JUDGMENT

R.V. Raveendran, J.

1. Leave granted.

2. The second Respondent (referred to as the `Developer') entered into a development agreement with the owners of certain lands at Bachupally village, Qutubullapur Mandal, Ranga Reddy District, for constructing independent houses and multistoried Apartment buildings with common facilities in a layout known as `Hill County township'. The landowners as the first party, the developer as the second party and the first Respondent who wanted to acquire an apartment therein as the third party entered into an agreement for sale dated 16.10.2006 under which the land-owners agreed to sell an undivided share equivalent to 87 sq.yds. out of a total extent of 16.95 acres to the first Respondent and the developer agreed to construct a residential apartment measuring 1889 sq.ft. for the first Respondent. The total consideration for the undivided share in the land, apartment and car parking space was agreed as Rs. 55,89,368. The agreement contemplating the entire price being paid in instalments, that is 10% on booking, 85% in seven instalments upto 15.3.2008 and 5% at the time of delivery. Clause (14) of the said agreement dated 16.10.2006 provided for settlement of disputes by arbitration.

3. On the request of the first Respondent, the Appellant (earlier known as `BHW Home Finance Ltd.') sanctioned a housing loan of Rs. 52 lakhs to the first Respondent for purchase of the said apartment in terms of a loan agreement dated 21.12.2006 entered into between the first Respondent as the borrower and the Appellant as the lender. The said loan agreement contained the terms of the loan, rate of interest, provisions for amortization, consequences of delay in payment of EM Is, security for repayment, and general covenants of borrower. Clause (11) thereof provided for settlement of all disputes (that is, all matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection and/or in consequences of breaches, termination or invalidity thereof or relating to the Agreement) by arbitration by the Managing Director of the Appellant or his nominee as sole Arbitrator. The first Respondent subsequently had entered into a supplemental loan agreement with the Appellant on 29.10.2007 for reducing the loan amount from Rs. 52 lakhs to Rs. 49,78,527/-; and the said loan has been disbursed in terms of the said loan agreements.

4. It is alleged that a tripartite agreement was also executed on 21.12.2006 among first Respondent as borrower, the developer as guarantor and the Appellant as the lender, under which it was agreed that the loan amount should be disbursed by the Appellant directly to the developer and such amounts paid to the developer shall be deemed to be disbursement of loan by the Appellant to the first Respondent.

5. In pursuance of the agreement of sale dated 16.10.2006, the first Respondent paid the entire sale price to the developer through the Appellant. Thereafter, the land-owners and the developer executed a registered sale deed dated 21.2.2008 for a consideration Rs. 21,27,409/-, conveying to the first Respondent, an undivided share in the land equivalent to 87 sq.yds. with the semi finished apartment bearing No. 3E in the third floor of Nainital Block of Hill County with one reserved parking space. On the same day the first Respondent entrusted the construction of the unfinished flat to the developer under a construction agreement dated 21.2.2008, under which the developer acknowledged the receipt of the total cost of construction, that is Rs.33,22,226 from the first Respondent and agreed to complete the construction of the apartment and deliver the same to the first Respondent by 16.10.2008 with a grace period of three months. Clause 7 of the said construction agreement dated 21.2.2008 between the first Respondent and the developer provided for arbitration and is extracted below:

7. Arbitration

a. In the event of any dispute between the parties in connection with th