Arbitration and conciliation Act, 1996 – s. 8 – The original land-owners executed 17 development agreements cum power of attorney in favour of one developer for developing an integrated complex – Subsequently, the owners constituted themselves into three societies which included appellant no.1-society – Thereafter, the parties to each of the Development Agreements executed supplementary Development agreements to their respective Development agreement – Accordingly, the developer was allotted
11 commercial complexes and the owners were allotted 4 commercial complexes – Respondents-owners were allotted a share in a building H1B and they were also the members of the appellant no. 1 society – Respondents and appellants entered into an Addendum to the supplementary Development agreement – Various spaces in building H1B were leased out to a company and rents were collected by the appellant no.1– Respondents sought sharing of the rent of the leased space – Pursuant thereto, respondents filed applications u/s. 23 of Societies Registration Act before the District Judge – Appellants filed applications u/s. 8 of the Arbitration Act and sought the appointment of Arbitrator in the light of the arbitration cl. 19 of the addendum – District Judge held disputes between the parties were not covered u/cl. 19 of the Addendum – Aggrieved, appellants filed appeals before the High Court, which were dismissed – On appeal, held: As per cl. 13 of the Addendum/Agreement, the societies were the “sole authorities” to collect/receive the lease rents in respect of the extends leased out in a given building earmarked as the share of the owners in the completion and pool the entire revenue generated from each of the buildings by way of lease rents and distribute the same to the owners – Therefore, the dispute between the respondents and the appellants with respect to the sharing of the rent with respect to the leased space can be said to be related to the Addendum and /or in connection with or relating to the Addendum – Cl.19 was applicable in the event of any dispute and difference arising among the parties out of, in connection with or relating to the agreement – Both the High Court and District Judge committed error in not referring the dispute between the appellants and the respondents to the arbitration – Parties referred to the Arbitration – Andhra Pradesh Societies Registration Act, 2001 – s. 23. Allowing the appeals, the Court
HELD: 1. On reading Clause 19 of the Addendum as a whole, it appears that in the event of dispute or difference among the parties out of, in connection with or relating to the agreement, the same shall be referred to arbitration. However, sub-clauses (c), (d) and (e) provide for different procedure in the event of any disputes and differences between the owners; between two or more societies or owners who are the members of two different societies and between two or more owners of the space in the same building. Sub-clause (c) of Clause 19 provides that any disputes or differences whatsoever arising between owners, which could not be resolved by the parties through negotiations, within a period of 30 days from the service of the notice of dispute, the same shall be referred to and shall finally be settled by the arbitration in accordance with the (Indian) Arbitration and Conciliation Act, 1996. Sub-clause (d) of Clause 19 provides that in the event of any dispute which involves two or more societies or owners who are the members of two different societies, the arbitral tribunal shall comprise of three or more arbitrators. It further provides, “who shall be appointed as a presiding arbitrator; who shall be the Chairman of the arbitral tribunal and the venue of the arbitration”. Sub-clause (e) of Clause 19 provides that in the event of any dispute which involves two or more owners of the space in the same building, the arbitral tribunal shall comprise of the sole arbitrator and, in such a situation, each party to the dispute shall refer the matter to the office bearers of their respective Society which shall be the arbitral tribunal and the venue of arbitration shall be in Hyderabad. [Para 7.1][104-H; 105-A-E]
2. As observed hereinabove, Clause 19 shall be applicable in the event of any dispute and difference arising among the parties out of, in connection with or relating to the agreement. As observed hereinabove, the developers, owners, societies and the original owners and even subsequent societies formed are parties to the agreement and the Addendum. It is also required to be noted and, as observed hereinabove, the dispute is with respect to sharing of the rent of the leased space and it can be said that the respondents are also claiming the share relying upon the Development Agreements; Supplementary Development Agreements and the Addendum. Therefore, the dispute can be said to in connection with or relating to the Agreements also. [Para 7.2][105-F-G]
3. Considering the above facts and circumstances, both the High Court and the District Judge have committed grave error in not referring the dispute between the appellants and the respondents to the arbitration. This Court is of the opinion that Clause 19 of the Addendum to the Supplementary Development Agreement shall be squarely applicable and therefore the disputes between the respondents and the appellants for which the respondents initiated proceedings under the Societies Registration Act, are required to be referred to the Arbitration and/or to the Arbitral Tribunal. [Para 7.3][105-H; 106-A-B]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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