The arbitration clause in the Cancellation Agreement is effective despite the Joint Venture Agreement being claimed as ongoing, allowing the disputes to be arbitrated in Delhi.

ORDER (ORAL)

Sanjeev Narula, J.

[VIA VIDEO CONFERENCING]

1. Ashiana Infrabuild LLP-the Petitioner herein - by way of the instant petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as `the Act'], seeks appointment of the Arbitral Tribunal for adjudication of the disputes arising out of certain agreements between the parties.

Brief facts:

2. The brief facts that are necessary for the disposal of the present petition are as follows:

2.1. The parties herein entered into a Joint Venture Agreement dated 24th March, 2011 [hereinafter referred to as 'JVA'] for the re-development/reconstruction of a residential project in Mumbai.

2.2. As a result of certain issues arising therein, a Cancellation Agreement dated 1st April, 2017 [hereinafter referred to as `CA'] was executed, by virtue whereof, the JV, along with all the rights and obligations arising thereunder, stood cancelled.

2.3. Parties also agreed that the legal entity, "M/s. S.D. Bhalerao Constructions Pvt. Ltd. - Project Building No. 58 - JV" shall automatically come to an end and all financial liabilities of the Project will stand merged and taken over by the Respondent w.e.f. 01st April, 2017.

2.4. Petitioner contends that the Respondent has failed to fulfil its payments obligation of refunding the capital contribution of the Petitioner (along with the interest accrued thereon), under the CA. Due to its inordinately delay and lack of inclination shown towards making such payment, a demand notice dated 24th May, 2018 was issued by the Petitioner, followed by another notice dated 25th June, 2018. There has been no response to either notice.

2.5. The continual failure on the part of the Respondent to honour its obligations towards the Petitioner gave rise to "disputes" in terms of the provisions of the CA. Petitioner invoked arbitration vide notice dated 24th June, 2020. There was no response to the said notice as well.

2.6. In the above background, Petitioner has approached this Court seeking appointment of the Arbitral Tribunal in terms of the arbitration clause contained in the CA.

Contentions of the Parties:

3. Mr. Vibhav Krishna, counsel for the Respondent, does not dispute the existence of CA, but opposes the petition on the following grounds:

3.1. The arbitration clause under the CA has not come into effect as the JVA is still subsisting. The firm set up under the JVA continues to function till date, as evident from a perusal of the additional affidavit dated 25th January, 2021 filed by the Respondent. The CA also acknowledges that the JVA survives and does not ipso facto come to an end. Thus, it cannot be held that the JVA has been terminated or cancelled, due to which, the arbitration clause therein would still be in effect. Further, the capital contribution of the Petitioner (Rs. 3,31,75,659/-) was to be returned in terms of recital `h' of the CA. The Petitioner has acknowledged that the payment of Rs. 3,31,75,659/- or any part thereof has not been paid and the pre-condition stipulated under CA for cancellation of JVA has not been fulfilled. Thus, the CA has not come into effect; therefore, the arbitration clause therein cannot govern the disputes between the parties.

3.2. The court lacks territorial jurisdiction, as the arbitration clause in the still-subsisting JVA provides for seat of arbitration at Mumbai and exclusive jurisdiction of the Mumbai courts. The jurisdiction of this court is ousted; the petition is thus not maintainable. In support of this submission, he relies upon the judgments in BALCO v. Kaiser Aluminium Technical Services Inc., 2012(9) SCC 552; Reliance Industries Ltd. v. Union of I