In ARB.P. 1050/2021-DEL HC- Even if confirming party is not bound by terms of contract but it has signed JV Agreement containing Arbitration Clause, then implied consent to arbitration can be inferred: Delhi HC
Justice Neena Bansal Krishna [10-10-2022]

 

Read Order: ANSAL PROPERTIES & INFRASTRUCTURE LTD. AND ORS v. DOWAGER MAHARANIS RESIDENTIAL ACCOMMODATION WELFARE & AMENITIES TRUST AND ORS 

Mansimran Kaur

New Delhi, October 11, 2022: The Delhi High Court has held that even if the confirming party is  not bound by the terms of the contract in the sense that there is no liability affixed for it under the Contract but the very fact that it has  signed the JV Agreement containing the Arbitration Clause, implies that it consented to all the disputes being decided through arbitration and the implied consent to the arbitration clause can be inferred.

 A Single-Judge Bench of Justice Neena Bansal Krishna allowed the instant petition instituted under Section 11(6) of the Arbitration & Conciliation Act, 1996 on behalf of the petitioner for appointment of Sole Arbitrator for adjudication of the disputes between the parties.

The Bench was of the view that there exists an Arbitration Agreement between the parties and the arbitrable disputes which were raised may be agitated before the Arbitrator in terms of Clause 15.12 of Joint Venture Agreement.

The case of the petitioner was  that the first respondent No.1 had approached the first petitioner  for commercial development of the property known as "Rai-Ka-Bagh Palace" located in Jodhpur, Rajasthan as an ethnic Heritage Shopping Mall and Commercial Centre. 

On December 6, 2004 a Memorandum of Understanding (MOU) was signed between them at New Delhi. According to the MOU, the respondent was responsible to obtain clearances with regard to change in land use to commercial use and a Hotel.

 Pursuant thereto a Collaboration Agreement was entered into between the parties and the possession was handed over to the petitioner after which petitioner deployed guards and caretakers on the property for its upkeep. The work of dismantling etc. was started but the project could not move forward as the first respondent was unable to get the land use changed from residential to commercial.

After approximately five years a Joint Venture Agreement(JVA) was entered into between first, second respondents 2, and second petitioner while the first petitioner was the confirming party.

 It was provided in the Collaboration Agreement that if the condition precedent was not satisfied or waived within nine months of JV Agreement, the parties had a right to terminate the Agreement and upon such termination, the Collaboration Agreement would bind the parties. Vide Addendum to the JV Agreement, the time period of nine months was extended to additional twelve months. Further, Article 15.12 of the JV Agreement provided for resolution of disputes through arbitration.

It was asserted that petitioners along with the second respondent complied with all the obligations under the Joint Venture Agreement. However, time and again the first respondent failed to fulfil its obligations in terms of the Agreement. On  February 2,  2017 the petitioners and their security guards were illegally evicted from the property. A Civil Suit was filed before Commercial Court, Jaipur, and Rajasthan seeking possession of the suit property.

 An application filed under Section 8 of the Arbitration & Conciliation Act, 1996 was allowed. A letter was received on behalf of first respondent raising frivolous objections but the Arbitration Clause was not disputed. However, it rejected the request for arbitration and refused to nominate any arbitrator. Hence, the present petition was filed for appointment of the Sole Arbitrator.

After considering the submissions from both sides, the Court noted that the issues that were posed for consideration before this Court were with respect to the objection agitated that the dispute was non- arbitrable as it is the NCLT which had the subject jurisdiction.

In view of the same, the Court noted that the scope of proceedings under Insolvency & Bankruptcy Code, 2016 is specific essentially pertaining to the bankruptcy of a Company. In the present case, the disputes which were raised did not come within the jurisdiction of NCLT and it cannot be said that the disputes herein were non-arbitrable.

The next challenge was made with respect to improper joinder of parties. 

Further reliance was made on the cases namely, Cheran Properties Ltd. v. Kasturi & Sons Ltd. and Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc. It respect of the above stated objection, the Court   noted that “...even if the confirming party was not bound by the terms of the contract in the sense that there was no liability affixed for it under the Contract but the very fact that it had signed the JV Agreement containing the Arbitration Clause, implies that it consented to all the disputes being decided through arbitration and the implied consent to the arbitration clause can be inferred.”

This aspect becomes significant from the intention of the parties as was reflected when an objection was taken about the non-maintainability of a suit under Section 8 of the Act, in the suit and the said application was allowed giving liberty to the first petitioner to seek redressal of disputes through Arbitration.

It was clearly evident that the first respondent had itself agitated about a binding arbitration agreement between the first petitioner and other parties when it took an objection about there being an existence of Arbitration Clause between the parties, the Court further remarked.   Undeniably the Joint Venture Agreement was signed by all the four parties to the present petition and the said Agreement contains a Clause 15.12 providing for resolution of the disputes through arbitration which is therefore held to be binding on all the parties, the Court noted. 

Hence the name of the second respondent being not mentioned in the title but in a CC cannot be agitated to assert that the respondent was not put to Notice about Invocation of Arbitration, the Court further stated. In view of the same, the Court concluded by stating that there existed an Arbitration Agreement between the parties and the arbitrable disputes which were raised may be agitated before the Arbitrator in terms of Clause 15.12 of Joint Venture Agreement

 For the aforementioned reasons, the petition was allowed.