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IN THE HIGH COURT OF DELHI AT NEW DELHI
C. Hari Shankar, J.
M/s Green Edge Infrastructure Pvt Ltd - Appellant
Versus
Magic Eye Developers Private Limited & Ors - Respondent
Arb.P. No. 347 of 2019, 753 of 2020; I.A. No. 12015 of 2020, 4064 of 2020, 4065 of 2020, 4066 of 2020, 4661 of 2020; O.M.P. (I) (Comm) No. 26 of 2019, 114 of 2020
Decided On : 25-03-2021
ARBITRATION - APPOINTMENT OF ARBITRATOR - DISPUTE ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT - INTERCONNECTED AGREEMENTS - ARBITRATION CLAUSE IN ONE OF THE AGREEMENTS - WHETHER DISPUTE ARBITRABLE - SCOPE OF JUDICIAL REVIEW UNDER SECTION 11(6A) OF THE ARBITRATION AND CONCILIATION ACT, 1996 - HELD, YES - ARBITRATION CLAUSE IN ONE OF THE AGREEMENTS IS WIDE ENOUGH TO ENCOMPASS THE DISPUTE - DISPUTE IS ARBITRABLE - ARBITRATOR APPOINTED.
Fact of the Case:
Green Edge Infrastructure Pvt. Ltd. (Green Edge) and Magic Eye Developers Pvt. Ltd. (Magic Eye) entered into four agreements, namely, Shareholder Agreement dated 4th July, 2012 (SHA-1), Shareholder Agreement dated 24th July, 2013 (SHA-2), Memorandum of Understanding dated 24th July, 2013 (MOU-1) and Memorandum of Understanding dated 9th August, 2013 (MOU-2). Disputes arose between the parties, and Green Edge invoked the arbitration clause in SHA-1. Magic Eye contended that the dispute was not arbitrable as it arose out of MOU-2, which did not contain an arbitration clause.
Finding of the Court:
The Court held that the dispute was arbitrable. It held that the arbitration clause in SHA-1 was wide enough to encompass the dispute, even though the dispute was also related to other agreements which did not contain arbitration clauses. The Court also held that the scope of judicial review under Section 11(6A) of the Arbitration and Conciliation Act, 1996 is limited to examining whether an arbitration agreement exists and whether the dispute is arbitrable. The Court found that there was an arbitration agreement between the parties and that the dispute was arbitrable.
Issues: 1. Whether the dispute was arbitrable? 2. Whether the arbitration clause in SHA-1 was wide enough to encompass the dispute?
Ratio Decidendi: 1. The scope of judicial review under Section 11(6A) of the Arbitration and Conciliation Act, 1996 is limited to examining whether an arbitration agreement exists and whether the dispute is arbitrable. 2. An arbitration clause in one agreement can be wide enough to encompass a dispute that is also related to other agreements which do not contain arbitration clauses, if the agreements are interconnected and form a single transaction.
Final Decision: The Court appointed an arbitrator to adjudicate the dispute.
JUDGMENT
C.Hari Shankar, J. - Arb.P. 347/2019
ARB.P. 753/2020
O.M.P.(I) (COMM.) 26/2019
1. Arguments in these petitions were heard together and are being disposed of by this common judgment. O.M.P.(I) (COMM.) 114/2020
Facts and contentions
2. M/S. Magic Eye Developers Pvt Ltd. ("Magic Eye") owns 11.29 acres of freehold land at Sector 106, Gurgaon. In connection with the said land, four agreements were executed between the parties, viz. the first Shareholder Agreement dated 4 th July, 2012, the second Shareholder Agreement dated 24th July, 2013, the first Memorandum of Understanding dated 24th July, 2013 and the second Memorandum of Understanding dated 9th August, 2013, which for the sake of felicity, would be referred to, hereinafter as "SHA-1", "SHA-2", "MOU-1" and "MOU-2", respectively. Mr. Abhimanyu Bhandari, learned counsel for M/s. Green Edge Infrastructure Pvt. Ltd. ("Green Edge"), submits that these agreements were interlinked. It is an admitted position that, while SHA-1, SHA-2 and MOU-1 contained arbitration clauses, and MOU-2 did not. The Arbitration clause in SHA-1 and SHA-2, with which alone these petitions are concerned, read thus:
In SHA-1
"27.3 Arbitration
Subject to Clause 28.1 and 28.2, any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and be finally and exclusively settled by arbitration i in accordance with the provisions of the Indian Arbitration and Conciliation Act, 1996. Such dispute shall be referred to a sole arbitrator appointed mutually by the Promoters and GEPL."
In SHA-2
"7.6 Arbitration
All disputes and differences under or arising out of this Agreement shall be referred to and settled by the arbitration of a sole arbitrator to be jointly appointed by the Parties. All proceedings in any such arbitration shall be conducted in English. The Arbitration shall take place in New Delhi and shall be governed by the Arbitration and Conciliation Act, 1996 or other law relating to arbitration in force in India at the relevant time. Any Award rendered upon such arbitration shall be a reasoned award in writing and shall be final, conclusive and binding on the Parties."
3. Though para 1 of Arb.P. 347/2019 filed by Green Edge invokes the arbitration clauses in SHA-1, SHA-2 and MOU-1, Mr. Bhandari restricts his claim, during arguments, to reference of the dispute to arbitration in accordance with Clause 27.3 of SHA-1. According to Mr. Bhandari, the dispute forming subject matter of Arb.P. 347/2019 and OMP (I) (COMM) 26/2019 would fall within the comprehensive scope of Clause 27.3 of SHA-1. Mr. Krishnendu Datta, learned Senior Counsel appearing for Magic Eye, submits, per contra, that the dispute raised by Green Edge in Arb.P. 347/2019 and OMP (I) (COMM) 26/2019, are expressly limited, by Green Edge itself, to MOU-2, which does not contain any arbitration clause and is not, therefore, arbitrable in nature.
4. Mr. Bhandari advances the following submissions in order to demonstrate the interconnection between the aforesaid four agreements, and to buttress his contention that the dispute raised by Green Edge is amenable to arbitration under Clause 27.3 of SHA-1:
(i) The dispute is related to 11.29 acres of freehold land at Sector 106, Gurgaon.
(ii) SHA-1 dated 4th July, 2012 dealt with inter se relations between Green Edge and Magic Eye in relation to development of the aforesaid land at Sector 106, Gurgaon in view of 20% equity shareholding held by Green Edge in Magic Eye, for which purpose the agreement required Green Edge to lead the process for obtaining requisite licences/NOCs, from various nodal agencies, for commercialization of the land. SHA-1, points out Mr. Bhandari, also provided for facilitation charges, in the form of built up area consisting of ten flats equivalent to 7600 sq. ft. of area in the land, to be provided to Green Edge in view of the aforesaid services provided to Magic Eye. The consideration recei
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