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2010 Supreme(Cal) 1181
HIGH COURT OF CALCUTTA
I.P.MUKERJI, J.
South City Projects (Kolkata) Limited - Appellant
Versus
Jugal Kishore Sadani – Respondent
Appeal No : A.P. No. 230 of 2010
Decided On : Sep 15, 2010
Abhrajit Mitra, Sarvapriya Mukherjee, Surojit Nath Mitra, Jishnu Chowdhury
Where the subject matter of the suit and disputes arising out of the arbitration agreement are the same, the Court assumes jurisdiction. The party seeking arbitration has the right to obtain reference of the disputes to arbitration on the ground that the subject matter is covered by the arbitration clause, but there is a time limit within which the option must be exercised.
Headnote:
ARBITRATION - STAY OF PROCEEDINGS - SECTION 10 CPC - SECTION 8 ARBITRATION ACT - SUBJECT MATTER OF SUIT AND DISPUTES ARISING OUT OF ARBITRATION AGREEMENT - SAME - COURT ASSUMES JURISDICTION - OPTION TO OBTAIN REFERENCE OF DISPUTES TO ARBITRATION - TIME LIMIT - WAIVER - COURT'S DUTY TO EXAMINE ISSUE - SUBJECT MATTERS OF ARBITRATION AGREEMENT AND SUIT - COMMON TO SOME EXTENT - DIFFERENT - DIFFERENT IN THE SENSE THAT ARBITRATION CAN PROCEED ONLY IF SUIT FAILS - COURT SHOULD APPLY PRINCIPLES OF SECTION 10 OF THE CODE OF CIVIL PROCEDURE - TRIAL OF SUIT TO BE STAYED - ARBITRATION TO START UPON CONCLUSION OF SUIT.
Fact of the Case:
Petitioner and respondents entered into an agreement for lease of a unit in South City Mall. Disputes arose, and the petitioner appointed an arbitrator. The respondents had earlier filed a suit in the Civil Court against the petitioner and two others, seeking execution and registration of appropriate lease deeds.
Finding of the Court:
The Court held that the subject matter of the proposed arbitration reference was not wholly covered by the suit, as the case for rescission of the contract was not before the Civil Court. The scope of the proposed arbitration was much wider than the scope of the suit. The Court further held that the petitioner should have taken appropriate steps to obtain a stay of the Civil Court suit.
Issues: Whether the entire subject matter of the proposed arbitration reference could be tried by the Civil Court, since the petitioner did not file a section 8 application under the Arbitration Act?
Ratio Decidendi: The Court applied the principles of section 10 of the Code of Civil Procedure and held that the trial of the Civil Court suit should be stayed till its disposal. The arbitration should only start upon conclusion of the suit.
Final Decision: The Court directed the Civil Court to complete the adjudication of the suit within six months from the date of the order. The disputes mentioned in the petition were referred to arbitration, and the matter was placed before the Hon'ble designate of the Hon'ble the Chief Justice for naming of an arbitrator.
I. P. Mukerji, J.
1. THIS is an application under section 11 of the Arbitration and Conciliation Act, 1996. It arises out of an agreement between the petitioner and the respondents dated 13th July 2007. It contains an arbitration clause being 13.1 which is as follows:
"13.1 All disputes and differences between the parties hereto regarding the interpretation scope or effect of any of the terms and conditions herein contained or in any way touching or concerning the said Unit or as regards the rights and liabilities of the parties hereto shall be referred to the arbitration of a sole arbitrator if both the parties mutually agree upon or two arbitrators, one to be appointed by the Lessee and the other to be appointed by the Lessor and both the said arbitrators shall appoint the Third Arbitrator and/or Umpire and the same shall be deemed to be a reference within the meaning of the Arbitration and Conciliation Act 1996 or any other statutory modification or enactment thereto for the time being in force."
2. The petitioner owns premises No. 373 Prince Anwar Shah Road, Kolkata 700068. At the time of execution of the said agreement, they were building the South City Mall there. This mall is spectacular. It is unique in the city of Kolkata. It is huge and gorgeous and has many shops and showrooms, cafes and a state of the art structure, layout and facilities, which includes multi level parking. By the above agreement the petitioner agreed to let out a space in it to the respondents to be used as a shop or showroom subject to observance of the conditions in the agreement. The terms and conditions of the agreement will be evident as I discuss the disputes which the petitioner is trying to refer to arbitration. Case for Arbitration
So, what is the case of the petitioner that according to them is to go to arbitration?
1. The said agreement was to lease to the respondents one unit in the South City Mall being No. S-004, measuring 820 sq.ft. (Super built up) area on the ground floor. The lease would be for 99 years commencing from January 2007.
2. Out of the total consideration of Rs.37.60 lacs fixed 80% was payable upon execution of the agreement, 10% on completion of the third floor casting and 10% on signing of the deed of lease.
3. The rent would be Rs. 100/- per annum payable within 7th of April every year. The respondents would have to pay electricity charges, common area maintenance charges at rates determined by the petitioner. 4. Maintenance would be with the petitioner. 5. The unit would have to be used as a showroom for selling or servicing various items like watches, jewelleries, crystal, showpieces and so on. 6. The respondents failed to make payment of 10% of the consideration to have the deed of lease executed. 7. Common area maintenance charges due on 31st March 2010 was Rs.3,76,855.29 to be paid by the respondents. 8. The respondents failed to open the showroom, as provided in the agreement. 9. They are selling items there, sale of which is not permitted by the agreement. It was the obligation of the respondents to open the showroom simultaneously with the mall. The said mall was opened on 16th January 2008. However, the respondents' showroom opened much later in the second week of August 2009. 10. Such alleged breach on the part of the respondents was pointed out by the letter of the Advocate on record for the petitioner dated 7th September 2009. Finally on 24th September 2009 the agreement was terminated by the petitioner stating that the respondents had no right over the showroom. 11. By his letter dated 25th November 2009, invoking the arbitration clause contained in that agreement, the petitioner appointed an arbitrator.
Now, much prior to that the respondents instituted a suit in the Court of the learned 5th Civil Judge (Senior Division) Alipore being Title Suit No. 10 of 2009 against the petitioner and two others, one being a firm and other an individual, described as defendant No. 2 and 3 in that suit. The plaint
