Case: Olympus Superstructures Pvt. Ltd Vs. Meena Vijay Khetan

3. The facts are as follows :There were three main agreements dated 9.3.1994, 9.3.1994 and 26.9.1994 under which the appellant agreed to sell Flat Nos. 101-102, 201-202 and 301- 302 on first, second and third floors of the proposed building Wembley at, Play ground Road, Vile Parle (East) Bombay to the respondents on the terms contained in the agreements. The consideration was Rs. 76, 72 and 74 lakhs respectively. The possession of the flats was to be handed over along with amenities by 30.10.1994. The terms of the contract provided the time-schedule for payments by the purchasers and said time was to be the essence of the contract and it was stated that failure to pay would entail termination of the agreement. The purchasers were to pay 21% interest in case of default. There were various other terms. Clause 7 provided that the power of termination should not be exercised by the appellant unless and until the appellant had given to the purchasers 15 days prior notice in writing of the intention to terminate the agreement and given the purchasers opportunity to set right the breaches, if any committed, within the said period. Clause 39 in each agreement contained an arbitration clause which read as followsAll disputes of differences whatsoever which shall at any time hereafter (whether during the continuance and in force of this Agreement or upon or after it discharges or determination) arise between the parties hereto or their respective successors in title and assigns touching or concerning this Agreement or its interpretation or effect or as to the rights duties and liabilities of the parties and liabilities of the parties hereto or either of them under or by virtue of this Agreement or otherwise as to any other matter in any way connected with arising out of or in relation to the subject matter of this Agreement shall in accordance with the subject to the provisions ofthe Arbitration Act, 1940 or any statutory modification or re-enactment thereof for the time being in force be referred to a single arbitrator if agreed upon by the parties or otherwise to the arbitration of two arbitrators to be appointed by each party to the dispute whose decision in the matter shall be final and binding on the partieswill have to be noticed that the above clause did not refer to any specific named arbitrator or arbitrators.4. Considerable amounts were paid under the above said three main agreements to the appellant. The appellant would contend there was default on part of the respondents while the respondents would contend that there was no progress in the construction.5. There were three other separate agreements dated 9.3.1994, 9.3.1994 and 29.6.1994 (hereinafter called the Interior Design Agreements) between the appellant and the same identical purchasers in which the appellant was appointed as `Interior Designer for carrying out renovation and interior designing and decorating the respective flats and the exterior area and to provide/install the special amenities in the flats for a lump sum payment of Rs. 10 lakhs each. No amount was, however, paid to the appellant under these three agreements before or at the time of executing of these three agreements. There is again a separate arbitration clause in each of these three agreements. It reads as followsAll disputes and difference which may arise between the parties hereto in connection with this agreement of interpretation and effect thereof or in connection with the rights and obligations of the parties hereto shall be referred to the Joint Arbitration of Shri P.N. Nanavati (Solicitor) and Mr. Rashmi Mehta (Solicitor). If the aforesaid Arbitrators then and in such event such disputes and differences shall be referred to arbitration of two arbitrators, one to be appointed by each of the parties hereto. The Arbitrators so appointed shall appoint an umpire before entering upon the reference. The Arbitrators of the umpire as the case may be shall be governed by the provisions of the Indian Arbitration Act, 1940 or any statutory modification or re-enactment thereof from time to time inwill be noticed that this clause required reference to specific named arbitrators.6. On 24.4.1995, the respondent wrote to the appellant seeking information as to the stage of the construction and as to when the appellant would be handing over possession of the flats. The appellant replied on 6.6.1995 complaining default on the part of the purchasers as some cheques were dishonored and stated that he was terminating the three agreements giving 15 days notice. On 22.6.1995 the respondents wrote to the appellant that considerable amounts were paid under each of the main agreements and that the appellant had not cared to inform the respondents about the progress of the construction, that the story of default was false, that the dishonored cheques had been substituted by Bankers cheques or cash and that the termination was invalid. The respondents were ready and willing to complete the contract. On 21.10.1995 the respondents wrote to the appellant giving details of payments and the mode of payment of the balance under the main and the Interior Design Agreements and stating that 10 lakhs were paid under each of the three Interior Design Agreement, by way of cash to the appellants solicitor, that only 6 lakhs remained to be paid after the 6th slab was laid and that the termination of the main agreement was bad in law etc. The appellant was called upon to withdraw the contention regarding termination and was asked as to when the 6th of the slabs would be laid so that the payment of Rs. 6 lakhs could be made. The appellant did not send any reply. The respondent then gave a notice on 19.3.1996 making various allegations against the appellant. A reply was sent by the appellant on 27.7.1996 limited to the allegations in the said letter dated 19.3.1996. A final notice was given by the respondents on 8.7.1996 stating that as there were several disputes and differences between the parties in relation to the agreements dated 9.3.1994, 9.3.1994 and 29.6.1994, they should be referred to one out of the three retired Judges whose names were suggested by the respondents. As the appellant failed to reply agreeing for arbitration, one of the respondents moved the Court on 9.8.1996 seeking interim protection before the filing of a regular petition underthe Arbitration and Conciliation Act, 1996. Thereafter a regular petition for appointment of arbitrator was moved under section 11 of the Act on 3.6.1997 and an order dated 13.6.1997 was passed by the learned Chief Justice appointing a sole arbitrator on 7.7.1997. The learned Arbitrator fixed a preliminary meeting on 14.7.1997. On that day the arbitrator issued certain directions. On 29.7.1997, the respondents filed their claim before the arbitrator. The appellant took several adjournments on 19.8.1997, 23.9.1997 and 3.10.1997 and raised an objection on 9.10.1997 regarding the continuance of the arbitrator which objection was dismissed on 16.10.1997. On 16.10.1997 the appellants new counsel sought time to challenge the order of the arbitrator dated 9.10.1997. Adjournment was refused. The arbitrator took up the matter for evidence. On 16.10.1997, the respondents (i.e. claimants before arbitrator) examined their witnesses in chief and the appellants counsel partly cross-examined them and sought time and the matter was adjourned for 21.10.1997. There were some winding up proceedings against the appellant and a provisional liquidator was appointed on 30.4.1997. On an application by the respondents, the arbitrator, after hearing the counsel for the parties, passed an order on 22.10.1997 that no leave of the company court was required at the stage of appointment of a provisional liquidator. The appellants advocate sought further time and the same was refused. The appellants advocate then filed three IAs for condoning delay in filing the written statement dated 22.10.1997 evidence was recorded but there was no evidence was closed. On 13.11.1997, the award was passed granting relief of specific performance in respect of the three main agreements and also in respect of the three Interior Design Agreements.7. The appellant challenged the three awards under Section 34 by filing three applications in December 1997 and these were dismissed by a learned Single Judge on 12.1.1998 and by the Division Bench on 2.4.1998. It is against these judgments that the present appeals have been filed.

Court's reasoning:
Points 1 and 2In our view, learned senior counsel for the respondents are right in contending that if parties before the arbitrator had any objections to the arbitrators Jurisdiction, the same must be raised before the arbitrator as provided in sub-clauses (2) and (3) of section 16.We do not think it necessary to decide this question in view of the fact that though Section 16 was referred to during the course of the hearing, the learned senior counsel for respondents had argued on merits that the arbitrator had Jurisdiction to decide the disputes/differences concerning the Interior Design agreements also and that even if the appellant could be permitted to raise these issues at the stage of Section 34, there was no substance in the said contentions.We shall, therefore, proceed to decide the question of jurisdiction on the assumption that the appellant is not precluded from raising these questions at the stage of Section 34 though these issues have not been raised before the arbitration as per sub-clause (2) and (3) Section 16.23. Before we do so, we shall advert to a recent decision of this Court in Rajinder Krishan Khanna v. Union of India, 1998(7) SCC 129 wherein this Court referred to Section 16 and Section 34(2)(a)(iv) of the Act. In that case a reference was made to arbitrators when the appeal was being heard by this Court. The appellant was the claimant. The opposite party raised a specific plea before the arbitrators that they had no Jurisdiction to decide about the value of the potentiality of the land and that the claim petition before the arbitrator could not have included the above claim, which was outside the reference and outside the writ petition and the Civil Appeal from which the reference arose by consent. It was argued for the appellant in reply that the respondents did not have a specific issue framed by the arbitrators in regard to the scope of the reference and the respondents were estopped from contending that the arbitrators could not have dealt with the question. This Court held that this case was not a case where no objection was raised by the respondent before the arbitrators as to the scope of the reference. A specific objection was raised in the written statement of the respondents that the potentiality of the land was not one of the questions referred to the arbitrators. This Court held that the fact that an issue was not framed by the arbitrators that the item was not covered by the reference did not raise any estoppel. The said question as to the scope of the reference could therefore be permitted to be raised under Section 34(2)(a)(iv) in the objections to the award. It is true that on the facts of the case before us, the objection as to the scope of the reference was not raised in the written statement of the appellant. But as already stated, we are not deciding the question whether the appellant is precluded at the stage of section 34 from raising the question relating to the scope of the reference. We shall assume, for the purpose of this case, that the said contention can still be raised under Section 34(2)(a)(iv). We shall accordingly deal with the merits of the question of Jurisdiction of the arbitrator.Thus it will be noticed that there are several items in Schedule E of the main agreement which overlap the items in Schedule A of the Interior Design Agreement. In view of the overlapping, in our opinion it has to be said that several items in the Schedule A of the Interior Design Agreement are in modification/substitution of the items in the Main Agreement. Therefore the coverage of the two agreements makes it clear that the execution of the Interior Design Agreement is `connected with the execution of the main Agreement. It may also be noted that the date of the main agreement and the Interior Design Agreement is the same in each of the three cases and clause 3 of the Interior Design Agreement states specifically that `the work of the said renovation, designing and installation shall commence from the execution thereof which means that the execution of the Interior Design agreement and the main agreement is to becannot be conflicting awards in regard to items which, overlap in the two agreements. Such a situation was never contemplated by the parties. The intention of the parties when they incorporated clause 39 in the main agreement and clause 5 in the Interior Design agreement was that the former clause was to apply to situations when there were disputes arising under both agreements and the latter was to apply to a situation where there were no disputes or differences arising under the main contract but the disputes and differences were confined only to the Interior Design Agreement. A case containing two agreements with arbitration clauses arose before this Court in Aggarwal Engineering Co. v. T.H. Machine Industries, AIR 1977 SC 2122 . There were arbitration clauses in two contracts one for sale of two machines to the appellant and the other appointing the appellant as sales representative. On the facts of the case, it was held that both the clauses operated separately and this conclusion was based on the specific clause in the sale contract that it was the "sole repository" of the sale transaction of the two machines. Krishna Iyer, J. held that if that were so, then there was no jurisdiction for travelling beyond the sale contract. The language of the other agreement appointing the appellant as sales representative was prospective and related to a sales agency and `later purchases, other than the purchases of these two machines. There was therefore no overlapping. The case before us and the above case exemplify contrary situations. In one case the disputes are connected and in the other they are distinct and not connected.In our opinion, the view taken by the Punjab, Bombay and Calcutta High Courts is the correct one and the view taken by the Delhi High Court is not correct. We are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree - with a view to shorten litigation in regular courts - to refer the issues relating to specific performance to arbitration. There is no prohibition inthe Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained inthe Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immovableagree with this reasoning. We hold on Point 3 that disputes relating to specific performance of a contract can be referred to arbitration and Section 34(2)(b)(i) is not attracted.This point concerns the issues between the parties on the merits of the award relating to default, time being exercise, readiness and willingness etc. These are all issues of fact. If we examine section 34(2) of the Act, the relevant provisions of which have already been extracted under Point 1 and 2, interference is permissible by the Court only if(i) the subject matter of the dispute is non-capable of settlement by arbitration under the law for the time being it force, or(ii) the arbitral amount is in conflict with the public policy inExplanation to the provisions says that without prejudice to the generality of sub-clause (ii) of clause (b), it is declared for the avoidance of any doubt, that an award is to be created as in conflict with the public policy of India if the making of the award was induced or affecting by fraud, or corruption or was in violation of sections 75 or 81. Section 75 deals with confidentiality while section 81 deals with admissibility of evidence in other proceedings. We do not have any such situation before us falling within section 3492)(b)(ii). The factual points raised in the case before us, to which we have referred to earlier, do not fall within Section 34(2)(b)(ii). Coming to Section 34(2)(b)(i) we have already held that the subject matter of the dispute is not incapable of settlement by arbitration under the law for the time being in force. Nor is any point raised that the arbitral award is in conflict with the public policy ofare, therefore, of the view that the merits of the award, on the facts of the case do not fall under Section 34(2)(b) of the Act. Point 4 is held accordingly against the appellant.