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IN THE HIGH COURT AT CALCUTTA
SABYASACHI BHATTACHARYYA, J.
Basant Kumar Khemka and Anr. - Petitioners
Versus
City Shoppe Estates Limited - Respondent
A.P. No. 69 of 2024 With A.P. No. 68 of 2024
Decided On : 12-08-2024
Arbitration - Arbitration and Conciliation Act, 1996 - Sections 2(1)(h), 7(5), 11 - The court interpreted the definition of 'party' under the Act to include successors-in-interest, allowing petitioners to invoke arbitration despite not being original signatories.
Fact of the Case:
The petitioners, owners of flats in a housing complex, sought arbitration against the developer for alleged failure to provide electricity, invoking an arbitration clause from a 1995 agreement to which they were not original parties.
Finding of the Court:
The court found that the petitioners, as successors-in-interest of original flat owners, qualified as 'parties' under the Arbitration and Conciliation Act, allowing them to invoke the arbitration clause in the 1995 agreement.
Issues: Whether the petitioners qualify as 'parties' under the Arbitration and Conciliation Act, 1996, and whether their disputes fall within the arbitration clause of the 1995 agreement.
Ratio Decidendi: The court held that successors-in-interest can invoke arbitration clauses from agreements made by original parties, emphasizing a broad interpretation of 'party' to facilitate arbitration.
Result: The applications under Section 11 of the Arbitration and Conciliation Act, 1996 are allowed, appointing an arbitrator to resolve the disputes.
JUDGMENT :
Sabyasachi Bhattacharyya, J.
1. The present applications under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the 1996 Act”) has been filed by two owners of flats in a Housing Complex called "Diamond Towers".
2. One M/s Jhansi Fuels & Chemicals Limited, the developer of the building complex, entered into an agreement for sale with one M/s Trot Shoe Company (P) Limited and pursuant thereto, executed a sale-deed in favour of the said M/s Tort Shoe on July 3, 1991 in respect of the subject property. On November 9, 1994, M/s Trot Shoe Company Private Limited sold the said premises to one Amlan Singha.
3. Amlan Singha, in turn, sold the subject property to the present petitioners on September 1, 2020 by a registered sale deed.
4. Meanwhile, M/s Jhansi Fuels and Chemical Limited was renamed as City Shoppe Estates Limited, the present respondent.
5. The petitioners issued a notice under Section 21 of the 1996 Act to the respondent on October 18, 2023, invoking the arbitration clause contained in an agreement dated May 2, 1995 entered into between M/s Jhansi Fuels & Chemicals Limited and seven owners of Diamond Towers who, as per the said agreement, represented all the flat owners. The dispute raised therein pertains to alleged disconnection of electricity to the subject property by the respondent and failure of the respondent to honour its liability to provide amenities and facilities, primarily electricity, to the petitioners-flat owners.
6. There being no consensus between the parties regarding the appointment of Arbitrator, the present application has been filed by the petitioners.
7. Learned counsel for the respondent objects to the application under Section 11 on several grounds. First, it is pointed out that the petitioners were not parties to the agreement dated May 2, 1995. Also, the purchase-deed of the petitioners does not contain any arbitration clause. Moreover, the purchase-deed of the petitioners does not incorporate specifically the arbitration clause contained in the agreement dated May 2, 1995. Thus, it is argued that the petitioners do not come within the purview of “party” as contemplated in Section 2 (1)(h) of the 1996 Act, which defines the term to mean a party to an arbitration agreement.
8. Further, learned counsel appearing for the respondent argues that the petitioners are hit by Section 7(5) of the 1996 Act. While Section 7 defines "arbitration agreement", sub-section (5) thereof provides that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. Such element is entirely absent in the present case.
9. The respondents further argues that the dispute now raised by the petitioners relates to alleged disconnection of the electricity supply of the petitioners by the respondent, which falls outside the purview of the 1995 agreement in any case. The 1995 agreement was entered between the original developer and seven flat owners of Diamond Towers and was in the nature of a resolution of the then existing disputes between them.
10. By placing reliance on several clauses of the said agreement, learned counsel for the respondent argues that the liability of the developer was restricted to provide a generator, which has already been done long back.
11. In terms of the agreement, it is submitted, the developer was to hand over the maintenance of the residential complex to the association formed by the flat owners on signing the agreement, which is provided in Clause 2(h) of the same. The reference to electric meters in Clause 2(l) in the agreement merely provided for the developer extending official, but not financial, assistance for separation of electric meters of the residential from the commercial/market complex. Mere provision in the agreement that future bills would be raised in the name of the association as
AI
Successors-in-interest can invoke arbitration clauses from agreements made by original parties, broadening the definition of 'party' under the Arbitration and Conciliation Act, 1996.
The appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act requires only a prima facie examination of the arbitration agreement's existence, with mixed questions of law....
Point of Law : Exercise of judicial power under Section 11 (6A) of the Act is concerned, the Designated Judge should confine himself only to the examination of the existence of an arbitration agreeme....
A notice under Section 21 is not required for a Section 11 application, and the Consumer Forum does not have jurisdiction over counterclaims in a commercial dispute.
The referral court's scope under Section 11(6-A) is limited to the prima facie existence of an arbitration agreement. A formal notice under Section 21 is not mandatory if the respondent has prior kno....
The main legal point established in the judgment is the principle of minimal judicial intervention in the arbitral process, emphasizing the competence of the arbitrator to decide all preliminary issu....
The existence of an arbitrable dispute, the validity of the arbitration agreement, and the existence of an arbitrable dispute are to be determined by the arbitral tribunal.
The main legal point established in the judgment is the validity and enforceability of the arbitration agreement, the arbitrability of the disputes, and the jurisdiction of the court to appoint an ar....
The main legal point established is that for a dispute to be referred to an arbitrator under Section 11(6) of the Arbitration Act, it must arise from the agreement and be arbitrable in nature.
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