1. Sale of flats and interior design agreements — dispute over construction and payment — arbitration awards granting specific performance — challenge under Section 34, Arbitration and Conciliation Act, 1996. (Para 1 , 2 , 4 , 5 , 6 )
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1999 Supreme(SC) 633
1999(5) Supreme 338
Supreme Court of India
(From Bombay High Court)
M. Jagannadha Rao & S.N. Phukan, JJ.
Olympus Superstructures Pvt. Ltd. -Appellant
versus
Meena Vijay Khetan & Ors. -Respondents
Civil Appeal Nos. 2912-2914 of 1991
(Arising out of S.L.P. (C) Nos. 19515-19517 of 1998)
Decided on 11-5-1999
Counsel for the Parties :
For the Appellant : H.L. Tiku, Balachandran Karup, Ms. Yashmeet, Ashok K. Mahajan, Advocates.
For the Respondents : D.R. Dhanuka, K.K. Venugopal, Sr. Advocates, S.U. Kamdar, Deepak Chitnis, Mahesh Agrawal, Rishi Agrawal, E.C. Agrawala, Ms. Triveni Potikar, Advocates.
Important Points
Important Points
1. An arbitrator can grant specific performance of contract relating to immovable property under an award.
2. Merely because the sections of the Specific Relief Act confer discretion on courts to grant specific performance of a contract does not mean that parties cannot agree that the discretion will be exercised by a forum of their choice.
1. An arbitrator can grant specific performance of contract relating to immovable property under an award.
2. Merely because the sections of the Specific Relief Act confer discretion on courts to grant specific performance of a contract does not mean that parties cannot agree that the discretion will be exercised by a forum of their choice.
Subject
Arbitration Law - JURISDICTION
Act Referred
ARBITRATION ACT: S.33, S.30
ARBITRATION AND CONCILIATION ACT: S.16(3), S.28, S.34(2)(b)(i), S.43(3)
SPECIAL LEAVE PETITION ARBITRATION AND CONCILIATION ACT: S.5, S.16, S.11, S.24
SPECIFIC RELIEF ACT: S.20
ARBITRATION AND CONCILIATION ACT: S.16(3), S.28, S.34(2)(b)(i), S.43(3)
SPECIAL LEAVE PETITION ARBITRATION AND CONCILIATION ACT: S.5, S.16, S.11, S.24
SPECIFIC RELIEF ACT: S.20
Headnote
Special Leave Petition-Arbitration and Conciliation Act, 1996-Sections 5, 11, 16 and 34-Appellant agreed to sell flats under three main agreements - Three other agreements called Interior Design Agreements entered-Disputes and differences between parties-Respondents gave notice to appellant to refer matter to one out of three retired Judges-Names suggested-Appellant failed to reply agreeing for arbitration-Sole Arbitrator appointed - Award passed granting relief of specific performance in respect of three main agreements and three Interior Design Agreements-Award challenged-Dismissed-SLP -Whether appellant right in contending that arbitration clause 39 in main agreement did not permit arbitrator to deal with disputes relating to Interior Design Agreements and whether appellant who did not raise any question of jurisdiction in relation to dispute under Interior Design Agreements could have raised question of jurisdiction of arbitrator or of his power to deal with issues arising under said agreements at stage of Section 34 -Held: clause 39 of main agreement applies-Intention of parties when they incorporated clause 39 in main agreement and clause 5 in Interior Design Agreement was that former clause to apply to situations when there was disputes arising under both agreements and later to apply to situation where there was no disputes or differences arising under main contract but disputes and differences confined only to Interior Design Agreement-Whether arbitrator cannot grant specific performance of agreement of sale and subject matter of dispute not capable of arbitration-Held : disputes relating to specific performance of contract can be referred to arbitration and Section 34(2)(b)(i) not attracted-Whether appellant could question factual findings relating to default-Time being essence, readiness and willingness etc.-Held: merits of award on facts of case do not fall under Section 34(2)(b) of the Act. (Paras 32, 37 and 38)
Legal Category Hierarchy
Table of Contents
2. Whether the arbitrator had jurisdiction over related agreements — whether specific performance is arbitrable — whether factual findings on default can be challenged under Section 34. (Para 7 , 8 )
3. Related agreements are covered by general arbitration clauses — specific performance is a contractual right — factual merits are not reviewable under Section 34. (Para 10 , 11 , 12 , 13 , 14 , 15 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 31 , 32 , 33 , 34 , 35 , 36 )
4. General arbitration clauses cover connected disputes — specific performance of immovable property is arbitrable — factual findings are outside the scope of Section 34 review. (Para 24 , 29 , 33 , 35 , 36 )
5. Appeals dismissed; arbitral awards confirmed. (Para 37 )
6. Can a general arbitration clause in a main agreement cover disputes under a separate, related agreement?
Yes, if the clause covers matters connected with or arising out of the subject matter of the main agreement and the related agreement is integrally connected or overlaps in scope. (Para 24 , 26 , 27 , 29 )
7. Can an arbitrator grant specific performance of a contract relating to immovable property?
Yes, the right to specific performance deals with contractual rights. There is no prohibition in the Specific Relief Act or the Arbitration and Conciliation Act, 1996, against such awards. (Para 33 , 35 )
8. Can a court review factual findings like readiness, willingness, or default under Section 34 of the Arbitration and Conciliation Act, 1996?
No, factual findings do not fall under the narrow grounds of Section 34(2)(b), such as non-arbitrability or conflict with public policy. (Para 36 )
9. When must a plea regarding the arbitral tribunal's jurisdiction or scope of authority be raised under the Act?
A plea regarding jurisdiction must be raised not later than the submission of the statement of defence; a plea regarding exceeding authority must be raised as soon as the matter is raised. (Para 12 , 14 )
JUDGMENT
M. Jagannadha Rao, J.-Leave granted.
These three Civil Appeals are directed against the Judgment of the Bombay High Court in A. Nos. 175-177 of 1998 dated 2.4.98 in Arbitration Petitions 281-283 of 1997. By virtue of this judgment dated 2.4.98, the decision of the learned Single Judge in Arbitration Petitions 281-283 of 1997 dated 12.1.1998 was confirmed. The learned Single Judge had, by his decision dismissed the objections filed by the appellant under Sections 5 and 34 of the Arbitration and Conciliation Act, 1996 (hereinafter called the ‘Act’) to the awards and confirmed the three Awards passed by the Arbitrator on 13.11.1997. The learned Chief Justice of the Bombay High Court had appointed a retired Judge of that Court on 13.6.1997 as sole arbitrator and the said arbitrator had passed the three awards on 13.11.1997.
2. The facts are as follows :
There are three main agreements dated 9.3.1994, 9.3.1994 and 29.6.1994 under which the appellant agreed to sell Flat Nos. 101-102, 201-202 and 301-302 on first, second and third floors of the proposed building Wembley at, Play ground Road, Vile Parle (East) Bombay to the respondents on the terms contained in the agreements. The consideration was Rs. 76, 72 and 74 lakhs respectively. The possession of the flats was to be handed over alongwith amenities by 30.10.94. The terms of the contract provided the time-schedule for payments by the purchasers and said time was to be the essence of the contract and it was stated that failure to pay would entail termination of the agreement. The purchasers were to pay 21 interest in case of default. There were various other terms. Clause 7 provided that the power of termination should not be exercised by the appellant unless and until the appellant had given to the purchasers 15 days prior notice in writing of the intention to terminate the agreement and given the purchasers opportunity to set right the breaches, if any committed, within the said period. Clause 39 in each agreement contained an arbitration clause which read as follows :
“39. All disputes of differences whatsoever which shall at any time hereafter (whether during the continuance and in force of this Agreement or upon or after it discharges or determination) arise between the parties hereto or their respective successors in title and assigns touching or concerning this Agreement or its interpretation or effect or as to the rights duties and liabilities of the parties and liabilities of the parties hereto or either of them under or by virtue of this Agreement or otherwise as to any other matter in any way connected with arising out of or in relation to the subject matter of this Agreement shall in accordance with the subject to the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof for the time being in force be referred to a single arbitrator if agreed upon by the parties or otherwise to the arbitration of two arbitrators to be appointed by each party to the dispute whose decision in the matters shall be final and binding on the parties hereto.”
It will have to be noticed that the above clause did not refer to any specific named arbitrator or arbitrators.
3. Considerable amounts were paid under the above said three main agreements to the appellant. The appellant would contend there was default on part of the respondents while the respondents would contend that there was no progress in the construction.
4. There were three other separate agreements dated 9.3.94, 9.3.94 and 29.6.94 (hereinafter called the Interior Design Agreements) between the appellant and the same identical purchasers in which the appellant was appointed a ‘Interior Designer’ for carrying out renovation and interior designing and decorating the respective flats and the exterior area and to provide/install the special amenities in the flats for a lumpsum payment of Rs. 10 lakhs each. No amount was, however, paid to the appellant under these three agreements before
