Arbitration agreements remain enforceable despite allegations of fraud if not serious; parties must resolve disputes through arbitration as per contract terms.

ORDER :

SUBODH ABHYANKAR, J.

Heard.

2. This order shall also govern the disposal of A.C. No.56 of 2023, considering the fact that M.P. No.1033 of 2023 has arisen out of an order passed on an application filed under Section 8 of the Act of 1996, i.e., for referring the parties to the arbitrator, whereas A.C. No.56 of 2023 has been filed for appointment of arbitrator. For the sake of convenience, the facts as narrated in M.P. No.1033/2023 are being taken into consideration.

3. This petition has been filed by the petitioners/defendants under Article 227 of the Constitution of India, against the order dated 02.02.2023, passed by the First Additional District Judge, Dewas, in Case No.RCSA-200/2022, whereby, an application filed by the petitioner under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as „the Act of 1996‟) for referring the parties to the arbitration, has been rejected by the Civil Court, on account of allegations of serious fraud pleaded by the plaintiff/respondent No.1. It was also held that since in the Civil Suit, apart from the plaintiff and defendant No.1 there are other defendants also, who are not the parties to the agreement dated 16.07.2020, they cannot be asked to enter into the arbitration proceedings.

4. In brief, the facts of the case are that initially, a registered development agreement was executed between the petitioner No.1/defendant, who is a registered partnership firm, with the respondent M/s. Johri Land and Finance/the plaintiff, which is also a registered partnership firm through its partners. The agreement (Annexure P/1) dated 16.07.2020 was executed by late Shri Naresh Soni on behalf of the partnership firm M/s Johri Land and Finance for development of land situated at Senior Patwari Halka No.18, District Dewas. As per the agreement, a sum of Rs.1 Crore was paid to the respondent No.1 as non- refundable security deposit, with a further stipulation that after the development of the land, the profits shall be shared by the parties in the ratio of 80:20, i.e., 80% by the developer-petitioner-defendant No.1 and 20% by the land owners/the respondent No.1/plaintiff. After the aforesaid agreement was entered into between the parties on 25.01.2021, the layout plan was sanctioned by the Town and Country Planning Department, and thereafter, on 21.01.2022, an amendment deed of development agreement was also executed, in which it was also provided that the earlier agreement shall be considered as the original agreement. In the meantime, permission of development of colony by Dewas Municipal Corporation was also granted, as also on 13.12.2021, the permission by the RERA. Whereas, the colony was developed by the petitioner on 31.05.2022, and admittedly, till 16.09.2022, around sixty plots of the colony were already sold. The aforesaid sale deeds were also signed by partner of respondent No.1 Shri Rajendra Soni.

5. In a turn of events, Shri Naresh Soni, one of the partners of the respondent No.1 firm, committed suicide on 05.08.2022, regarding which, a merg was registered and according to the respondents, the deceased Naresh Soni had also left a suicide note which is also filed on record as Annexure-R/1, in which he had also made serious allegations against the relatives of the partners of the petitioner firm, and subsequently, a publication was also made by the respondent No.1 cancelling the Power of Attorney executed in favour of the partner of the petitioner firm.

6. Subsequent to that, a civil suit No.RCSA-200/2022 was also filed by the respondent No.1