Even when arbitration agreement exists, it would not prevent Court to decline prayer for reference if dispute in question doesn’t correlate to said agreement:SC

Read Judgment: Dlf Home Developers Limited vs. Rajapura Homes Private Limited &Anr

Pankaj Bajpai

New Delhi, September  23, 2021: The Supreme Court has opined that in order to determine the nature of arbitral proceedings, the two groups of agreements in question will have to be read in harmony and reconciled so as to avoid any head on collision, and thereafter a conclusion as to which of the clauses would be applicable in the present case, needs to be drawn.

The Division Bench of Chief Justice N.V. Ramana and Justice Surya Kant opined that the dispute sought to be referred to arbitration by the petitioner-DHDL pertains to non-deposit of agreed amount by the second Respondent(Resimmo PCC) and resultant payment thereof as `Fee’ which the Petitioner claims in terms of clause 4 of RCMA(DLF-Rajapura Homes Construction Management Services Agreement)/SCMA(DLF-Southern Homes Construction Management Services Agreement).

Therefore, whether or not the petitioner has complied with the ‘condition precedent’ under Rajapura SPA(Share Purchase Agreement) and thus has become entitled to `fee’ as per clause, is purely a question of fact to be determined by the Arbitral Tribunal, added the Bench.

The observation came in light of the Arbitration Petition filed by DLF Home Developers Limited u/s 11(6)  r/w/s 11(12) of the Arbitration and Conciliation Act, 1996 for appointment of sole arbitrator to adjudicate the differences between the parties that had arisen out of the two Construction Management Agreements.

The Division Bench observed that the court, u/s 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie case of non-existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.

Since two valid arbitration clauses existed and the parties were relying upon the different arbitration clauses, the Division Bench harmonized both the clauses and viewed that the arbitration clause in the main agreement was worded in wide terms and specifically contemplated issues that were in “any way connected with, arising out of or in relation to the subject matter of the arbitration agreement”.

It is difficult for us to accept it outrightly that the respective Share Purchase Agreements are the ‘principal agreements governing the transaction’ between the parties or that the present disputes can be resolved solely under the arbitration clause contained therein, added the Bench.

The Top Court elaborated that the consideration of the Services to be provided by DHDL and performance of the terms of this Agreement, DHDL shall be entitled subject to the terms and conditions contained in this Agreement, to the Fees and the Company shall pay to DHDL the Fees, after deduction of any withholding tax required to be withheld in accordance with applicable Law.

The Apex Court therefore appointed Justice R.V. Raveendran (Former Judge, Supreme Court of India) as the sole arbitrator to resolve all disputes/differences between the parties.