreements cum power of attorney in favour of one Phoenix Infocity Private Limited for developing an integrated complex comprising of residential units, commercial and office spaces and service apartments on the project land. Subsequently, the owners constituted themselves into three societies registered under the Andhra Pradesh Societies Registration Act, 2001, namely Avinash Hitech City 2 Society (appellant no. 1), Ganga Hitech City 2 Society and Vignesh Hitech City 2 Society. That the said societies applied for and were granted co¬developer status in respect of the SEZ Project. It appears that thereafter the parties to each of the Development Agreements executed Supplementary Development Agreements to their respective Development Agreement. That, in terms of the Development Agreements and the Supplementary Development Agreements, the constructed space in the proposed buildings were to be shared in the ratio of 37.5 : 62.5 between the owners and the developer. Accordingly, the developer was allotted 11 commercial complexes and the owners were allotted 4 commercial complexes. It seems that the respondents are the owners who have been allotted a share in building H1B and also are the members of the appellant no. 1 Society. It appears that, thereafter, an Addendum to the Supplementary Development Agreement was executed by inter alia the appellants and the respondents (excluding the lessee, HCL Technologies Limited) on 12.03.2010. Clause 19 of the Addendum provides for the mechanism to resolve the dispute between the parties (which shall be dealt with hereinbelow). Clause 13 of the Addendum is with respect to the collection of lease rents in respect of the extends leased out in a given building earmarked as the share of the owners till the completion. Clause 16 empowers the societies to determine and collect monthly maintenance charges from the owners and Clause 18 provides that the owners are liable to pay the proportionate share of common expenses for upkeep and maintenance to the societies.3.2 A cold shell of building H1B was completed by the developer and appellant no. 1 Society converted the same to warm shell 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. Thereafter, various spaces in building H1B were leased out to HCL Technologies Ltd. and the rents were collected by appellant no. 1 Society.3.3 That, thereafter, the respondents filed a petition under Section 23 of the Andhra Pradesh Societies Registration Act, 2001 (for short ‘the Societies Registration Act?) before the Principal District Judge, Ranga Reddy District making an allegation that their purported share in the rentals were not being paid to them and prayed for a direction to appellant no. 1 Society to produce the entire accounts for the rental amounts received by it from the tenants along with audit reports and minute books from 2011 to 2015. The respondents also prayed that appellant no. 1 Society be directed to pay amounts already due to the respondents, being their purported share in the rental amounts. That, thereafter another petition was filed by the respondents praying that the Court split appellant no. 1 Society into two different societies claiming to have ?lost all faith and confidence on the integrity? of the executive committee of appellant no. 1 Society and claiming that their interest could no longer be protected by appellant no. 1 Society. That, thereafter, third application was filed by the respondents before the learned District Judge under Section 23 of the Societies Registration Act and prayed for a mandatory injunction against the appellants herein directing them to inter alia distribute the rents purportedly received by appellant no. 1 Society.3.4 In the light of the arbitration Clause 19 of the Addendum, the appellants filed petitions under Section 8 of the Arbitration and Conciliation Act, 1996 seeking the appointment of an arbitrator in accordance with Clause 19 of the Addendum. All the three applications came to be dismissed by the learned District Judge on the ground that the disputes between the parties in the petition under Section 23 of the Societies Registration Act are not covered under Clause 19 of the Addendum.3.5 Aggrieved by the order of the learned District Judge dismissing the application under Section 8 of the Arbitration and Conciliation Act, the appellants herein preferred three separate appeals before the High Court. By the impugned common judgment and order dated 22.11.2018, the High Court has dismissed the said appeals. Hence, the present appeals.

Court's reasoning:
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.