1. Civil suit seeking declaration of Conveyance Deed void and Development Agreements terminated — Application under Section 8, Arbitration and Conciliation Act, 1996 for referral to arbitration. (Para 1 , 2 , 4 , 5 )
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2023 Supreme(SC) 1229
SUPREME COURT OF INDIA
ANIRUDDHA BOSE, SUDHANSHU DHULIA, JJ.
Sushma Shivkumar Daga and Another – Appellants
Versus
Madhurkumar Ramkrishnaji Bajaj and Others – Respondents
Civil Appeal No. 1854 of 2023
Decided On : 15-12-2023
Important Points
IMPORTANT POINT
Arbitral Tribunal is competent to decide on its own competence – Plea of fraud must be serious in nature in order to oust jurisdiction of Arbitrator.
Arbitral Tribunal is competent to decide on its own competence – Plea of fraud must be serious in nature in order to oust jurisdiction of Arbitrator.
Subject
Arbitration Law - Reference to Arbitration
Act Referred
Headnote
Arbitration and Conciliation Act, 1996 – Sections 8, 11(6) and 16 – Reference to arbitration – Termination of Development Agreements – All jurisdictional issues including existence and validity of arbitration clause can be gone into by Arbitral Tribunal – Arbitral Tribunal is competent to decide on its own competence – Scope of judicial scrutiny at stage of Section 11 (6) or Section 8 is extremely limited – Plea of fraud must be serious in nature in order to oust jurisdiction of Arbitrator – Allegations must have some implication in public domain to oust jurisdiction of Arbitrator. (Paras 15, 17, 20)
Facts of the case:
Only question to be decided is whether Trial Court and High Court have rightly referred the matter to arbitration or dispute is of such a nature that it is not liable to be referred to arbitration, as there was no arbitration clause in Conveyance Deed dated 17.12.2019 or if there was, yet the matter in any case is such that it is not arbitrable.
Findings of Court:
There is absolutely no ambiguity that both Tripartite Agreements dated 31.03.2007 and 25.07.2008 contain an arbitration clause, which forms basis of all subsequent agreements including agreements sought to be declared as validly terminated by appellants and conveyance deed sought to be declared as null and void. Both trial court as well as High Court have given a correct finding on facts as well as on law. We find no scope for interference in the matter.
Result : Appeal dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. Devansh Mohta, Adv. Mr. Shirish K. Deshpande, AOR Ms. Rucha Pravin Mundlik, Adv. Ms. Harsimran Kaur Rai, Adv. Mr. Gaurangi Patil, Adv. Mr. Mohit Gautam, Adv. Mr. Apoorv Sharma, Adv.
For the Respondent(s): Mr. E. C. Agrawala, AOR Mr. Tishampati Sen, AOR Ms. Riddhi Sancheti, Adv. Mr. Anurag Anand, Adv. Mr. Himanshu Kaushal, Adv. Mr. Mukul Kulhari, Adv.
For the Appellant(s) : Mr. Devansh Mohta, Adv. Mr. Shirish K. Deshpande, AOR Ms. Rucha Pravin Mundlik, Adv. Ms. Harsimran Kaur Rai, Adv. Mr. Gaurangi Patil, Adv. Mr. Mohit Gautam, Adv. Mr. Apoorv Sharma, Adv.
For the Respondent(s): Mr. E. C. Agrawala, AOR Mr. Tishampati Sen, AOR Ms. Riddhi Sancheti, Adv. Mr. Anurag Anand, Adv. Mr. Himanshu Kaushal, Adv. Mr. Mukul Kulhari, Adv.
Table of Contents
2. Dispute non-arbitrable due to absence of arbitration clause in Conveyance Deed — Suit for cancellation of immovable property deed constitutes action in rem — Allegations of fraud. (Para 2 , 18 , 19 , 20 )
3. Judicial intervention in arbitration is minimal — Arbitration clauses in foundational agreements cover subsequent derived documents — Suit for cancellation of a deed is an action in personam. (Para 6 , 7 , 8 , 17 , 19 , 20 )
4. A judicial authority shall refer parties to arbitration unless it finds prima facie no valid arbitration agreement exists or the dispute is manifestly non-arbitrable. (Para 7 , 11 , 12 , 17 )
5. Appeal dismissed; referral of the matter to arbitration by the Trial Court and High Court upheld. (Para 21 )
6. What is the scope of judicial intervention under Section 8 of the Arbitration and Conciliation Act, 1996?
Judicial intervention is extremely limited. A court must refer parties to arbitration unless it finds prima facie that no valid arbitration agreement exists or the dispute is manifestly non-arbitrable. (Para 7 , 12 , 17 )
7. Is a suit for the cancellation of a deed relating to immovable property arbitrable?
Yes. A suit for cancellation of a deed or a declaration of rights arising from a deed is considered an action in personam, not an action in rem, and is therefore arbitrable. (Para 19 )
8. What is the doctrine of kompetenz-kompetenz under Section 16 of the Arbitration Act?
The doctrine implies that the arbitral tribunal is empowered to rule on its own jurisdiction, including determining the existence or validity of the arbitration agreement, to minimize judicial interference. (Para 14 , 15 , 16 )
9. When does an allegation of fraud oust the jurisdiction of an arbitral tribunal?
Fraud must be serious and either permeate the entire contract, including the arbitration agreement, or have implications in the public domain; fraud strictly between parties does not bar arbitration. (Para 20 )
10. What are the criteria for determining if a dispute is non-arbitrable?
A dispute is non-arbitrable if it relates to actions in rem, affects third-party rights (erga omnes), involves inalienable sovereign and public interest functions, or is expressly barred by mandatory statutes. (Para 11 )
JUDGMENT :
SUDHANSHU DHULIA, J.
1. The appellants before this Court were the plaintiffs in a civil suit, filed in the year 2021, seeking declaration that the Conveyance Deed dated 17.12.2019 to be declared null and void, and that the registered Development Agreements dated 17.09.2007, 20.11.2007, 30.11.2007, 03.12.2007 and 27.02.2008 stand validly terminated. The respondents/ defendants moved an application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Arbitration Act”) for referring the matter to arbitration by relying upon the arbitral clause in the two agreements dated 31.03.2007 and 25.07.2008. It was contended that the aforesaid agreements formed the basis of the Conveyance Deed and the Development Agreements which are subject matter of the suit. The Trial Court allowed the application of the defendant and referred the matter for arbitration, vide its order dated 13.10.2021. This order was challenged in Writ Petition No. 8836 of 2021 by the appellants/plaintiffs before the Bombay High Court, which was dismissed vide order dated 10.12.2021. Aggrieved by these two orders, the appellants/plaintiffs are now before this Court.
2. The only question to be decided by us here is whether the Trial Court and the High Court have rightly referred the matter to arbitration or the dispute is of such a nature that it is not liable to be referred to arbitration, as there was no arbitration clause in the Conveyance Deed dated 17.12.2019 or if there was, yet the matter in any case is such that it is not arbitrable. The brief facts of the case are as follows:
M/s Emerald Acres Private Limited (respondent no. 2) was incorporated by Late Mr. Shivkumar Daga and his wife, Mrs. Sushma Shivkumar Daga (appellant no. 1) on 18.04.2006 to carry on the business of real-estate development. Subsequently, two Tripartite Agreements were signed between Shivkumar Daga (hereinafter referred to as ‘SD’) Madhurkumar Ramakrishnaji Bajaj and Others (hereinafter referred to as ‘MB’) and M/s. Emerald Acres Private Limited (hereinafter referred to as ‘EAPL’) to develop, trade, and deal with the property and also to acquire such further properties as may be mutually agreed between the parties. Both the Tripartite Agreements dated 31.03.2007 and 25.07.2008 contain the following arbitration clause:
“It is agreed between Parties that in the event of any disputes or differences between the Parties hereto in relation to this Agreement or in relation to any matter touching or arising from this Agreement, the parties shall refer such disputes and differences to the arbitration under the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification thereof.”
3. Shivkumar Daga died on 08.05.2011, bequeathing his assets through a will dated 10.02.2011 to his wife (appellant no. 1) and his son (appellant no. 2), in which a probate petition has already been filed and as per the records before us the case is still pending.
4. The appellants i.e. SD’s wife and his son then filed a suit seeking, inter-alia, a declaration that the Deed of Conveyance dated 17.12.2019 be declared null and void, and that the Development Agreements entered into pursuant to the two Tripartite Agreements be declared validly terminated.
5. The Conveyance Deed dated 17.12.2019 sought to be declared void and the five Development Agreements dated 17.09.2007, 20.11.2007, 30.11.2007, 03.12.2007 and 27.02.2008 sought to be declared as validly terminated by the appellants, all find their source in the two Tripartite Agreements dated 31.03.2007 and 25.07.2008.
6. The first prerequisite for an application under Section 8, of an arbitration agreement being there in the 2007 and 2008 Tripartite agreements cannot be denied, as all the other Development Agreements find their source in the aforesaid two Tripartite Agreements. The Trial Court and the High Court have rightly held that the broad language of the “arbitration clause” in the two Tripartite Agreement
