Dlf Home Developers Limited vs Rajapura Homes Private Limited & Anr.

HELD 1. The jurisdiction of this Court under Section 11 is primarily to find out whether there exists a written agreement between the parties for resolution of disputes through arbitration and whether the aggrieved party has made out a prima facie arbitrable case. The limited jurisdiction, however, does not denude this Court of its judicial function to look beyond the bare existence of an arbitration clause to cut the deadwood. This Court or a High Court, as the case may be, are not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen Arbitrator. On the contrary, the Court(s) are obliged to apply their mind to the core preliminary issues, albeit, within the framework of Section 11(6-A) of the Act. Such a review is not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement. [Paras 18, 19][14-B-C; 16-A-C]

2.1 In terms of Clauses 3.1, 6.1 and 6.2 of Share Purchase Agreements, the parties entered into two Construction Management Service Agreements dated 25.01.2017. The ‘Share Purchase Agreements’ as well as the ‘Construction Management Agreements’ are subsisting and have not been repudiated by the Parties. Both sets of agreements contain arbitration clauses that are not similar to one another. Upon perusing the Share Purchase Agreements, it is clear that the primary purpose of these agreements is to effectuate the change of ownership of Respondent No.1 and the Begur Company from DHDL to Resimmo PCC. The Rajapura SPA and the Southern Homes SPA as per their Clause 6.1 and 6.2, do provide for the completion of the respective residential projects as a post-closing obligation, however, these construction obligations had to be fulfilled in accordance with the terms of the ‘Construction Agreements’. The very purpose of the RCMA and SCMA was, on the other hand, to operationalise the manner in which the Petitioner-DHDL would achieve the said construction related obligations. The construction agreements not only contemplate the scope of services to be provided by the petitioner but also lay down the obligation on Respondent No.2 to pay “Fee” to the PetitionerDHDL upon completion of the residential projects. A prima facie reading of ‘Share Purchase Agreements’ and `Construction Management Agreements’, does suggest that notwithstanding certain overlaps between these agreements, their object and field of operation is different and distinct in nature. It is therefore difficult 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. [Paras 24-26][20-D-E; 23-B-G]

2.2 The dispute sought to be referred to arbitration by the Petitioner DHDL pertains to non-deposit of agreed amount by Respondent No.2 and resultant payment thereof as ‘Fee’ which the Petitioner claims in terms of clause 4 of RCMA/SCMA. Whether or not the Petitioner has complied with the ‘condition precedent’ under Rajapura SPA and thus has become entitled to ‘fee’ as per clause referred to above, is purely a question of fact to be determined by the Arbitral Tribunal. The arbitration Clause

9 of the Rajapura SPA/Southern Homes SPA does not have any overriding effect and is in no way broader or wider when compared to Clause 11 of the RCMA/SCMA. Therefore, even if it is assumed that the present differences between the parties are incidental to the terms of the Share Purchase Agreements, it is difficult to construe that Clause 9 of Share Purchase Agreements contemplates adjudication of the issues that are “connected with” or are “in relation” to the subject matter of the Share Purchase Agreements. [Paras 27, 29][23-H; 24-A-B, E-G] Olympus Superstructure Pvt. Ltd. v. Meena Vijay Khetan and Others (1999) 5 SCC 651: [1999] 3 SCR

490 – distinguished.

2.3 If the Respondent(s) plea, that present dispute(s) should be arbitrated only under the Rajapura SPA/Southern Homes SPA is accepted at face value, the eventual result would be that any and all disputes relating to the Petitioner’s construction obligation would be arbitrable under the provisions of the Share Purchase Agreements only. But then, what would be the purpose of having a separate arbitration clause 11 under the RCMA/SCMA? The parties do not seem to have rendered the arbitration clause in RCMA and SCMA as redundant, more so when these are the agreements later in time. The scope of the arbitration clause in Rajapura SPA/Southern Homes SPA is limited to issues relating to the agreement’s primary subject matter, i.e., any dispute arising out of the transaction of sale and purchase of shares. The provisions of the RCMA/SCMA, and the arbitration clause therein, would as a logical corollary then be applicable to any dispute/difference concerning the performance of the construction related obligations and deposit of agreed amount by Respondent No.2 or payment thereof to the Petitioner-DHDL. The Petitioner has not once alleged in these Petitions that the dispute sought to be referred to Arbitration emanates from the Share Purchase Agreements. As far as the share transactions between the Petitioner and Respondent No.2 is concerned, it has been unequivocally submitted on behalf of the Petitioner that the purchase of shares by Respondent No.2 has been duly completed. There is nothing on record to suggest that Respondent No.2 is aggrieved by non-compliance, deviation or breach of promise to sell its shares by the Petitioner-DHDL. On the contrary, the counter-affidavit filed by the Respondent(s) indicates that the sale of the shares of Respondent No.1 and the Begur Company have been completed. Still further, it is not the case that Ressimo PCC has already invoked Clause 9 of the Rajapura SPA or of the Southern Homes SPA. Thus, when neither party has pleaded the infringement of the core provisions of the Share Purchase Agreements, it is difficult to accept outrightly that the subjectcontroversy falls within the ambit of Clause 9 of the said agreements and can be adjudicated only under the rules of SIAC, with seat and venue at Singapore. [Paras 30, 31][24-G-H; 25-A-F]

2.4 The Parties have neither denied that there is no ‘arbitrable dispute’ between them nor have they challenged the existence of the arbitration clause(s) in the Construction Management Service Agreements. The primary twin-test envisioned under Section 11(6) of the Act has been satisfied by the Petitioner-DHDL, thus the instant application(s) are maintainable. The nature of disputes that have arisen between the parties, thus, can be adjudicated in the arbitral proceedings under Clause 11 of the RCMA and SCMA. The RCMA and SCMA, though interlinked and connected, are still two separate agreements. If on appreciation of the facts and law, the arbitrator finds that the ‘real dispute’ between the parties stems from the Share Purchase Agreements, the arbitrator shall be free to wind up the proceedings with liberty to the Parties to seek redressal under the rules of Singapore International Arbitration Centre (SIAC). The case of the Respondent(s) is that the Petitioner has committed breaches under both RCMA as well as SCMA, and that the genesis of the disputes lies in separate and distinct facts. Save where the parties have resolved to the contrary, it would be inappropriate to consolidate the proceedings originating out of two separate agreements. However, since the Fee Agreement provides that the “Fee” can only be calculated after taking into consideration various financial components of both the Rajapura Homes Projects and the Southern Homes Project, it would be necessary for the sake of avoiding wastage of time and resources, and to avoid any conflicting awards, that the disputes under Arbitration Petition No.17 and Arbitration Petition No.16 are referred to a sole Arbitrator. Sole arbitrator appointed to resolve all disputes/differences between the parties. [Paras 32, 33, 35 and 36][25-F-H; 26-A-B; E-H]

Duro Felgura, S.A. v. Gangavaram Port Limited (2017)

9 SCC 729 : [2017] 10 SCR 285; Garware Wall Ropes Limited v. Coastal Marine Constructions and

Engineering Limited (2019) 9 SCC 209 : [2019] 5 SCR 579; Mayavati Trading Private Limited v. Pradyuat Deb Burman (2019) 8 SCC 714 : [2019] 12 SCR 123; Vidya Drolia and Others v. Durga Trading Corporation (2021)

2 SCC 1 : 2021 (6) JT 460; Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited (2020) 2 SCC 455; P.R. Shah, Shares and Stock Brokers Private Limited v. BHH Securities Private Limited and Others (2012) 1 SCC 594 : [2011] 16 SCR 87; Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund and Ors 2021 SCC Online SC 268 – referred to.