Mr. Teegala Vikram Reddy vs M/s. Ridge Homes LLP

Heard Mr. K Raghava Ramana, learned counsel for the applicant and Ms. M. Tejaswini, learned counsel appearing for the respondent.

Perused the record.

The present Arbitration Application has been preferred under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of a Sole Arbitrator for adjudication of the disputes that have arisen between the parties under the Agreement of Sale dated 12.08.2022 executed between them.

Learned counsel for the applicant submits that the applicant and the respondent entered into the aforesaid Agreement of Sale in respect of the subject property measuring about Ac.11-00 guntas out of Ac.23-00 guntas. According to the applicant, the respondent failed to comply with the terms and conditions agreed upon between the parties, resulting in disputes and differences. It is further submitted that despite repeated requests and exchange of communications, the disputes could not be amicably resolved, compelling the applicant to invoke the arbitration clause contained in the agreement and thereafter file the present application for appointment of an Arbitrator.

It is further contended on behalf of the applicant that the agreement contains a valid and binding arbitration clause governing the rights and liabilities of the parties. It is submitted that the disputes raised by the applicant arise directly out of the said agreement and are therefore arbitrable. Since there was no consensus between the parties regarding appointment of an Arbitrator pursuant to invocation of the arbitration agreement, the applicant seeks intervention of this Court under Section 11(6) of the Act.

The respondent has entered appearance and filed a counter affidavit opposing the application. Learned counsel for the respondent submits that it is the applicant who committed breach of the terms of the Agreement of Sale and that the respondent has always been ready and willing to perform its contractual obligations. It is further contended that the claims made by the applicant are disputed on facts and that the respondent has substantial defences available in law. The respondent has accordingly prayed for dismissal of the present application.

Learned counsel for the respondent at the first instance referred to the Memorandum of Understanding dated 11.09.2018 (for short, 'the MOU') and contended that the said MOU, the first which was entered into between the parties, does not have an arbitration clause. He further contended that since the said MOU does not have an arbitration clause, the application under Section 11(6) of the Arbitration and Conciliation Act, 1996 itself is unsustainable. He further submitted that though there was a subsequent agreement for sale with possession which had an arbitration clause, but that agreement is not part of the original MOU and that it is an altogether independent cause of action and therefore the same cannot be linked with the first MOU for the purpose of invoking clause and also for pressing upon the application under Section 11(6) of the Arbitration and Conciliation Act, 1996. ]

This Court has carefully considered the rival submissions advanced by the learned counsel appearing for the respective parties and has also perused the pleadings and documents placed on record. The execution of the Agreement of Sale dated 12.08.2022 between the parties is not in dispute. Equally, the existence of an arbitration clause incorporated in the said agreement has not been seriously disputed.

The scope of enquiry while exercising powers under Section 11 of the Arbitration and Conciliation Act, 1996 is extremely limited. At this stage, the Court is only required to satisfy itself regarding the existence of a valid arbitration agreement and whether disputes have arisen between the parties requiring reference to arbitration. The correctness of the rival allegations, the question as to which party committed breach of the agreement and the entitlement of either party to the reliefs claimed are matters falling exclusively within the jurisdiction of the Arbitral Tribunal.

The objections raised by the respondent in the counter affidavit essentially pertain to disputed questions of fact touching upon the performance of reciprocal obligations under the Agreement of Sale. Such disputed issues require appreciation of oral and documentary evidence and cannot be adjudicated in proceedings under Section 11 of the Act. Those issues are accordingly left open for consideration by the learned Arbitrator.

A plain reading of the MOU first executed on 11.09.2018 would establish that it is between the same parties and in respect of the same property and the said MOU though contained a clause of settlement of dispute, but the recourse was approaching the competent court of law. However, in between the same parties and in respect of the same property there was yet another agreement termed as “absolute agreement of sale” along with possession entered into on 12.08.2022. Clause 12 of the said absolute agreement of sale specifically enumerates that the subsequent absolute agreement of sale is to be treated as part of the MOU entered into between the applicant and the non-applicants on 11.09.2018.

For ready reference, Clause 12 of the Absolute Agreement of Sale with Possession, dated 12.08.2022 is extracted hereunder, viz.,

In addition to the aforesaid clause, Clause 11 of the said agreement also envisages settlement of dispute by resorting to the provisions of Arbitration and Conciliation Act, 1996. For ready reference, Clause 11 of the said agreement is also reproduced hereunder, viz.,

On a conjoint reading of the above two clauses would make it emphatically clear that the parties with wide open eyes have entered into the subsequent Absolute Agreement of Sale on 12.08.2022, and in the said agreement itself the parties have made the said agreement to be part and parcel of the earlier MOU and in the subsequent agreement in spite of earlier MOU reflecting to resolve the dispute by approaching the competent Court of Law have this time decided to resolve the disputes by resorting to the provisions of Arbitration and Conciliation Act, 1996.

In NBCC (India) Limited vs. Zillion Infraprojects Private Limited^{11.(2024) 7 SCC 174}, the Hon'ble Supreme Court held at paragraph Nos.15 to 17 as under, viz.,

It could thus be seen that this Court has held that when the parties enter into a contract, making a general reference to another contract, such general reference would not have the effect of incorporating the arbitration clause from the referred document into the contract between the parties. It has been held that the arbitration clause from another contract can be incorporated into the contract (where such reference is made), only by a specific reference to arbitration clause. It has further been held that where a contract between the parties provides that the execution or performance of that contract shall be in terms of another contract (which contains the terms and conditions relating to performance and a provision for settlement of disputes by arbitration), then, the terms of the referred contract in regard to execution/performance alone will apply, and not the arbitration agreement in the referred contract, unless there is special reference to the arbitration clause also.

Upon an overall consideration of the material available on record, this Court is satisfied that a valid arbitration agreement exists between the parties and that disputes have admittedly arisen out of the Agreement of Sale dated 12.08.2022. Consequently, the conditions necessary for exercise of jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 stand fulfilled.

Accordingly, this Court appoints Hon'ble Justice Shri P Naveen Rao, former Judge of this High Court (#3001, My Home Bhooja, Block-A, Plot Nos.22-24&31-33, Raidurgam, K.V.Ranga Reddy District, Telangana State-500081, Mobile No.8374012311) as the Sole Arbitrator to adjudicate the disputes that have arisen between the parties under the Agreement of Sale dated 12.08.2022. The learned Arbitrator shall enter upon the reference and conduct the arbitral proceedings in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The venue of arbitration and the fee payable to the learned Arbitrator shall be determined in consultation with the parties and the learned Arbitrator.

It is made clear that this Court has not expressed any opinion on the merits of the rival claims and contentions raised by either party. All claims, counter claims, objections and defences available to the parties are left open to be urged before the learned Arbitrator, who shall decide the same independently and in accordance with law.

Accordingly, the Arbitration Application stands allowed.

As a sequel, miscellaneous applications pending, if any, shall stand closed. There shall be no order as to costs.