Delhi High Court

Esri R And D Center India Private Limited vs Ambience Towers Private Limited & Anr. on 4 July, 2024

Author:
C.Hari Shankar

Bench:
C. Hari Shankar

$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 1268/2023
ESRI R&D CENTER INDIA PRIVATE
LIMITED .....Petitioner
Through: Mr. Rajshekhar Rao, Senior
Advocate with Mr. Sidharth Sethi, Ms.
Pragya Chauhan, Mr. Kunal Saini and Ms.
Meherunissa Anand, Advocates

versus

AMBIENCE TOWERS PRIVATE LIMITED & ANR.
.....Respondents
Through: Mr. V. Anush Raajan and Ms.
Riya Mittal, Advocates for R-l.
Mr. Hitesh Sachar, Advocate for R2

CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
JUDGMENT (ORAL)

% 04.07.2024

1. Respondent 1, Ambience Towers Private Ltd1 leased out, to the
petitioner ESRI R&D Center India Pvt Ltd, 35,965 sq. ft. on the 8th
floor of a building at Commercial Plot No. 10, Community Centre,
Block B, Shalimar Bagh, New Delhi2. According to the petitioner, the
premises were not habitable in the condition in which they were leased
out to it.

2. Clauses 18.2, 23.1 and 23.2 of the Lease Deed read thus:
"Ambience" hereinafter

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
"18.2 In case for any default on the part of the Lessor, the Space,
Complex and/or Building is destroyed or becomes inaccessible and
unusable to Lessee to carry out its activity, then the Lessee shall
have the right to terminate the lease. This right would be available
even during Lock in period, if the premises become inaccessible
and unusable to the Lessee. The Lessor understands that cure
period to rectify the defect is 30 days. However, both Parties agree
that the process of rectification would commence within 7 days of
occurrence of such defect and in case rectification requires more
than 30 days period, both the Parties with their mutual consent may
enhance the cure period beyond 30 days.

*****

23.1 In the event of a sale or assignment by the Lessor of all or
any part of the Colony/Complex/Building (which may include the
Space) the same shall operate to release the Lessor from any
further liability upon any of the covenants or conditions, express or
implied, herein contained in favour of the Lessee and, in such
event, the Lessee agrees to look solely to the responsibility of the
successor in interest of the Lessor in and to this Lease Deed. All
payments and deposits made hereunder shall be transferred to the
accounts of the transferee and this Lease Deed shall not be affected
by any such sale, and the Lessee agrees to attorn the lease to the
subsequent transferee or assignee so long as subsequent transferee
or assignee honors the terms of this Lease Deed.

23.2. In the event of a sale or assignment by the Lessor of all or
any part of the building, the Lessor shall provide a "No objection"

letter to the Lessee obtained from the mortgagee confirming it has
consented to the terms of the Lease Deed."

3. It is also an admitted position that the petitioner, as the lessee in
respect of the leased area, is not a signatory to any document attorning
the lease with Ambience to any other party, including Respondent 2
Tutelage Professionals Pvt Ltd3.
"The leased area" hereinfater
"Tutelage" hereinafter

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50

4. The lease deed also contained the following clauses regarding
resolution of disputes arising between the parties:

"26. SETTLEMENT AND ARBITRATION

26.1. The parties hereto have agreed to amicably settle and/or
resolve all disputes and differences arising out of these presents or
otherwise concerning the Lease/Occupation/Use of the Space
amongst themselves; but in the event any dispute of whatsoever
nature is incapable of being resolved amongst the parties hereto
amicably then and in that event the parties have agreed to refer all
disputes and differences including the construction scope or effect
of any of the terms and conditions herein contained or otherwise
concerning the Lease/ Occupation/ Use of the Space and/or the
determination of any right and/or liability and/or in any way
touching or concerning these presents or otherwise concerning the
Lease/Occupation/ Use of the Space to the sole Arbitration of an
independent mediator to be appointed by mutual agreement of the
LESSOR and LESSEE.

26.2. The Arbitrator shall not be entitled to give interim awards
and directions, which shall be binding on the parties.

27. JURISDICTION:

27.1. All matters relating to the aforesaid Arbitration and all
judicial proceedings in connection therewith and/or otherwise,
shall be held in Delhi and the Courts in Delhi and/ or the High
Court of Delhi at New Delhi. The High Court of Delhi at New
Delhi and the Courts subordinate thereto, alone shall have
jurisdiction in these matters regardless of the place of the execution
of this Lease Deed."

5. On 18 November 2022, the leased area was sold by Ambience
to Tutelage. Clauses 3, 8 and sub clauses (xv), (xxiv) of Clause 9(a)
and Clause 9(b) of the Sale Deed merit reproduction:

"3. The Vendor doth hereby irrevocably sells, conveys,
transfers and assigns all its rights, title and interests absolutely and
forever in the said Property (fully described in Schedule-I hereto),
along with all the rights of ownership, possession together with all
fittings and fixtures, connections, plants, lifts, DG Sets, sanctioned
electricity load, all privileges, easements, advantages,
appurtenances, connections, attached thereto in favour of the

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
Vendee, free from all Encumbrances, charges, liens, injunctions,
mortgages, gifts, disputes, litigation, prior agreements, for a Total
Sale Consideration of Rs. 322,52,26,000/- (Rupees Three Hundred
Twenty-Two Crores Fifty-Two Lakhs and Twenty-Six Thousand
Only), which shall hereinafter become the sole and absolute
property of the Vendee, and Vendee shall enjoy the rights,
ownership and privileges attached to the said Property absolutely
and forever.

*****

8. That the Vendor has irrevocably sold/ conveyed/transferred
absolutely and forever all its rights and interest in the said Property
to the Vendee together with all its rights, title, interest, easements,
privileges, pathways, passage, benefit and advantages of right and
appurtenances thereto and TO HAVE AND TO HOLD the said
Property hereby conveyed unto the Vendee along with all the
rights, title, interest of the Vendor in or upon the said Property and
that no one except the Vendee shall have any rights, title, claims,
interest whatsoever in the said Property hereby conveyed or any
part thereof.

9. REPRESENTATION AND WARRANTS

(a) The Vendor hereby assures, represents and declares that :

*****

xv. Save and except the portion of Property
leased/licensed to third parties, as per details below, there
are no other tenants (protected, permanent or otherwise) or
trespassers on the said Property or any part thereof. Vendor
shall ensure that the below mentioned leases/licenses shall
be attorned in favour of the Vendee as per details
mentioned below, in the agreed format/draft of Deed of
Attornment as annexed as Annexure B hereto,
simultaneously at the time of execution of this Sale Deed.

S.no Name of Nature of Details of
Lessee/ Document Premises
Operator with Details
1. ESRI R & D Lease Deed 8th Floor of
Center dated the Property,
India Private 15.01.2021, having Super
Limited bearing Area of 35,645
Registration No. Sq, Fts.

775.

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
2. Awfis Space Operating 7th Floor of the
Solutions Agreement Property,
Private dated having Super
Limited 24.11.2021 Built-up Area
of 35,645
Sq.fts. (Carpet
Area of 21,213
Sq. Fts.)
3. Smartworks Letter of Intent 6th Floor of the
Coworking dated Property,
Spaces Private 06.05.2022 having
Limited Chargeable
Area of 17,00
Sq. Fts.
(Carpet Area
of 11,570 Sq.
Fts.)

xxiv. The Vendor has been left with no right, title,
interest, claim or concern of any nature whatsoever in the
said Property and the Vendee has become the absolute
owner of the said Property, with full right to use, enjoy,
sell, transfer and/or to deal with the same in any manner as
absolute owner without any objection/hindrance by the
Vendor or any other person claiming through or under the
Vendor.

*****

(b) All or any other charges, fees, cess or taxes, duties, dues,
demands, liabilities and outgoing charges such as electricity bills,
water bills, property taxes/cess, utility bills, vendors payments, etc,
in relation to the said Property, has been borne and paid by the
Vendor up to the date of the registration of the Sale Deed and
thereafter the same shall be borne and paid by the Vendee.

However, if the payments are required to be made by the Vendee in
respect to such charges, fees, cess or taxes, duties, dues, demands,
liabilities and outgoing charges such as electricity bills, water bills,
property taxes/cess, utility bills, vendors payments, etc. after the
execution of Sale Deed, then all amounts paid by the Vendee (for
the period prior to the registration of Sale Deed), Vendee shall raise
a demand to that effect upon the Vendor and Vendor shall pay the
same to the Vendee immediately of the receipt of such demand."

6. On 9 May 2023, the petitioner addressed a Notice of Default to
both the respondents. In view of the fact that the leased area had been

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
further sold by Ambience to Tutelage, the notice stated that it was
being addressed to both the respondents. The notice alleged that the
leased area was not habitable and that the columns in the leased area
did not possess the requisite compressive strength and would require
repair. As neither Ambience nor Tutelage took any steps in this
regard, the notice alleged that the petitioner had to spend considerable
amounts in attempting to make the leased area habitable. It was further
pointed out that the Enforcement Directorate had also issued a Public
Notice stating that the entire building at Commercial Plot No.10 had
been attached by it in relation to an investigation into the affairs of the
Ambience Group. In these circumstances, the notice alleged that the
petitioner was not in a position to enjoy the leased area. The
petitioner, therefore, invoked Clause 18.2 of the lease deed which
entitled the petitioner to terminate the lease deed, if the leased area
became unusable for the petitioner. Alleging that Ambience was in
fundamental breach of its obligations under the lease deed, and had
failed to provide the usable leased area to the petitioner despite
repeated representations in that regard, the petitioner stated that it
intended to terminate the lease deed. The respondents were therefore
called upon to cure the defaults in the leased area within 60 days, by
providing a habitable and usable access to the leased area and
reimbursing to the petitioner the amount of ₹ 1,29,01,487.90, stated to
have been incurred by the petitioner in executing the repairs in the
leased area. Failure, on the part of the respondents, to cure the
defaults within 60 days, it was said, would constrain the petitioner to
issue a notice for cancellation of the lease deed.

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50

7. The period of 60 days, provided in the notice, expired on 9 July
2023. Neither of the respondents, however, took any step towards
curing the defaults indicated by the petitioner. The petitioner,
therefore, addressed a second communication to both the respondents
on 10 July 2023, alleging that the respondents continued to be in
breach of their obligations to provide a habitable and usable access to
the leased area to the petitioner and to reimburse the amounts spent by
the petitioner in repairing the premises. The respondents were,
therefore, put on notice that failure, on their part, to cure the notified
defects within 30 days would result in ipso facto
cancellation/termination of the Lease Deed. The notice also asserted
that the petitioner was entitled to recover, from the respondents, the
security deposit of ₹ 1,92,48,300/-, maintenance security deposit of ₹
47,05,140/- and any other amounts due to the petitioner, apart from ₹
1,29,01,487.90 incurred by the petitioner in repairing the leased area.

8. According to the petitioner, as the notified defects were not
cured by the respondents, the lease deed stood terminated on 10
August 2023. The petitioner in the circumstances, addressed a
communication dated 10 August 2023 to Tutelage, handing over
thereunder the vacant, physical and actual possession of the leased
area to Tutelage.

9. Simultaneously, the petitioner addressed a Notice of Demand to
both the respondents, calling upon them to pay, to the petitioner, a
total amount of ₹ 14,63,44,072.29 towards cost of repairs and reworks
carried out by the petitioner and agreed to be repaid by Ambience, as

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
well as other costs incurred by the petitioner, and compensation for
the losses suffered by the petitioner. The respondents were called
upon to pay the aforesaid amount within 30 days, failing which the
petitioner stated that it would seek recourse to appropriate legal
remedies.

10. Ambience responded on 11 September 2023, denying all
liabilities in the matter in view of the sale of the leased area to
Tutelage on 18 November 2022, with concomitant transfer of all its
rights and obligations. The situation thus reached a stage, according to
the petitioner, where it was left with no option but to seek recourse to
the remedies available in law.

11. In accordance with the protocol envisaged by Clause 26.1 of the
Lease Deed, the petitioner addressed a notice to the respondents on 12
September 2023 calling upon them to settle the matter amicably.

12. This attempt also failed. The petitioner, thereupon, issued a
notice to the respondents under Section 214 of the Arbitration and
Conciliation Act, 19965 on 3 October 2023, proposing resolution of
the disputes between the petitioner and respondents by arbitration.
The petitioner suggested the name of Hon'ble Ms. Justice R.
Banumathi, a retired Judge of the Supreme Court of India, to arbitrate
on the issue.
21. Commencement of arbitral proceedings. - Unless otherwise agreed by the parties, the arbitral
proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be
referred to arbitration is received by the respondent.
"The 1996 Act", hereinafter

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50

13. On 2 November 2023, Ambience replied, denying all liability in
the matter. There has been no response from Tutelage to the Notice of
Arbitration dated 3 October 2023.

14. It is in these circumstances that the petitioner has approached
this Court under Section 11(6)6 of the 1996 Act, requiring the Court to
appoint an Arbitrator to arbitrate on the disputes between the
petitioner and respondents.

15. Both the respondents have filed counter-affidavits by way of
response to the writ petition and the petitioner has filed rejoinders
thereto.

Rival Submissions

16. I have heard lengthy arguments from both sides. The petitioner
was represented by Mr. Rajshekhar Rao, learned Senior Counsel
assisted by learned Counsel Mr. Sidharth Sethi, Ms. Pragya Chauhan,
Mr. Kunal Saini and Ms. Meherunissa Anand. Mr. V. Anush Raajan
appeared for Ambience and Mr. Hitesh Sachar represented Tutelage.

Opening submissions of Mr. Raj Shekhar Rao
(6) Where, under an appointment procedure agreed upon by the parties,--

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them
under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it
under that procedure,
the appointment shall be made, on an application of the party, by the arbitral institution designated by the
Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations
other than international commercial arbitration, as the case may be to take the necessary measure, unless the
agreement on the appointment procedure provides other means for securing the appointment.

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50

17. Mr. Rao submits that Clause 23.1 of the Lease Deed dated 15
January 2021 releases Ambience only from "further liability".
Moreover, Clause 23.1 recorded the consent of Ambience to attorn the
lease to Tutelage provided Tutelage honoured the terms of the Lease
Deed. He submits that no such document, attorning the lease to
Tutelage, was ever signed by his client. Ambience, therefore,
continues to remain liable to the petitioner.

18. At the same time, possession of the leased area was handed over
by Ambience to Tutelage. Ambience also transferred the security
deposit paid by the petitioner to Tutelage. Any direction for refund of
the security deposit would, therefore, have to be issued to Tutelage.
Moreover, inasmuch as the petitioner continued to remain in the
leased area for nearly 9 months after the sale thereof to Tutelage, the
issue of the extent to which Ambience, or Tutelage, or both, would be
liable to the petitioner, also fell for determination.

19. Thus, submits Mr. Rao, both respondents have necessarily to be
impleaded as parties in the arbitral proceedings, and it would be for
the learned arbitrator to adjudicate on the situs of liability.

Submissions of Mr. Raajan in reply

20. Mr. V. Anush Raajan, appearing for Ambience, draws my
attention to paras 2.5 and 2.6 of the present petition, which read thus:

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
"2.5 Subsequent to the execution of the Lease Deed, the
Petitioner was informed on 5 December 2022 that Respondent No
1 had sold the Leased Area to Respondent No 2 in November 2022
and that:

(i) all payments on deposits made by the Petitioner
under and in terms of the Lease Deed had been transferred
by Respondent No. 1 to Respondent No. 2;

(ii) Respondent No. 1 had assigned all its rights and
obligations under the Lease Deed to Respondent No. 2.

2.6 As such, the Respondent No. 2 stepped into the shoes of
Respondent No. 1 with effect from November 2022 and became
the successor in interest to the Respondent No. 1. Respondent No.
2 is entitled to all rights which were enforceable by the Respondent
No. 1 under the Lease Deed and is bound by all obligations that
Respondent No. 1 was bound by, without any further act or deed.
Being the assignee and successor interest of Respondent No. 1,
Respondent No. 2 is also bound by the arbitration clause contained
in the Lease Deed and is a necessary party for the proper, fair and
final adjudication of the disputes between the parties."

Mr. Raajan submits that the petitioner was, therefore, always aware of
the sale of the leased area to Tutelage. No live dispute, therefore, he
submits, survives between the petitioner and Ambience. The
petitioner cannot, therefore, forcibly involve Ambience in the
proposed arbitral proceedings. He relies on paras 25 and 28 of

N.T.P.C. Ltd v. SPML Infra Ltd7
to submit that a Court which is
seized with an application under Section 11(6) of the 1996 Act has
also to examine whether a live arbitral dispute exists between the
parties.

Submissions of Mr. Hitesh Sachar

21. Mr. Hitesh Sachar, appearing for Tutelage, on the other hand,

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
echoes Mr. Rao's submission that Clause 23.1 of the Lease Deed only
insulates Ambience from "further liability". Inasmuch as the
allegation of the petitioner against Ambience relates to a period prior
to the sale of the leased area to Tutelage, Mr. Sachar submits that
Ambience continues to remain liable towards the petitioner and, in
fact, Tutelage has no liability in that regard. He also draws attention
to paras 3, 4 and 11 of the Legal Notice dated 9 May 2023 addressed
by the petitioner to the respondents, which read thus:

"3. As per the terms of the Lease Deed, Ambience was obliged to
provide the Leased Area to ESRI in a habitable, accessible
condition to enable ESRI to be able to use it for its activities.
Ambience had also represented that the Leased Area was
structurally sound and in good condition. Even otherwise, in law
also, providing habitable access to the leased area is a fundamental
obligation of the lessor.

4. However, it is an admitted fact and a matter of record that till
date (i.e. even after 2.5 years of execution of the Lease Deed),
Ambience/Tutelage has failed to provide a habitable or usable
Leased Area to ESRI. This fact has been documented in various
communications, photographs and reports of third-party
vendors/consultants. Pertinently, on 29 August 2022, Ambience
had categorically acknowledged that the compressive strength on
all columns in the Leased Area and Building failed to meet the
appropriate requirements which would require repair.

11. Therefore, by way of this notice, ESRI is notifying the
defaults/breaches of Ambience/Tutelage and as a last opportunity,
calling upon Ambience/Tutelage to cure the defaults within a
period of 60 days by:

a. Providing a habitable and usable access to the Leased
Area to ESRI;

b. Reimbursing the amount of INR 1,29,01,487.90 incurred
by ESRI in executing repair works for water leakage and
accommodating Landlord's structural remediation work
within the Leased Area."

Mr. Sachar points out that, in para 3 of the Legal Notice, the
(2023) 9 SCC 385

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
petitioner's clear allegation was against Ambience, in failing to
provide the leased area to the petitioner in a habitable and accessible
condition. Even in paras 4 and 11, he submits that the petitioner's
allegation continues to remain against Ambience. The claims of the
petitioner in para 11, he submits, have also to be met by Ambience,
not by Tutelage.

22. Mr. Sachar also places reliance on para 15, 16 and 19 of the
reply tendered by Ambience to the Notice of Demand dated 10
August 2023 of the petitioner:

"15. As per the terms of the lease deed, ESRI is liable to pay
Ambience INR 5,77,44,900/- towards arrears of Rent between May
2021 and November 2022, Late Charges for each month of delay
applied to every month between May 2021 to November 2022
applicable to rent arrears up to the date of issuance of the present
letter in terms of Clause 2.4., in the amount of INR 2, 19,43,062/-,
Maintenance charges amounting to INR 1,41,15,420/-. Our Client
has several times passed on the relevant information regarding
outstanding payments to ESRI, however, the same have not been
paid till date is admitted.

16. The present letter may be treated as a notice issued in terms
of Clause 14.1.1 of the Lease Deed and you are hereby called upon
to forthwith pay INR 9,38,03,382/- as of 15th August 2023. You
will note that the above demanded amount will carry interest@
18% per annum up to the date of payment, if the demanded amount
is not paid within the 30 days of receipt of the present letter and a
cure period of 30 days.

*****

19. On several occasions, including but not limited to the
emails from Sim Saran, Senior Real Estate Attorney of 01.11.2022
and emails from Mr. Rohit Singh of India Operations, ESRI that
ESRI even as of November 2022 was in occupation of the Leased
Area and was running its operations from the premises. All the
requests of ESRI to delay the rent commencement on one pretext
or the other, viz. water seepage in July 2022 or the structural
integrity improvements and reports, were denied by Ambience and
demands were raised on several occasions. However, ESRI on one
hand occupying the Leased Area merely used the reason of
improvement works to be done by Ambience in terms of the

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
Leased Deed refused to pay the Rent, Maintenance and Other
Charges."

The counter claims of Ambience, therefore, he submits, are also
against the petitioner. The contractual liability, if any, therefore, is
between the petitioner and Ambience. He further submits that there
has never been any attornment of the lease by the petitioner to
Tutelage.

23. Mr. Sachar therefore submits that it is not Ambience, but
Tutelage, which is being unnecessarily dragged into arbitral
proceedings.

Mr. Rao's submissions in rejoinder

24. Advancing submissions by way of rejoinder to the submissions
of Mr. Raajan and Mr. Sachar, Mr. Rao submits that, inasmuch as the
leased area was sold by Ambience to Tutelage on 18 November 2022,
and, on 10 August 2023, possession of the leased area was handed
over by the petitioner to Tutelage, both respondents have necessarily
to be made parties in the arbitral proceedings, and it would be for the
arbitrator to adjudicate as to the actual situs of liability.

25. Mr. Rao alludes to the following e-mail dated 29 August 2022
addressed by Ambience to the petitioner, to submit that Ambience
cannot seek to escape its liability merely on the ground that it had sold
the leased area to Tutelage along with all rights and obligations:

"Dear Sim,

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By:AJIT KUMAR By:CHANDRASHEKHAR
AN HARI SHANKAR
Signing Signing Date:07.07.2024
Date:07.07.2024 23:51 23:50
Please find attached the structural report for ND testing done by
TPC, Structural consultants and structural designers of the
Ambience Tower Shalimar Bagh Building.

To our astonishment the compressive strength of some columns on
the eighth floor is not at par as per the latest design parameters.
TPC on the basis of the ND test and the design analysis have
suggested certain strengthening and retrofitting details which are to
be followed from ground up. (Drawings and details attached).

We are aligning our teams to have the changes executed at site.
Kindly keep your teams informed.

We appreciate your patience and support.

Regards,

Archna Dhingra
General Manager Head Leasing & Marketing
Ambience Group"

This e-mail, he submits, was written much before the leased area was
sold by Ambience to Tutelage. Ambience cannot, therefore, plead
indifference in the matter.

26. After having been sold the leased area, Tutelage, too, made no
effort to rectify the defects in the premises. This is why the petitioner
was compelled to issue a Notice of Default to the respondents to
terminate the lease. Mr. Rao points out that, in the Notice of Default
addressed by the petitioner to the respondents on 9 May 2023, the
petitioner had claimed not only provision of a habitable and usable
access to the leased area but also reimbursement of the amount of ₹
1,29,01,487.90 spent by the petitioner in executing repair of the leased
area. Inasmuch as Tutelage had purchased the leased area with all

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rights and obligations, the question would fall for consideration as to
the extent to which Tutelage would be liable for the monetary claim of
the petitioner. It would be for the learned arbitrator to adjudicate on
this issue. For this purpose, Mr. Rao further refers me to the
following paras from the Notice of Demand sent by the petitioner to
the respondents on 10 August 2023:

"3. In terms of clause 18.2 of the Lease Deed,
Ambience/Tutelage is obliged to refund the following refundable
deposits to ESRI within 30 days of the termination of the Lease
Deed (i.e. by 9 September 2023):

3.1 Interest free refundable security deposit equivalent to 6
months' rent amounting to ₹ 1,92,48,300; and

3.2 Maintenance Security Deposit amounting to ₹ 47,05,140.

4. In addition to the above, in view of the fundamental
breaches/defaults committed by Ambience/Tutelage, ESRI is also
entitled to receive the below amounts incurred by:

4.1 Cost of Repairs and Reworks carried out by ESRI and
agreed to be reimbursed by Ambience

4.1.1 It is an admitted fact that ESRI has spent
considerable amounts in attempting to make the Leased
Area habitable and usable. An amount of ₹ 1,29,01,487.90
was incurred by ESRI in executing repair works for water
leakage and to accommodate structural remediation work
within the Leased Area. Though Ambience had admitted
its liability to reimburse such amount to ESRI, it has failed
to do so to date, despite repeated requests.

4.2 Other costs incurred by ESRI

4.2.1 ESRI had installed certain enhancements and fit
outs over the Leased Area and had to expend substantial
amounts towards the same. On termination of the Lease
Deed, whatever could be removed, has been removed by
ESRI with a view to mitigate its losses. However, it is not
possible and/or feasible to remove certain enhancements
made to the Leased Area by ESRI. An indicative (and not
exhaustive) list of the enhancements that cannot be
removed from the Leased Area is set out in Annexure-1 to

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the present notice. At the same time, since these are being
left behind, Ambience/Tutelage will obviously benefit from
these enhancements that have been installed at ESRI's cost.

However, for ESRI, these are sunk costs, attributable solely
to the breaches by Ambience/Tutelage. Consequently,
Ambience/Tutelage is also liable to pay these sunk costs to
ESRI. ESRI is in the process of quantifying the exact sunk
costs incurred by it towards the enhancements that cannot
be removed and the quantification will be submitted in due
course.

27. Mr. Rao also refers me to the reply dated 11 September 2023 by
Ambience to the said notice, and points out that though, in the said
reply, Ambience has disowned all liabilities vis-a-vis the petitioner
regarding determination of lease and its sequelae, it has nonetheless
answered the claim of damages for the period during which the
ownership of the property continued to be with Ambience, i.e. prior to
sale of property to Tutelage. Thus, he submits that Ambience cannot
completely disclaim liability in the transaction. Mr. Rao has also
placed reliance on para 163 of the judgment of the Constitution Bench
of the Supreme Court in
Cox and Kings Ltd v. SAP India Pvt Ltd8
.

28. Mr. Rao submits that, in view of Section 16(1)9 of the 1996
Act, which incorporates the kompetenz-kompetenz doctrine, the issue
of the relevant parties to an arbitral dispute goes to the very root of the
competence of the Arbitral Tribunal, and must be left to the Arbitral
Tribunal.
(2024) 4 SCC 1
16. Competence of arbitral tribunal to rule on its jurisdiction. -

(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections
with respect to the existence or validity of the arbitration agreement, and for that purpose,--

(a) an arbitration clause which forms part of a contract shall be treated as an
agreement independent of the other terms of the contract; and

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Analysis

Scope of jurisdiction of the referral court under Section 11(6) and
Section 11(6A)

29. The first aspect to be examined is the scope of inquiry by the
referral court under Section 11(6) of the 1996 Act.

30. Sub-section (6A)10 was introduced in Section 11 by
Section
6(ii)
of the Arbitration and Conciliation (Amendment) Act 201511.
Section 3(v) of the Arbitration and Conciliation (Amendment) Act,
201912 omits sub-section (6A) from
Section 11
.
Section 3(v)
of the
2019 Amendment Act, however, is yet to be enforced and, therefore,

Section 11(6A)
continues to remain on the statute book and in force.
This position stands recognized in para 161 of Cox and Kings:

"161. In 2015, the
Arbitration Act
was amended to insert
Section
(6-A). The said provision reads as follows:

"11. (6-A) The Supreme Court, or as the case may be, the
High Court, while considering any application under sub-
section (4) or sub-section (5) or sub-section (6), shall,
notwithstanding any judgment, decree or order of any
court, confine to the examination of the existence of an
arbitration agreement."

(emphasis supplied)

By virtue of non obstante clause,
Section 11
(6-A) has set out a new
position, which takes away the basis of the position
laid down in

SBP & Co. v. Patel Engg. Ltd.13 In 2019, Parliament passed the

(b) a decision by the arbitral tribunal that the contract is null and void shall not
entail ipso jure the invalidity of the arbitration clause.
(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under
sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of
any Court, confine to the examination of the existence of an arbitration agreement.
"The 2015 Amendment Act" hereinafter
"The 2019 Amendment Act" hereinafter
(2005) 8 SCC 618

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Arbitration and Conciliation (Amendment) Act, 2019
omitting

Section 11
(6-A). However, the amendment to
Section 11
(6-A) is
yet to be notified. Till such time,
Section 11
as amended in 2015
will continue to remain in force."

(Italics in original; underscoring supplied)

Evolution of the law - the decisions in Boghara Polyfab, Master
Construction Co., New India Assurance Co. Ltd, Duro Felguera,
Antique Art Exports, Mayawati Trading and Vidya Drolia

31. Prior to the insertion of sub section (6A) in
Section 11
, the view
of the Supreme Court with respect to the issues which could be
examined by a referral court, seized with a petition for referring a
dispute to arbitration, was more expansive.
In
National Insurance
Co. Ltd v. Boghara Polyfab Pvt Ltd14
, the Supreme Court held that,
where it was contended that no arbitrable dispute survives as the
dispute stood discharged by accord and satisfaction, the referral court
had to examine the issue.

Following the decision in Boghara
Polyfab, the Supreme
Court further held
in
U.O.I. v. Master
Construction Co.15
, that where reliance was placed on a discharge
voucher, no claim certificate or settlement agreement as evidence of
discharge of the claim, the referral court had to prima facie examine
the credibility of the allegations before referring the dispute to
arbitration.

Further in
New India Assurance Co. Ltd v. Genus Power
Infrastructure Ltd16
, the Supreme Court held that where fraud,
coercion, duress and undue influence was alleged, the party raising the
allegations had to, prima facie, substantiate the allegations by
(2009) 1 SCC 267
(2011) 12 SCC 349
(2015) 2 SCC 424

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evidence.

32. Apparently of the view that a referral court ought not to enter
into these aspects, which should be left for decision by the Arbitral
Tribunal, the legislature, by the 2015 Amendment Act. introduced sub

-section (6A) in
Section 11
of the 1996 Act.
Section 11(6A)
, plainly
read, strictly confines the scope of examination by a referral court
exercising referral jurisdiction under
Section 11(6)
to the existence of
an arbitration agreement. This position was explicitly elucidated, by
the Supreme Court, in
Duro Felguera, S.A. v. Gangavaram Port
Ltd17
, by ruling that the jurisdiction of the referral court was,
following the insertion of
Section 11(6A)
, "limited to examining
whether an arbitration agreement exists between the parties - nothing
more, nothing less".

33. A two Judge Bench of the Supreme Court in
United India
Insurance Co Ltd v. Antique Art Exports Pvt. Ltd18
, even after the
introduction of
Section 11(6A)
and the decision in Duro Felguera
held, nonetheless, that a plea of discharge of the debt by accord and
satisfaction, if urged, would have to be examined by the referral court
under
Section 11(6)
.

This view was, however, reversed by a Bench of
three Hon'ble Judges of the Supreme Court in
Mayawati Trading Pvt
Ltd v. Pradyuat Deb Burman19
, which again reiterated the principle
in Duro Felguera that, post the insertion of sub-section (6A) in

Section 11
, the referral court had to confine the scope of its
(2017) 9 SCC 729
(2019) 5 SCC 362
(2019) 8 SCC 714

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examination to the factum of existence of an arbitration agreement,
and not peregrinate beyond that.

34. Another Bench of three Hon'ble Judges of the Supreme Court,
in
Vidya Drolia v. Durga Trading Corporation20
, examined the entire
legal position and held thus:

"133. Prima facie case in the context of
Section 8
is not to be
confused with the merits of the case put up by the parties which
has to be established before the Arbitral Tribunal. It is restricted to
the subject-matter of the suit being prima facie arbitrable under a
valid arbitration agreement. Prima facie case means that the
assertions on these aspects are bona fide. When read with the
principles of separation and competence-competence and
Section
of the Arbitration Act, the referral court without getting bogged
down would compel the parties to abide unless there are good and
substantial reasons to the contrary.

134. Prima facie examination is not full review but a primary
first review to weed out manifestly and ex facie non-existent and
invalid arbitration agreements and non-arbitrable disputes. The
prima facie review at the reference stage is to cut the deadwood
and trim off the side branches in straightforward cases where
dismissal is barefaced and pellucid and when on the facts and law
the litigation must stop at the first stage. Only when the court is
certain that no valid arbitration agreement exists or the
disputes/subject-matter are not arbitrable, the application
under
Section 8
would be rejected. At this stage, the court should
not get lost in thickets and decide debatable questions of facts.
Referral proceedings are preliminary and summary and not a mini
trial......

*****

138. ......On the other hand, issues relating to contract
formation, existence, validity and non-arbitrability would be
connected and intertwined with the issues underlying the merits of
the respective disputes/claims. They would be factual and disputed
and for the Arbitral Tribunal to decide.

139. We would not like to be too prescriptive, albeit observe that
the court may for legitimate reasons, to prevent wastage of public
(2021) 1 SCC 1

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and private resources, can exercise judicial discretion to conduct an
intense yet summary prima facie review while remaining conscious
that it is to assist the arbitration procedure and not usurp
jurisdiction of the Arbitral Tribunal. Undertaking a detailed full
review or a long-drawn review at the referral stage would obstruct
and cause delay undermining the integrity and efficacy of
arbitration as a dispute resolution mechanism. Conversely, if the
court becomes too reluctant to intervene, it may undermine
effectiveness of both the arbitration and the court. There are certain
cases where the prima facie examination may require a deeper
consideration. The court's challenge is to find the right amount of
and the context when it would examine the prima facie case or
exercise restraint. The legal order needs a right balance between
avoiding arbitration obstructing tactics at referral stage and
protecting parties from being forced to arbitrate when the matter is
clearly non-arbitrable.

140. Accordingly, when it appears that prima facie review
would be inconclusive, or on consideration inadequate as it
requires detailed examination, the matter should be left for final
determination by the Arbitral Tribunal selected by the parties by
consent. The underlying rationale being not to delay or defer and to
discourage parties from using referral proceeding as a ruse to delay
and obstruct. In such cases a full review by the courts at this stage
would encroach on the jurisdiction of the Arbitral Tribunal and
violate the legislative scheme allocating jurisdiction between the
courts and the Arbitral Tribunal. Centralisation of litigation with
the Arbitral Tribunal as the primary and first adjudicator is
beneficent as it helps in quicker and efficient resolution of
disputes.

*****

153. Accordingly, we hold that the expression "existence of an
arbitration agreement" in
Section 11
of the Arbitration Act, would
include aspect of validity of an arbitration agreement, albeit the
court at the referral stage would apply the prima facie test on the
basis of principles set out in this judgment. In cases of debatable
and disputable facts, and good reasonable arguable case, etc., the
court would force the parties to abide by the arbitration agreement
as the Arbitral Tribunal has primary jurisdiction and authority to
decide the disputes including the question of jurisdiction and non-
arbitrability.

154. Discussion under the heading "Who Decides Arbitrability?"

can be crystallised as under:

154.1. Ratio of the decision in SBP & Co. v. Patel Engg.

Ltd. on the scope of judicial review by the court while

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deciding an application under
Sections 8
or 11 of
the
Arbitration Act
, post the amendments by Act 3 of 2016
(with retrospective effect from 23-10-2015) and even post
the amendments vide Act 33 of 2019 (with effect from 9-8-
2019), is no longer applicable.

154.2. Scope of judicial review and jurisdiction of the
court under
Sections 8
and
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."

The decision in NTPC

35. All these decisions were considered by a two Judge Bench of

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the Supreme Court in
NTPC Ltd v. SPML Infra Ltd21
, on which Mr.
Sachar places reliance. The appeal in NTPC arose from a decision
rendered by this Court. NTPC and SPML Infra22 executed a contract
for installation services in a power project situated at
Vishakhapatnam. SPML furnished bank guarantees to the tune of ₹
14,96,89,136/- to secure NTPC. NTPC issued a Completion
Certificate on 27 March 2019, but withheld the bank guarantees. On
SPML inquiring about the reasons for withholding the bank
guarantees, NTPC referred to certain pending liabilities and disputes
with SPML with respect to other projects. SPML protested, stating
that NTPC had no jurisdiction to link the bank guarantees to other
liabilities of SPML. Following this, SPML raised a demand of ₹
72,01,53,899/- on NTPC. NTPC, naturally, did not release the bank
guarantees, resulting in SPML filing WP (C) 7213/2019 before this
Court for a direction to NTPC to release the bank guarantees
forthwith.

36. Pending the writ petition, NTPC and SPML entered into a
settlement agreement on 27 May 2020, whereunder NTPC agreed to
release the withheld bank guarantees and SPML agreed to withdraw
WP (C) 7213/2019 and also not to initiate any other proceedings,
including arbitration. The bank guarantees were, therefore, released
by NTPC on 30 June 2020, and SPML withdrew WP (C) 7213/2019
on 21 September 2020. SPML, however, thereafter, repudiated the
settlement agreement and filed a petition under
Section 11(6)
of the
(2023) 9 SCC 385
"SPML", hereinafter

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1996 Act before this Court, seeking appointment of an arbitrator to
arbitrate on the disputes with NTPC. It was alleged, in the said
petition, that SPML had been forced to enter into the settlement
agreement dated 27 May 2020 by duress and coercion. It was alleged
that the retention of the bank guarantees by NTPC had left SPML with
no option but to agree to sign the settlement agreement. Submitting
that NTPC had failed to appoint an arbitrator despite repeated requests
by SPML, SPML requested this Court to step in and appoint an
arbitrator in exercise of its power under
Section 11(6)
of the 1996 Act.

37. Responding to the writ petition, NTPC submitted, inter alia,
that no dispute survived between the parties in view of the settlement
agreement dated 27 May 2020, in compliance of which NTPC
released, to SPML, the bank guarantees and SPML withdrew WP(C)
7213/2019. The claim of SPML, therefore, stood discharged by
accord and satisfaction. The allegations of duress and coercion were
categorically denied as false and attempt to wriggle out of the
settlement agreement. NTPC, therefore, prayed that SPML's petition
under
Section 11(6)
of the 1996 Act be rejected outright.

38. This Court held, on SPML's plea of duress and coercion and
NTPC's response thereto, that it was unable to accept NTPC's
contention that the dispute as to whether the contract between NTPC
and SPML stood discharged/novated by the settlement agreement
dated 27 May 2020 was untenable, insubstantial, or frivolous. This
Court, therefore, allowed SPML's petition and appointed a retired
Judge of this Court to arbitrate on the disputes.

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39. NTPC appealed to the Supreme Court.

40. The Supreme Court took note of the decisions already cited
hereinabove, upto Vidya Drolia, as well as a subsequent decision of
the Supreme Court in BSNL v. Nortel Networks (India) (P) Ltd23.
Having examined all these decisions, the Supreme Court held the
position of law to be thus:

"25. Eye of the Needle: The above-referred precedents
crystallise the position of law that the pre-referral jurisdiction of
the courts under
Section 11(6)
of the Act is very narrow and
inheres two inquiries. The primary inquiry is about the existence
and the validity of an arbitration agreement, which also includes an
inquiry as to the parties to the agreement and the applicant's
privity to the said agreement. These are matters which require a
thorough examination by the referral court. The secondary inquiry
that may arise at the reference stage itself is with respect to the
non-arbitrability of the dispute.

26. As a general rule and a principle, the arbitral tribunal is the
preferred first authority to determine and decide all questions of
non-arbitrability. As an exception to the rule, and rarely as a
demurrer, the referral court may reject claims which are manifestly
and ex-facie non-arbitrable...

27. The standard of scrutiny to examine the non-arbitrability of
a claim is only prima facie. Referral courts must not undertake a
full review of the contested facts; they must only be confined to a
primary first review and let facts speak for themselves. This also
requires the courts to examine whether the assertion on
arbitrability is bona fide or not. The prima facie scrutiny of the
facts must lead to a clear conclusion that there is not even a vestige
of doubt that the claim is non-arbitrable. On the other hand, even if
there is the slightest doubt, the rule is to refer the dispute to
arbitration.

28. The limited scrutiny, through the eye of the needle, is
necessary and compelling. It is intertwined with the duty of the
(2021) 5 SCC 738

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referral court to protect the parties from being forced to arbitrate
when the matter is demonstrably non-arbitrable30. It has been
termed as a legitimate interference by courts to refuse reference in
order to prevent wastage of public and private resources31.

Further, as noted in
Vidya Drolia
(supra), if this duty within the
limited compass is not exercised, and the Court becomes too
reluctant to intervene, it may undermine the effectiveness of both,
arbitration and the Court32.

Therefore, this Court or a High Court,
as the case may be, while exercising jurisdiction under
Section
11(6)
of the Act, is not expected to act mechanically merely to
deliver a purported dispute raised by an applicant at the doors of
the chosen arbitrator, as explained in
DLF Home Developers
Limited v. Rajapura Homes Pvt
. Ltd24."

41. The Supreme Court went on, thereafter, to apply these
principles to the facts before it and held on facts thus:

"44. A simple narration of the bare facts, as indicated above,
leads us to conclude that the allegations of coercion and economic
duress are not bona fide, and that there were no pending claims
between the parties for submission to arbitration. The
Respondent's claim fits in the description of an attempt to initiate
"ex facie meritless, frivolous and dishonest litigation". We will
endeavour to give reasons for our conclusion.

45. The whole dispute revolves around the solitary act of the
Appellant, NTPC, in not returning the Bank Guarantees despite the
successful completion of work. This continued even after SPML
issued the No-Demand Certificate and NTPC released the final
payment. These undisputed facts led to the institution of the Writ
Petition before the Delhi High Court. There were no allegations of
coercion or economic duress compelling SPML to withdraw any
pending claims under the subject contract as a condition for the
return of the Bank Guarantees. On the contrary, the only allegation
by SPML was with respect to NTPC's "illegal" action of
interlinking the release of the Bank Guarantees with some other
contracts. This was precisely the argument before the High Court,
and, in fact, this submission is recorded by the High Court while
issuing notice and injuncting NTPC. This fact clearly indicates that
the plea of coercion and economic duress leading to the Settlement
Agreement is an afterthought.

46. We will now examine whether the allegations of coercion
and economic duress in the execution of the Settlement Agreement
(2021) 16 SCC 743

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are bona fide or not. This inquiry has a direct bearing on the
arbitrability of the dispute. It was during the subsistence of the
Writ Petition and the High Court's interim order, when SPML had
complete protection of the Court, that the parties entered into the
Settlement Agreement. This agreement was comprehensive. It inter
alia provided for (i) the release of Bank Guarantees by NTPC, (ii)
the withdrawal of SPML's Writ Petition, (iii) restraining NTPC
from filing contempt proceedings against SPML for letting the
Bank Guarantees expire, and finally, (iv) restraining SPML from
initiating any proceedings under the subject contract, including
arbitration. The Settlement Agreement also recorded that there
were no subsisting issues pending between the parties.

47. The plea of coercion and economic duress must be seen in
the context of the execution of the Settlement Agreement not being
disputed, and its implementation leading to the release of the Bank
Guarantees on 30.06.2020 also not being disputed. Almost three
weeks after the release of the Bank Guarantees, a letter of
repudiation was issued by SPML on 22.07.2020. This letter was
issued about two months after the Settlement Agreement was
executed and in fact during the subsistence of the Writ Petition.

After reaping the benefits of the Settlement Agreement, the Writ
Petition was withdrawn on 21.09.2020. It is thereafter that the
present application under
Section 11(6)
of the Act was filed. The
sequence of events leads us to conclude that the letter of
repudiation was issued only to wriggle out of the terms of the
Settlement Agreement.

48. The foregoing clarifies beyond doubt that the claims sought
to be submitted to arbitration were raised as an afterthought.
Further, SPML's allegations of coercion and economic duress in
the execution of the Settlement Agreement lack bona fide. They
are liable to be knocked down as ex facie frivolous and untenable.

49. In view of the above-referred facts, which speak for
themselves, we are of the opinion that this is a case where the High
Court should have exercised the prima facie test to screen and
strike down the ex-facie meritless and dishonest litigation. These
are the kinds of cases where the High Court should exercise the
restricted and limited review to check and protect parties from
being forced to arbitrate."

42. Mr. Raajan relies on para 25 of NTPC to contend that I, in my
referral Court avatar in the present case, have necessarily to
determine whether both the respondents have to be impleaded as

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parties to the arbitral proceedings, and cannot leave the determination
to the arbitrator.

Magic Eye Developers and Lombardi Engineering

43. The scope of examination by the Court in the light of
Section
11(6A)
and the law that has developed in that regard was also
examined by various other decisions, which are not, however, of
particular significance to the present case, but may be noticed.
In

Magic Eye Developers Pvt Ltd v. Green Edge Infrastructure Pvt
Ltd25
, a Bench of two Hon'ble Judges of the Supreme Court examined
the extent to which a
Section 11(6)
referral court could examine the
plea of existence of validity of the arbitration agreement. The
Supreme Court noted the introduction of
Section 11(6A)
and the
principle stated therein, that the Court could only examine whether an
arbitration agreement exists between the parties; nothing more,
nothing less. Thereafter, however, the Supreme Court reiterated the
view expressed in para 25 of NTPC that the referral court was
required to enquire as to the parties to the agreement and the
applicant's privity to the agreement, and conclusively decide this issue
at the referral stage itself. Similarly, held the Supreme Court in para
12 of the report in Magic Eye Developers, the dispute regarding the
existence of the validity of the arbitration agreement has also to be
conclusively determined by the referral court, and cannot be left for
decision by the Arbitral Tribunal. Paras 9 to 13 of Magic Eye
Developers may be reproduced, thus, in this context:
(2023) 8 SCC 50

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"9. Thus, post-
Arbitration and Conciliation Amendment Act,
, the jurisdiction of the court under
Section 11(6)
of the Act is
limited to examining whether an arbitration agreement exists
between the parties - "nothing more, nothing less". Thus, as per
the
Section 11(6A)
of the Act, it is the duty cast upon the referral
court to consider the dispute/issue with respect to the existence of
an arbitration agreement.

10. At this stage, it is required to be noted that as per the settled
position of law, pre-referral jurisdiction of the court under
Section
11(6)
of the Arbitration Act is very narrow and inheres two
inquiries. The primary inquiry is about the existence and the
validity of an arbitration agreement, which also includes an inquiry
as to the parties to the agreement and the applicant's privity to the
said agreement. The said matter requires a thorough examination
by the referral court. [para 25 of the decision in NTPC] The
Secondary inquiry that may arise at the reference stage itself is
with respect to the non-arbitrability of the dispute. Both are
different and distinct.

11. So far as the first issue with respect to the existence and the
validity of an arbitration agreement is concerned, as the same goes
to the root of the matter, the same has to be to conclusively decided
by the referral court at the referral stage itself. Now, so far as the
non-arbitrability of the dispute is concerned, even as per the law
laid-down by this Court in the case of
Vidya Drolia
(supra), the
court at prereferral stage and while examining the jurisdiction
under
Section 11(6)
of the Act may even consider prima facie
examining the arbitrability of claims. As observed, the prima facie
review at the reference stage is to cut the deadwood and trim off
the side branches in straightforward cases where dismissal is
barefaced and pellucid and when on the facts and law the litigation
must stop at the first stage.

12. However, so far as the dispute with respect to the existence
and validity of an arbitration agreement is concerned and when the
same is raised at pre-referral stage, the referral court has to decide
the said issue conclusively and finally and should not leave the
said issue to be determined by the arbitral tribunal. The reason is
that the issue with respect to the existence and validity of an
arbitration agreement goes to the root of the matter.

13. As observed by the Constitution Bench in the case of N.N.
Global Mercantile Pvt. Ltd.26, sans an agreement, there cannot be
any reference to the arbitration.
In
the said decision
this Court has
N.N. Global Mercantile (P) Ltd v. Indo Unique Flame Ltd
, (2023) 7 SCC 1

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also specifically observed and held that the intention behind the
insertion of
Section 11(6A)
in the Act was to confine the Court,
acting under
Section 11
, to examine and ascertain about the
existence of an arbitration agreement. We are of the opinion that
therefore, if the dispute/issue with respect to the existence and
validity of an arbitration agreement is not conclusively and finally
decided by the referral court while exercising the pre-referral
jurisdiction under
Section 11(6)
and it is left to the arbitral tribunal,
it will be contrary to
Section 11(6A)
of the Arbitration Act. It is the
duty of the referral court to decide the said issue first conclusively
to protect the parties from being forced to arbitrate when there
does not exist any arbitration agreement and/or when there is no
valid arbitration agreement at all."

44. Another Bench of three Hon'ble Judges of the Supreme Court
in
Lombardi Engineering Ltd v. Uttarakhand Jal Vidyut Nigam
Ltd27
, reiterated the legal position emerging from Duro Felguera and
Vidya Drolia, after referring to the relevant passages from the said
decisions:

"29. Following the general rule and the principle
laid down
in

Vidya Drolia
(supra), this Court has consistently been holding
that the arbitral tribunal is the preferred first authority to determine
and decide all questions of non-arbitrability.

In
Pravin Electricals
(P) Ltd v. Galaxy Infra
and
Engineering Private Ltd28, Sanjiv
Prakash v. Seema Kukreja29
and
Indian Oil Corpn Ltd v. NCC
Ltd30
, the parties were referred to arbitration, as the prima facie
view in each of these cases on the objection of non-arbitrability
was found to be inconclusive. Following the exception to the
general principle that the court may not refer parties to arbitration
when it is clear that the case is manifestly and ex facie non-

arbitrable, in BSNL v. Nortel Networks India Pvt Ltd,

Secunderabad Cantonment Board v. B. Ramachandraiah
and

Sons31 and B & T AG v. Ministry of Defence32
, arbitration was
refused as the claims of the parties were demonstrably time-
barred."
(2024) 4 SCC 341
(2021) 5 SCC 671
(2021) 9 SCC 732
(2023) 2 SCC 539
(2021) 5 SCC 705
2023 SCC OnLine SC 657

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Cox and Kings

45. A deeper analysis into the aspect of the parties to arbitration,
and the extent to which this could be decided by a referral court under

Section 11(6)
was undertaken by a constitution Bench of the Supreme
Court in Cox and Kings, before which the issue which had arisen for
consideration was thus delineated:

"2. Five Judges of this Court are called upon to determine the
validity of the "Group of Companies" doctrine in the jurisprudence
of Indian arbitration. The doctrine provides that an arbitration
agreement which is entered into by a company within a group of
companies may bind non-signatory affiliates, if the circumstances
are such as to demonstrate the mutual intention of the parties to
bind both signatories and non-signatories. This doctrine is called
into question purportedly on the ground that it interferes with the
established legal principles such as party autonomy, privity of
contract, and separate legal personality. The challenge before this
Court is to figure out whether there can be a reconciliation between
the Group of Companies doctrine and well-settled legal principles
of corporate law and contract law."

46. The following question of law had been referred by a Bench of
three Hon'ble Judges of the Supreme Court, for determination by a
Larger Bench, in Cox and Kings:

"5.1. (a) Whether the Group of Companies doctrine should be read
into
Section 8
of the Act or whether it can exist in Indian
jurisprudence independent of any statutory provision;

5.2. (b) Whether the Group of Companies doctrine should continue
to be invoked on the basis of the principle of "single economic
reality";

5.3. (c) Whether the Group of Companies doctrine should be
construed as a means of interpreting implied consent or intent to
arbitrate between the parties; and

5.4. (d) Whether the principles of alter ego and/or piercing the
corporate veil can alone justify pressing the Group of Companies
doctrine into operation even in the absence of implied consent."

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47. After considering a veritable plethora of decisions not only by
the Supreme Court of India, but also the law as it exists in France,
Switzerland, England, Singapore and the US, the Supreme Court
examined in detail the circumstances in which a party who was not a
signatory to the arbitration agreement could nonetheless be made a
party to the proceedings. The conclusion of the Supreme Court on
this issue is to be found in paras 83, 84 and 86 of the report, which
read thus:

"83. Reading
Section 7
of the Arbitration Act in view of the
above discussion gives rise to the following conclusions : first,
arbitration agreements arise out of a legal relationship between or
among persons or entities which may be contractual or otherwise;
second, in situations where the legal relationship is contractual in
nature, the nature of relationship can be determined on the basis of
general contract law principles; third, it is not necessary for the
persons or entities to be signatories to the arbitration agreement to
be bound by it; fourth, in case of non-signatory parties, the
important determination for the Courts is whether the persons or
entities intended or consented to be bound by the arbitration
agreement or the underlying contract containing the arbitration
agreement through their acts or conduct; fifth, the requirement of a
written arbitration agreement has to be adhered to strictly, but the
form in which such agreement is recorded is irrelevant; sixth, the
requirement of a written arbitration agreement does not exclude the
possibility of binding non-signatory parties if there is a defined
legal relationship between the signatory and non-signatory parties;
and seventh, once the validity of an arbitration agreement is
established, the Court or tribunal can determine the issue of which
parties are bound by such agreement.

84. It is presumed that the formal signatories to an arbitration
agreement are parties who will be bound by it. However, in
exceptional cases persons or entities who have not signed or
formally assented to a written arbitration agreement or the
underlying contract containing the arbitration agreement may be
held to be bound by such agreement. As mentioned in the
preceding paragraphs, the doctrine of privity limits the imposition
of rights and liabilities on third parties to a contract. Generally,
only the parties to an arbitration agreement can be subject to the
full effects of the agreement in terms of the reliefs and remedies

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because they consented to be bound by the arbitration agreement.
Therefore, the decisive question before the Courts or tribunals is
whether a non-signatory consented to be bound by the arbitration
agreement. To determine whether a non-signatory is bound by an
arbitration agreement, the Courts and tribunals apply typical
principles of contract law and corporate law. The legal doctrines
provide a framework for evaluating the specific contractual
language and the factual settings to determine the intentions of the
parties to be bound by the arbitration agreement.

*****

86. Courts and tribunals across the world have been applying
traditional contractual and commercial doctrines to determine the
consent of the non-signatory parties to be bound by the arbitration
agreement. Generally, consent-based theories such as agency,
novation, assignment, operation of law, merger and succession,
and third-party beneficiaries have been applied in different
jurisdictions. In exceptional circumstances, non-consensual
theories such as piercing the corporate veil or alter ego and
estoppel have also been applied to bind a non-signatory party to an
arbitration agreement. The Group of Companies doctrine is one
such consent-based doctrine which has been applied, albeit
controversially, for identifying the real intention of the parties to
bind a non-signatory to an arbitration agreement."

48. In para 97, the Supreme Court advocated the interpretation of
commercial contracts in a pragmatic manner, keeping in mind
commercial realities:

"97....... The Courts must interpret contracts in a manner that
would give them a sense of efficacy rather than invalidating the
commercial interests of the parties. The meaning of the contract
must be gathered by adopting a common sense approach, which
should " not be allowed to be thwarted by a narrow, pedantic and
legalistic interpretation". Therefore, there is a need to adopt a
modern approach to consent, which takes into consideration the
circumstances, apparent conduct, and commercial facets of
business transactions."

49. The position which emerges where there are multiple
agreements was also examined thus, in paras 121 and 122 of the
report:

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"121. In case of a composite transaction involving multiple
agreements, it would be incumbent for the Courts and tribunals to
assess whether the agreements are consequential or in the nature of
a follow-up to the principal agreement. This Court in Canara
Bank33observed that a composite transaction refers to a situation
where the transaction is interlinked in nature or where the
performance of the principal agreement may not be feasible
without the aid, execution, and performance of the supplementary
or ancillary agreements.

122. The general position of law is that parties will be referred
to arbitration under the principal agreement if there is a situation
where there are disputes and differences "in connection with" the
main agreement and also disputes "connected with " the subject-

matter of the principal agreement. In Chloro Controls34, this Court
clarified that the principle of "composite performance" would have
to be gathered from the conjoint reading of the principal and
supplementary agreements on the one hand, and the explicit
intention of the parties and attendant circumstances on the other.
The common participation in the commercial project by the
signatory and non-signatory parties for the purposes of achieving a
common purpose could be an indicator of the fact that all the
parties intended the non-signatory party to be bound by the
arbitration agreement. Thus, the application of the Group of
Companies doctrine in case of composite transactions ensures
accountability of all parties who have materially participated in the
negotiation and performance of the transaction and by doing so
have evinced a mutual intent to be bound by the agreement to
arbitrate."

50. The threshold standard was thus explained:

"127. In Cox & Kings35, Surya Kant, J. observed that Reckitt
Benckiser36 fixed a higher threshold of evidence for the
application of the Group of Companies doctrine as compared to
earlier decisions of this Court. This Court's approach is Reckitt
Benckiser is indicative of the fact that the mere presence of a
group of companies is not the sole or determinative factor to bind a
non-signatory to an arbitration agreement. Rather, the Courts or
tribunals should closely evaluate the overall conduct and
involvement of the non-signatory party in the performance of the
contract. The nature or standard of involvement of the non-
MTNL v. Canara Bank, (
2020) 12 SCC 767
Chloro Controls India (P) Ltd v. Severn Trent Water Purification Inc.
, (
2013) 1 SCC 641
Cox & Kings Ltd v. SAP India (P) Ltd
, (
2022) 8 SCC 1
Reckitt Benckiser (India) (P) Ltd v. Reynders Label Printing (India) (P) Ltd
, (2019) 7 SCC 62

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signatory in the performance of the contract should be such that the
non-signatory has actively assumed obligations or performance
upon itself under the contract. In other words, the test is to
determine whether the non-signatory has a positive, direct, and
substantial involvement in the negotiation, performance, or
termination of the contract. Mere incidental involvement in the
negotiation or performance of the contract is not sufficient to infer
the consent of the non-signatory to be bound by the underlying
contract or its arbitration agreement. The burden is on the party
seeking joinder of the non-signatory to the arbitration agreement to
prove a conscious and deliberate conduct of involvement of the
non-signatory based on objective evidence.

128. An arbitration agreement is a distinct and separate
agreement from the substantive commercial contract which
contains the arbitration agreement. An arbitration agreement is
independent of the other terms of the contract, to the extent that
nullification of the contract will not lead to invalidation of the
arbitration agreement. The concept of separability of the arbitration
agreement from the underlying contract ensures that the intention
of the parties to resolve the disputes through arbitration does not
vanish merely because of a challenge to the legal validity of the
underlying contract.al. To join a non-signatory to arbitration, the
decisive question that has to be answered is whether a non-
signatory consented to the arbitration agreement, as distinct from
the underlying contract containing the arbitration agreement.

*****

132. We are of the opinion that there is a need to seek a balance
between the consensual nature of arbitration and the modern
commercial reality where a non-signatory becomes implicated in a
commercial transaction in a number of different ways. Such a
balance can be adequately achieved if the factors laid down under
Discovery Enterprises37 are applied holistically. For instance, the
involvement of the non-signatory in the performance of the
underlying contract in a manner that suggests that it intended to be
bound by the contract containing the arbitration agreement is an
important aspect. Other factors such as the composite nature of
transaction and commonality of subject-matter would suggest that
the claims against the non-signatory were strongly interlinked with
the subject-matter of the tribunal's jurisdiction. Looking at the
factors holistically, it could be inferred that the non-signatories, by
virtue of their relationship with the signatory parties and active
involvement in the performance of commercial obligations which
are intricately linked to the subject-matter, are not actually
ONGC Ltd v. Discovery Enterprises (P) Ltd, (2022) 8 SCC 42

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strangers to the dispute between the signatory parties."

51. Thereafter, the Supreme Court went into the aspect of the
standard of determination by a referral court, which was the last issue
arising for consideration before it. In para 161, the Supreme Court
noted the insertion of sub section (6A) in
Section 11
of the 1996 Act
by the 2015 Amendment Act, as well as the omission of the said
inserted sub section (6A) by the 2019 Amendment Act, and observed
that, as the amendment to
Section 11
by the 2019 Amendment Act
have yet to be notified,
Section 11(6A)
continues to remain in force.
Thereafter comes para 163, on which Mr. Rao relies:

"163.
Section 16
of the Arbitration Act enshrines the principle of
competence-competence in Indian arbitration law. The provision
empowers the Arbitral Tribunal to rule on its own jurisdiction,
including any ruling on any objections with respect to the existence
or validity of arbitration agreement.
Section 16
is an inclusive
provision which comprehends all preliminary issues touching upon
the jurisdiction of the Arbitral Tribunal. The doctrine of
competence-competence is intended to minimise judicial
intervention at the threshold stage. The issue of determining parties
to an arbitration agreement goes to the very root of the
jurisdictional competence of the Arbitral Tribunal."

52. Following this, in para 166, the Constitution Bench held that, at
the referral stage, a Court has only to determine prima facie existence
of an arbitration agreement and if the issue could not be determined
by the referral court, it has to be decided by the Arbitral Tribunal. It
was emphasized that "referral court" should not unnecessarily
interfere with the arbitral proceedings and, rather, show allow the
Arbitral Tribunal to exercise its primary jurisdiction.

53. On the aspect of inclusion of a non-signatory to the arbitral
proceedings, the Constitution Bench holds in para 169 thus:

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"169. In case of joinder of non-signatory parties to an arbitration
agreement, the following two scenarios will prominently emerge:

first, where a signatory party to an arbitration agreement seeks
joinder of a non-signatory party to the arbitration agreement; and
second, where a non-signatory party itself seeks invocation of an
arbitration agreement. In both the scenarios, the referral court will
be required to prima facie rule on the existence of the arbitration
agreement and whether the non -signatory is a veritable party to
the arbitration agreement. In view of the complexity of such a
determination, the referral court should leave it for the Arbitral
Tribunal to decide whether the non-signatory party is indeed a
party to the arbitration agreement on the basis of the factual
evidence and application of legal doctrine. The Tribunal can delve
into the factual, circumstantial, and legal aspects of the matter to
decide whether its jurisdiction extends to the non-signatory party.
In the process, the Tribunal should comply with the requirements
of principles of natural justice such as giving opportunity to the
non-signatory to raise objections with regard to the jurisdiction of
the Arbitral Tribunal. This interpretation also gives true effect to
the doctrine of competence-competence by leaving the issue of
determination of true parties to an arbitration agreement to be
decided by the Arbitral Tribunal under
Section 16
."

(Emphasis supplied)

54. Following the above discussion, in para 170 and in its various
sub-paras, the Supreme Court has laid down determinative
conclusions, of which the following are relevant for the present
dispute:

"170.1. The definition of "parties" under
Section 2(1)(h)
read with

Section 7
of the Arbitration Act includes both the signatory as well
as non-signatory parties;

170.2. Conduct of the non-signatory parties could be an indicator
of their consent to be bound by the arbitration agreement;

170.3. The requirement of a written arbitration agreement under

Section 7
does not exclude the possibility of binding non-signatory
parties;

170.4.
Under the Arbitration Act
, the concept of a "party" is
distinct and different from the concept of "persons claiming
through or under" a party to the arbitration agreement;

170.5. The underlying basis for the application of the Group of

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Companies doctrine rests on maintaining the corporate
separateness of the group companies while determining the
common intention of the parties to bind the non-signatory party to
the arbitration agreement;

*****

170.12. At the referral stage, the referral court should leave it for
the Arbitral Tribunal to decide whether the non-signatory is bound
by the arbitration agreement; and"

55. The resultant position that emerges from a consolidated reading
of all these decisions is that, while the legal position as it existed prior
to 2015 empowered - rather, required - the referral court could enter
into several aspects such as existence of fraud, validity of the contract,
discharge of liability by accord and satisfaction and the like, this
position does not continue after the insertion of sub section (6A) in

Section 11
by 2015 Amendment Act. Inasmuch as the omission of

Section 11(6A)
by the 2019 Amendment Act is yet to be notified, the
sub-section continues to remain in force.
Section 11(6A)
considerably
restricts the scope of inquiry by the referral court under
Section 11(6)
.
The referral court is essentially to concern itself with the existence
and validity of the arbitration agreement. Peripheral, but connected,
issues such as the aspect of limitation, and whether non-signatories to
an arbitration agreement can be bound by it, would also fall for
determination by the referral court. While examining these issues, the
referral court has to adopt a prima facie approach and is not to arrive
at a conclusive determination. The final arbiter on these issues is, by
operation of
Section 16
, the Arbitral Tribunal, and the jurisdiction of
the Arbitral Tribunal in that regard has to be respected. The referral
court, however, cannot completely distance itself, while examining

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the existence of validity of an arbitration agreement, from the aspect
of whether parties, who are being sought to be included in the arbitral
proceedings, are or are not required to be included. If, however, it is
not possible from the material on record to arrive at a prima facie
finding in this regard, then, applying the kompetenz kompetenz
principle and in view of
Section 16
of the 1996 Act, the matter has to
be left for determination by the Arbitral Tribunal.

56. It is in the backdrop of these principles and standards that the
rival contentions of learned Counsel have to be examined.

On merits

57. If the contention of learned Counsel for both the respondents
were to be accepted, the sequitur would be that the petitioner's claims
could never be arbitrated, and that is obviously not acceptable. Every
arbitrable dispute must be arbitrated, if the arbitral institution is to
retain any validity and legitimacy. It is not open to the Court to hold
that there exists an arbitral dispute, but it cannot be arbitrated.

58. Indeed, neither of the respondents contends that there is no
arbitrable dispute. Each of the respondents contends that the dispute
is solely between the petitioner and the other respondent. Ambience
contends that the dispute is between the petitioner and Tutelage,
whereas Tutelage contends that the dispute between the petitioner and
Ambience. The petitioner contends, on the other hand, that the
dispute is with both Respondents 1 and 2. The only issue before the

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Court is whether one, or the other, or both the respondents, have to be
made parties to the arbitration.

59. In exercise of its jurisdiction under
Section 11(6)
and in the
light of
Section 11(6A)
and the law that has developed in that regard,
which reached its high watermark in Cox and Kings, the Court can
examine this issue only on a prima facie basis. If, prima facie, the
Court is able to arrive at a conclusion that either Ambience or
Tutelage - but not both - cannot be impleaded in the proposed
arbitration, the Court must so hold. While examining the issue,
however, the Court must be conscious of the autonomy that vests in
the Arbitral Tribunal in this regard. As Cox and Kings holds, it is
fundamentally for the Arbitral Tribunal to decide who should, or
should not, be a party before it. It is always open to a party before the
Arbitral Tribunal to contend that it has been unnecessarily roped in,
and to seek deletion from the array of parties. It is not, therefore, as
though any permanent prejudice results to either of the parties, even if
this Court were to refer the dispute between the petitioner and both the
respondents to arbitration. The only situation in which any lasting
prejudice may result is if the Court were to affirmatively hold that one
or the other respondent cannot be impleaded in the arbitral
proceedings. If this Court so holds, even prima facie, it is bound to
inhibit the discretion vested in the Arbitral Tribunal in that regard. Of
course, that said, the Court must, while referring the dispute to
arbitration, ensure that parties, who are clearly not necessary parties,
and are not roped in. This is also a pre-eminent consideration. The
Court cannot blindly accept the stand of either party and refer the

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dispute to arbitration, where one or the other party contests its liability
to be subjected to arbitral proceedings.

60. The present controversy at hand, has to be examined keeping in
mind all these factors.

61. The claims that the petitioner proposes to refer to arbitration
included providing of a habitable and usable access to the petitioner to
the leased area and reimbursement of the amount incurred by the
petitioner in executing repair works in the leased area, apart from
compensation for the losses incurred by the petitioner. Paras 3, 4.1,
4.2 and 4.3 of the Notice of Demand dated 10 August 2023 addressed
by the petitioner to the respondents involves both the respondents
within the ambit of the disputes. Para 4.1 flags a claim of ₹ 1,
29,01,487.90, which is stated to have been spent by the petitioner in
making the leased area habitable and usable. The petitioner claims the
said amount from Ambience. Para 4.2 includes other costs incurred
by the petitioner. The petitioner points that, as this included
enhancement made by the petitioner to the leased area which cannot
be removed, Tutelage would continue to benefit from the said
enhancement installed at the petitioner's costs. The amounts incurred
towards these enhancements are, therefore, being sought both from
Ambience and Tutelage. As Mr. Rao points out, even after Tutelage
purchased the leased area on 18 November 2022, nearly nine months
elapsed before the leased area was handed over by the petitioner to
Tutelage. During this period, the prejudice to the petitioner
continued, and Tutelage made no efforts to redress it. According to

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the petitioner, it continued to be prejudiced by having to hold
possession of an inhabitable and unusable area. It had, in the process,
to incur expenses towards transportation, loading and unloading fee,
moving fee, storage fee, rent, security deposit, incidental expenses and
expenses towards architectural services, design services, fit outs,
construction registration, installation, structural assessment, security
services and transit insurance, apart from other costs. Both the
respondents, according to Mr. Rao, would be liable to reimburse these
expenses and costs, to one extent or the other, and the extent to which
either petitioner would be liable, would have to be arbitrated.

62. It cannot be said, at this prima facie stage, without a
comprehensive examination of the entire dispute and possibly by
leading of evidence, that all these expenses would, if they were found
to be payable to the petitioner, have to be borne either by Ambience or
by Tutelage, to the exclusion of the other.

63. Inasmuch as the petitioner's primary contention is that
Ambience was in breach of its liability to provide, to the petitioner, a
leased area in a habitable and usable form, and Clause 23.1 of the
Lease Deed dated 15 January 2021 specifically insulates Ambience
from "further liability", it would require consideration as to whether,
if the alleged breach of the lease agreement is found to have actually
taken place, Ambience can claim immunity from liability in that
regard on the ground that it had sold the leased area to Tutelage on 18
November 2022. This would have to be decided keeping in mind the
covenants of the Lease Deed and the terms of sale of the leased area

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from Ambience to Tutelage. It would further have to be examined
whether the sale of the leased area by Ambience to Tutelage
transferred all obligations by Ambience to Tutelage including the
obligations relating to a period prior to 18 November 2022. The
effect of the email 29 August 2022 from Ambience to the petitioner,
which acknowledges the fact that the compressive strength of certain
columns from the eighth floor is not as per the latest design
parameters and assures the petitioner that Ambience aligning its teams
to have changes executed at the site, would also have to be
considered. Inasmuch as the petitioner is seeking damages, and had to
continue to remain in possession of the leased area for a considerable
period even after 18 November 2022, the extent to which these
damages, if payable to the petitioner, would have to be apportioned
between Ambience and Tutelage, would also fall for determination.

64. In my opinion, these are all intricate mixed issues of fact, which
have to be determined keeping in mind all the attendant facts and
circumstances and may require a detailed analysis of the material on
record, perhaps by requiring evidence to be led. Applying the
principle in the judgments cited earlier, these are not aspects on which
this Court can, even prima facie, arrive at a conclusion, which would
bind the Arbitral Tribunal. The cumulative effect of Clauses 3, 8 and
sub clauses (xv), (xxiv) of Clause 9(a) and Clause 9(b) of the Sale
Deed dated 18 November 2022, as well as Clause 23.1 of the Lease
Deed dated 15 January 2021 would also be required to be examined.

65. Given the law in this regard, I am of the opinion that these

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aspects have necessarily to be left for determination by the Arbitral
Tribunal and, within the limited scope of jurisdiction of this Court in
view of
Section 11(6)
read with
Section 11(6A)
of the 1996 Act, it is
not appropriate for this Court to enter into this territory and return any
definitive findings thereon, even if they are prima facie. The very fact
that each respondent is seeking to palm off the liability on the other
gives rise to disputed and triable factual issues, which would fall
within the exclusive province of the Arbitral Tribunal.

66. I cannot, therefore, concur with the submission either of Mr.
Raajan or Mr. Sachar that either of the respondents has unnecessarily
been dragged into the arbitral proceedings. While it would be open to
both the respondents to convince the learned Arbitral Tribunal that it
should be deleted from the array of parties, I am of the opinion that
such a request, if made, should be decided by the Arbitral Tribunal,
and that within the limited scope of
Section 11(6)
of the 1996 Act, this
Court should not pronounce on this issue.

Conclusion

67. For all the aforesaid reasons, the objections of Ambience and
Tutelage, to their proposed inclusion in the arbitral proceedings, are
rejected. This shall, however, not inhibit either of the respondents
from raising the issue before the learned Arbitral Tribunal. If it is so
raised, it shall be decided in accordance with law, uninhibited by any
observations in this judgment, which have been made solely for
disposing of the present petition under
Section 11(6)
of the 1996 Act.

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68. As the parties have not been able to arrive at a consensus
regarding the Arbitrator to be appointed, this Court respectfully
requests Hon'ble Mr. Justice Vipin Sanghi, former Chief Justice of the
High Court of Uttarakhand and Acting Chief Justice of this Court
(Tel: 9871300037) to arbitrate on the disputes between the parties.

69. The parties shall be at liberty to raise all claims/counter-claims
before the learned Arbitrator, who shall decide them in accordance
with law.

70. The fees of the learned Arbitrator shall be fixed between the
parties in consultation with the learned Arbitrator and shall be shared
equally between them.

71. The Arbitrator would submit the necessary disclosure under

Section 12
of the 1996 Act within a week of entering on the reference.

72. This petition stands disposed of in the aforesaid terms.

C.HARI SHANKAR, J
JULY 4, 2024
rb/yg
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