2019 Supreme(SC) 996

SUPREME COURT OF INDIA
ARUN MISHRA, M. R. SHAH, JJ.
M/s Avinash Hitech City 2 Society & Ors. – Appellants
Versus
Boddu Manikya Malini & Anr. Etc. – Respondents
CIVIL APPEAL NOS. 7047-7049 OF 2019 [Arising out of SLP (Civil) Nos. 4213-4215 of 2019]
Decided On : 06-09-2019

IMPORTANT POINT
Agreement, supplementary agreement and addendum defining share of parties in properties. When agreement contains arbitration clause and dispute arises as to sharing rent in same share as defined in the agreement, parties should be referred to arbitration.

Headnote:

Arbitration and Conciliation Act, 1996 - Section 8 - Development agreement, supplementary agreement and addendum for development of property - Shares defined by these instruments - Respondents claiming share in rent on basis of these instruments - Dispute, held, in connection with or relating to the Agreements also - Clause 19 of the agreement incorporating arbitration clause applicable - Parties ought to have been referred to arbitration or arbitration tribunal. (Para 7)

Facts of the case:

The original land­owners executed 17 development agreements cum power of attorney in favour of one Phoenix Infocity Private Limited for developing an integrated complex comprising of residential units, commercial and office spaces and service apartments on the project land. Subsequently, the owners constituted themselves into three societies registered under the Andhra Pradesh Societies Registration Act, 2001, namely Avinash Hitech City 2 Society (appellant no. 1), Ganga Hitech City 2 Society and Vignesh Hitech City 2 Society. The said societies were granted co­developer status in respect of the SEZ Project. It appears that thereafter the parties to each of the Development Agreements executed Supplementary Development Agreements to their respective Development Agreement. In terms of the Development Agreements and the Supplementary Development Agreements, the constructed space in the proposed buildings were to be shared in the ratio of 37.5 : 62.5 between the owners and the developer. Accordingly, the developer was allotted 11 commercial complexes and the owners were allotted 4 commercial complexes. It seems that the respondents are the owners who have been allotted a share in building H1B and also are the members of the appellant no. 1 Society. Thereafter, an Addendum to the Supplementary Development Agreement was executed by the appellants and the respondents (excluding the lessee, HCL Technologies Limited). Clause 19 of the Addendum provides for the mechanism to resolve the dispute between the parties.

A cold shell of building H1B was completed by the developer and appellant no. 1 Society converted the same to warm shell by setting up the air conditioning facilities, back­up generators and back­up power implementation, building management system implementation, electrical works and civil works and the funds for the same were raised by appellant no. 1 Society by way of bank loans. Thereafter, various spaces in building H1B were leased out to HCL Technologies Ltd. and the rents were collected by appellant no. 1 Society.

The respondents filed a petition under Section 23 of the Andhra Pradesh Societies Registration Act, 2001 before the Principal District Judge, Ranga Reddy District making an allegation that their purported share in the rentals were not being paid to them and prayed for a direction to appellant no. 1 Society to produce the entire accounts for the rental amounts received by it from the tenants along with audit reports and minute books from 2011 to 2015. The respondents also prayed that appellant no. 1 Society be directed to pay amounts already due to the respondents, being their purported share in the rental amounts. Thereafter another petition was filed by the respondents praying that the Court split appellant no. 1 Society into two different societies claiming to have “lost all faith and confidence on the integrity” of the executive committee of appellant no. 1 Society and claiming that their interest could no longer be protected by appellant no. 1 Society. Thereafter, third application was filed by the respondents before the learned District Judge under Section 23 of the Societies Registration Act and prayed for a mandatory injunction against the appellants herein directing them to inter alia distribute the rents purportedly received by appellant no. 1 Society.

In the light of the arbitration Clause 19 of the Addendum, the appellants filed petitions under Section 8 of the Arbitration and Conciliation Act, 1996 seeking the appointment of an arbitrator in accordance with Clause 19 of the Addendum. All the three applications came to be dismissed by the learned District Judge on the ground that the disputes between the parties in the petition under Section 23 of the Societies Registration Act are not covered under Clause 19 of the Addendum.

Aggrieved by the order of the learned District Judge dismissing the application under Section 8 of the Arbitration and Conciliation Act, the appellants herein preferred three separate appeals before the High Court. The High Court has dismissed the said appeals.

Finding of the Court:

Parties ought to have been referred to arbitration or arbitration tribunal.

Result: Appeals allowed.