Delhi High Court
Badrinath Kakkar & Anr. vs M/S Ansal Properties And … on 29 October, 2024
Author: Sachin Datta
Bench: Sachin Datta
$~J-1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment pronounced on: 29.10.2024
+ ARB.P. 721/2022
SURESH KUMAR KAKKAR & ANR ..... Petitioners
Through: Ms. Akanksha Kaul, Mr. Harsh Sethi
and Mr. Anant, Advocates.
versus
M/S ANSAL PROPERTIES
AND INFRASTRUCTURE LIMITED & ANR. ..... Respondents
Through: Mr. Ravi Sikri, Sr. Adv. alongwith
Mr. Sachin Midha, Mr. Deepank
Yadav, Mr. Aditya Vikram Bajpai
and Ms. Kanak Grover, Adv. for R1.
Mr. Aditya Kumar and Mr. Parv
Verma, Advocates for R3.
Mr. Vijay Kasana, Mr. Abhijeet
Vikram Singh and Mr. Kshitij
Chhabra, Advocates for R4.
Mr. Ajay Choudhary and Mr. Bhanu
Gupta, Advocates for R5.
+ O.M.P.(I) (COMM.) 14/2022, CRL.M.A. 23067/2022, I.A.
18367/2022, I.A. 9831/2023
SURESH KUMAR KAKKAR & ANR ..... Petitioners
Through: Ms. Akanksha Kaul, Mr. Harsh Sethi
and Mr. Anant, Advocates.
versus
M/S ANSAL PROPERTIES
AND INFRASTRUCTURE LIMITED & ANR. ... Respondents
Through: Mr. Ravi Sikri, Sr. Adv. alongwith
Mr. Sachin Midha, Mr. Deepank
Signature Not Verified
Digitally Signed ARB.P. 721/2022 & Connected Matters Page 1 of 24
By:KAMLA RAWAT
Signing Date:07.11.2024
16:48:09
Yadav, Mr. Aditya Vikram Bajpai
and Ms. Kanak Grover, Adv. for R1.
Mr. Aditya Kumar and Mr. Parv
Verma, Advocates for R3.
Mr. Vijay Kasana, Mr. Abhijeet
Vikram Singh and Mr. Kshitij
Chhabra, Advocates for R4.
Mr. Ajay Choudhary and Mr. Bhanu
Gupta, Advocates for R5.
+ ARB.P. 722/2022
BADRINATH KAKKAR & ANR ..... Petitioners
Through: Mr. Harsh Sethi, Mr. Anant Nigam
and Mr. Raghav Luthra, Advs
versus
M/S ANSAL PROPERTIES
AND INFRASTRUCTURE LIMITED& ANR. ..... Respondents
Through: Mr. Tanmay Mehta and Mr. Nikhil
Palli, Advs. for R-3 and 4.
+ OMP(I) (COMM) 15/2022 & IA Nos. 5424/2022, 7587/2022,
8605/2023
BADRINATH KAKKAR & ANR ..... Petitioners
Through: Mr. Harsh Sethi, Mr. Anant Nigam
and Mr. Raghav Luthra, Advs.
versus
M/S ANSAL PROPERTIES
AND INFRASTRUCTURE LIMITED& ANR. ..... Respondents
Through: Mr. Sachin Midha, Mr. Aditya and
Mr. Vikram Bajpai, Advs. for R-I and
2.
Mr. Nikhil Palli, Adv. for R4.
CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA
JUDGMENT
Signature Not Verified
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By:KAMLA RAWAT
Signing Date:07.11.2024
16:48:09
ARB.P. 721/2022
1. This is a petition under Section 11 of the Arbitration and Conciliation
Act, 1996 (hereafter ‘A&C Act’) seeking appointment of a sole arbitrator to
adjudicate the disputes between the parties.
Factual Background
2. The Family Members / Companies of the petitioner no.1 and the
respondent no.1 (Ansal Properties and Infrastructure Ltd.) have entered into
Four Collaboration Agreements dated 14.10.2010.
3. This petition is concerned with the Third Collaboration Agreement
dated 14.10.2010 (hereafter ‘Third Collaboration Agreement’). The said
Third Collaboration Agreement has been executed between petitioner no.1
and respondent no.1 in respect of land admeasuring 28 Kanal, 12 Marla
(3.575 Acre.), situated in revenue estate of village Badshahpur, Tehsil &
District Gurgaon in Sector 67, Gurgaon. The purport of the said agreement
was that the respondent no.1 would develop the said land and construct a
Residential/Group Housing/Commercial Colony thereon. Clause 7 of the
said agreement mentions that the petitioner/owner’s share in the said project
shall be an area of 5183.75 Sq Yd. of the developed residential plots and the
respondent no.1/ developer’s share shall comprise the balance area of the
residential plots and the entire community, commercial and other sites
including sites for EWS/LIG categories.
4. Pursuant to execution of the aforesaid Third Collaboration Agreement
on 14.10.2010, Plot Buyer Agreements dated 23.12.2010 came to be
executed between the petitioner no.1, respondent no. l and a group company
of respondent no. l i.e. M/s Ansal Townships & Infrastructure Ltd., (the
respondent no.2 herein), as a Confirming Party, whereby specific Plot No(s).
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By:KAMLA RAWAT
Signing Date:07.11.2024
16:48:09
C-1018 and C-1019, Esencia, Sector-67, Gurugram, Haryana (hereafter
‘Plots’) were allotted to the petitioner no.1. However, neither the possession
of the Plots was handed over to the petitioner no.1 nor the sale deeds were
executed.
5. Certain disputes have also arisen between the parties in relation to the
land admeasuring 9 Kanal & 1 Marla (1.1312 acres) situated in the revenue
estate of village Badshahpur, Tehsil & Distt. Gurgaon in Sector 67,
Gurgaon, purportedly forming part of the Fourth Collaboration Agreement.
Pursuant thereto, vide letter dated 29.11.2018, the respondent no.1
froze/suspended the handing over of possession of the aforesaid plots to the
petitioners.
6. Disputes having arisen between the parties, the petitioners sent notice
invoking arbitration dated 14.04.2022 to the respondent no.1 and 2, invoking
the arbitration clause contained in the Third Collaboration Agreement dated
14.10.2010. However, no reply thereto is stated to have been sent by the said
respondents. The arbitration clause reads as under:
“29. That the dispute, if any, arising out of this agreement, the same
shall be referred for arbitration to a sole arbitrator. The
proceeding of arbitration shall be in accordance with Arbitration
and Conciliation Act, the language of arbitration shall be English
and the venue shall be New Delhi/Delhi only. The Courts having
jurisdiction at Delhi/New Delhi shall be competent to entertain
and dispose any issue arising out of this indenture.”
7. After filing of the present petition, certain additional facts have come
to light. Vide sale deeds dated 10.12.2018, Plot Nos. C-1018 and C-1019 had
been sold by respondent no.1 to M/s RSD Finance Ltd, who is arrayed as
respondent no.3 in the present petition. These plots have been carved
out/form part of the land which is the subject matter of the settlement
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By:KAMLA RAWAT
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16:48:09
agreement. Respondent no.3 had further sold Plot No. C-1018 to ‘Omwati’,
and Plot No. C-1019 to M/s Alliance Land Developers Pvt. Ltd., who were,
consequently, arrayed as respondent no. 4 and 5 respectively in the present
petition. The petitioners have sent notice invoking arbitration to respondent
no. 3 to 5 on 11.10.2023. However, no reply thereto was sent by the said
respondents.
Submissions of the parties
8. Learned counsel for the petitioners has submitted that vide order dated
18.09.2023 the respondent nos. 1 and 2 have already consented for
constituting an arbitral tribunal to resolve the disputes between the parties.
So far as respondent nos. 3 to 5 are concerned, it is submitted that the said
respondents ultimately claim their purported title to the plots through
respondent nos. 1 and 2 and therefore the assignees and/or have acquired the
benefits which have accrued to the respondent nos. 1 and 2 under the
Collaboration Agreement. It is submitted that the Third Collaboration
Agreement, which contains the arbitration clause, defines the term
“developer” to include its assignees. It is also submitted that the said
respondents have impliedly consented to remain bound by the arbitration
clause. In support of these submissions reliance has been placed on Rajesh
Gupta v. Mohit Lata Sunda, 1 and Shapoorji Pallonji and Co. Pvt. Ltd. v.
Rattan India Power Ltd.2. Learned counsel for the petitioner has also made
submission on the merits of the disputes. It is submitted that the petitioners
are the owner of the land and at no point any sale deed was executed by the
petitioners in favour of respondent no.1. The respondent nos.1 and 2 have
1
(2020) 269 DLT 575
2
(2021) 281 DLT 246
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By:KAMLA RAWAT
Signing Date:07.11.2024
16:48:09
allotted the Plots to the petitioners and at no point the said allotment was
cancelled. The Plots are the petitioner’s share of developed land under the
Third Collaboration agreement and the same could not have been dealt/sold
by the respondent nos.1 and 2. It is alleged that the respondent nos. 3 to 5
are not bona fide purchasers.
9. Learned senior counsel for the respondent nos.1 and 2 had initially
opposed the appointment of an arbitrator. However, as recorded in order
dated 18.09.2023, learned senior counsel submitted, on instructions, that the
said respondents have no objection to the constitution of an arbitral tribunal
to comprehensively adjudicate the disputes between the parties.
10. Learned counsel for the respondent no. 3 has submitted that the
respondent no. 3 is a bonafide purchaser of the said Plot Nos. C-1018 and C-
1019. It is submitted that the respondent no. 3 had been allotted / purchased
the Plots as a part of a settlement with the respondent no.1 and another
group company of respondent no.1. It is submitted that respondent no. 1
being the absolute owner of the Plots transferred the same to respondent no.
3 in accordance with law. It is submitted that the respondent no. 3 had
further sold the Plots to respondent nos.4 and 5. It is submitted that
respondent no. 3 is not a party to the Third Collaboration Agreement; being
a third-party and a non-signatory to the Third Collaboration Agreement, it
cannot be made a party to the arbitration. It is contended that in these
circumstances, the respondent no. 3 cannot be referred to arbitration under
the said agreement. In this regard, reliance has been placed on Gujarat
Composite Ltd. v. A Infrastructure Ltd., 3 and Chloro Controls India (P)
3
(2023) 7 SCC 193
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By:KAMLA RAWAT
Signing Date:07.11.2024
16:48:09
Ltd. v. Severn Trent Water Purification Inc. 4. It is submitted that the
contention to the effect that the respondent no.3 is the assignee of the
respondent no.1 is without any merit. There is no assignment of
rights/obligations under the Third Collaboration Agreement from respondent
no. 1 to respondent no. 3. Reliance has also been placed on Kapilaben v.
Ashok Kumar Jayantilal Sheth,5 to submit that such an assignment is
impermissible in law. It is further submitted that disputes, if any, have arisen
under the Plot Buyer Agreements which do not contain an arbitration clause.
It is submitted that if petitioners are desirous of filing a claim of specific
performance and for cancellation of the subsequently executed sale deeds
and other relevant documents, appropriate remedy would be a suit and not
arbitration.
11. Learned counsel for the respondent no.4 has submitted that the
respondent no. 4 is a bonafide purchaser of Plot No. C-1018 having
purchased it from respondent no. 3 vide registered sale deed dated
03.03.2021 for a lawful consideration, who in turn had purchased it from
respondent no.1. It is submitted that the petitioners are not the owners of
Plot No. C-1018. It is submitted that as per Haryana Development and
Regulations of Urban Areas Act, 1975, the petitioners had vested their land
for development to the developer/respondent no.1, who has obtained licence
for development from the Director, Town and Country Planning, Haryana.
Once the license has been obtained by the developer, the said developer
becomes the absolute owner of the land and only the developer can execute
sale deed/conveyance deed in respect thereof. It is submitted that Plot Buyer
4
(2013) 1 SCC 641
5
(2020) 20 SCC 648
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By:KAMLA RAWAT
Signing Date:07.11.2024
16:48:09
Agreement at clause F clearly records that the petitioner no. 1 was
‘provisionally’ allotted Plot No. C-1018; the said allotment agreement was
cancelled on 29.11.2018. It is submitted that even if petitioners were the real
owners of the Plot, the respondent no.3 had purchased the Plots from the
ostensible owner/respondent no.1 and thus the rights of the respondent nos.
3 and 4 are protected under Section 41 of The Transfer of Property Act,
1882. It is further submitted that the arbitration clause contained in the Third
Collaboration Agreement was novated with the jurisdiction clause entered
into the Plot Buyer Agreements dated 23.12.2010 and therefore the present
petition is not maintainable. It is further submitted that the claim of the
petitioners seeking cancellation of sale deed executed in favour of
respondent no. 3 and subsequently in favour of respondent no. 4 by
respondent no. 3 is beyond the scope of the arbitration clause. It is also
submitted that the respondent no.4 is a non-signatory/third party to the Third
Collaboration Agreement. It is submitted that there is no legal basis to
compel the respondent no.4 to arbitrate. In its written submissions, the said
respondent sought to place reliance on the following judgements:
Ramcoomar Koondoo v. Macqueen6, Harphool Singh v. Daropati 7,
Sankara Hali &Sankara Institute of Philosophy and Culture v. Kishori
Lal Goenka 8, Vidya Drolia v. Durga Trading Corpn. 9, Alupro Building
Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd. 10, Florentine Estates of6
1872 SCC OnLine PC 29 : (1811-72) 4 IR 541
7
2011 SCC OnLine Del 957, the said judgment has been set aside by the Supreme Court in Daropti v.
Harphool Singh, (2013) 10 SCC 622
8
(1996) 7 SCC 55
9
(2021) 2 SCC 1
10
(2017) 162 DRJ 412Signature Not Verified
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By:KAMLA RAWAT
Signing Date:07.11.2024
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India Ltd. v. Lokesh Dahiya 11, Gujarat Composite Limited (supra), Simran
Sodhi v. Sandeep Singh, 12 and Cox & Kings Ltd. v. SAP India (P) Ltd.
(3J). 13
12. Learned counsel for the respondent no.5 has submitted that the
respondent no. 5 is a bonafide purchaser of Plot No. C-1019 having
purchased it from respondent no. 3 vide registered sale deed dated
30.09.2020 for valuable consideration. It is submitted that no litigation/
charge or lien pending against the Plots was reflected anywhere in the
records of the Department of Town & Country Planning, Haryana at the
time of purchase. The developer/respondent no.1 had duly transferred the
Plots to respondent no.3, as it possessed rights to sale/ transfer the developed
land. It is submitted that respondent no. 5 is neither a party nor is a person
claiming through or under any party, under the Third Collaboration
Agreement; therefore, the terms of the said agreement, including arbitration
clause, do not bind the respondent no. 5. It is further submitted that disputes
sought to be raised against respondent no.5 are beyond the scope of the
arbitration clause. It is also submitted that disputes, if any, arise out of the
Plot Buyer Agreement and the said agreement does not have an arbitration
clause. In support of these submissions, reliance has been placed on S.N.
Prasad v. Monnet Finance Ltd., 14 Sukanya Holdings (P) Ltd. v. Jayesh H.
Pandya,15 Usha D. Rana vs Raj State Coop. Tribunal Jaipur,16 Deutsche11
(2022) 295 DLT 722
12
(2023) 296 DLT 363
13
(2022) 8 SCC 1
14
(2011) 1 SCC 320
15
(2003) 5 SCC 531
16
Order dated 13.09.2022 passed by Rajasthan High Court bench at Jaipur in S.B. Civil Writ Petition No.
4540/2006Signature Not Verified
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By:KAMLA RAWAT
Signing Date:07.11.2024
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Post Bank Home Finance Ltd. v. Taduri Sridhar.17
Analysis and Findings
13. I have perused the record and heard counsel for the parties.
14. At the outset, it is important to note that in terms of the judgment of
the Supreme Court in In Re: Interplay Between Arbitration Agreements
under A&C Act, 1996 & Stamp Act, 1899 – (7J),18 and as further explained
in SBI General Insurance Co. Ltd. v. Krish Spinning, 19 the scope of
examination under Section 11 of the A&C is confined to the ‘existence’ of
an arbitration agreement. Further, it is not permissible to take recourse to/
apply tests like the “eye of the needle” and “ex-facie meritless” to decline
reference to arbitration, and that the observations to the contrary in some
prior judgements such as NTPC Ltd. v. SPML Infra Ltd.20and Vidya Drolia
(supra), are not in conformity with the principles of modern arbitration. In
SBI General Insurance (supra), it has been held as under:
“114. In view of the observations made by this Court in In Re :
Interplay (supra), it is clear that the scope of enquiry at the stage of
appointment of arbitrator is limited to the scrutiny of prima facie
existence of the arbitration agreement, and nothing else. For this reason,
we find it difficult to hold that the observations made in Vidya
Drolia (supra) and adopted in NTPC v. SPML (supra) that the jurisdiction
of the referral court when dealing with the issue of “accord and
satisfaction” under Section 11 extends to weeding out ex-facie non-
arbitrable and frivolous disputes would continue to apply despite the
subsequent decision in In Re : Interplay (supra).
xxx xxx xxx
118. Tests like the “eye of the needle” and “ex-facie meritless”, although
try to minimise the extent of judicial interference, yet they require the
referral court to examine contested facts and appreciate prima facie17
(2011) 11 SCC 375
18
(2024) 6 SCC 1
19
2024 SCC OnLine SC 1754
20
(2023) 9 SCC 385Signature Not Verified
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evidence (however limited the scope of enquiry may be) and thus are not
in conformity with the principles of modern arbitration which place
arbitral autonomy and judicial non-interference on the highest pedestal.
119. Appointment of an arbitral tribunal at the stage of Section 11 petition
also does not mean that the referral courts forego any scope of judicial
review of the adjudication done by the arbitral tribunal. The Act, 1996
clearly vests the national courts with the power of subsequent review by
which the award passed by an arbitrator may be subjected to challenge by
any of the parties to the arbitration.
xxx xxx xxx
125. We are also of the view that ex-facie frivolity and dishonesty in
litigation is an aspect which the arbitral tribunal is equally, if not more,
capable to decide upon the appreciation of the evidence adduced by the
parties. We say so because the arbitral tribunal has the benefit of going
through all the relevant evidence and pleadings in much more detail than
the referral court. If the referral court is able to see the frivolity in the
litigation on the basis of bare minimum pleadings, then it would be
incorrect to doubt that the arbitral tribunal would not be able to arrive at
the same inference, most likely in the first few hearings itself, with the
benefit of extensive pleadings and evidentiary material.”
15. In context of a situation where non-signatories are sought to be
impleaded in arbitration, the standard of determination at the reference
stage, has been set out by the Supreme Court in Cox & Kings Ltd. v. SAP
India (P) Ltd. – (5J), 21 wherein it has been held as under:
“G. The standard of determination at the referral stage — Sections 8
and 11[…]
164. In Vidya Drolia, N.V. Ramana, J. (as the learned Chief Justice then
was) held that the amendment to Section 8 rectified the shortcomings
pointed out in Chloro Controls with respect to domestic arbitration. He
further observed that the issue of determination of parties to an
arbitration agreement is a complicated exercise, and should best be left
to the Arbitral Tribunals : (Vidya Drolia case, SCC p. 161, para 239)“239. … Jurisdictional issues concerning whether certain parties
21
(2024) 4 SCC 1Signature Not Verified
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are bound by a particular arbitration, under group-company
doctrine or good faith, etc. in a multi-party arbitration raises
complicated factual questions, which are best left for the tribunal
to handle. The amendment to Section 8 on this front also indicates
the legislative intention to further reduce the judicial interference
at the stage of reference.”
165. In Pravin Electricals (P) Ltd. v. Galaxy Infra &Engg. (P) Ltd., a
Bench of three Judges of this Court was called upon to decide an appeal
arising out of a petition filed under Section 11(6) of the Arbitration Act for
appointment of sole arbitrator. The issue before the Court was the
determination of existence of an arbitration agreement on the basis of the
documentary evidence produced by the parties. This Court prima facie
opined that there was no conclusive evidence to infer the existence of a
valid arbitration agreement between the parties. Therefore, the issue of
existence of a valid arbitration agreement was referred to be decided by
the Arbitral Tribunal after conducting a detailed examination of
documentary evidence and cross-examination of witnesses.
166. The above position of law leads us to the inevitable conclusion that
at the referral stage, the Court only has to determine the prima facie
existence of an arbitration agreement. If the referral court cannot decide
the issue, it should leave it to be decided by the Arbitral Tribunal. The
referral court should not unnecessarily interfere with arbitration
proceedings, and rather allow the Arbitral Tribunal to exercise its
primary jurisdiction. In Shin-Etsu Chemical Co. Ltd. v. AkshOptifibre
Ltd., this Court observed that there are distinct advantages to leaving the
final determination on matters pertaining to the validity of an arbitration
agreement to the Tribunal : (Shin-Etsu Chemical Co. case SCC p. 267,
para 74)
“74. … Even if the Court takes the view that the arbitral
agreement is not vitiated or that it is not valid, inoperative or
unenforceable, based upon purely a prima facie view, nothing
prevents the arbitrator from trying the issue fully and rendering a
final decision thereupon. If the arbitrator finds the agreement
valid, there is no problem as the arbitration will proceed and the
award will be made. However, if the arbitrator finds the agreement
invalid, inoperative or void, this means that the party who wanted
to proceed for arbitration was given an opportunity of proceeding
to arbitration, and the arbitrator after fully trying the issue has
found that there is no scope for arbitration.”
167. In Chloro Controls, this Court held that it is the legislative intent of
Section 45 of the Arbitration Act to give a finding on whether an
arbitration agreement is “null and void, inoperative and incapable of
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being performed” before referring the parties to arbitration. In 2019, the
expression “unless it prima facie finds” was inserted in Section 45. In
view of the legislative amendment, the basis of the above holding
of Chloro Controls1 has been expressly taken away. The present position
of law is that the referral court only needs to give a prima facie finding on
the validity or existence of an arbitration agreement.
168. In Deutsche Post Bank Home Finance Ltd. v. Taduri Sridhar, a two-
Judge Bench of this Court held that when a third party is impleaded in a
petition under Section 11(6) of the Arbitration Act, the referral court
should delete or exclude such third party from the array of parties before
referring the matter to the Tribunal. This observation was made prior to
the decision of this Court in Chloro Controls and is no longer relevant in
light of the current position of law. Thus, when a non-signatory person
or entity is arrayed as a party at Section 8 or Section 11 stage, the
referral court should prima facie determine the validity or existence of
the arbitration agreement, as the case may be, and leave it for the
Arbitral Tribunal to decide whether the non-signatory is bound by the
arbitration agreement.
169. In case of joinder of non-signatory parties to an arbitration
agreement, the following two scenarios will prominently emerge : first,
where a signatory party to an arbitration agreement seeks joinder of a
non-signatory party to the arbitration agreement; and second, where a
non-signatory party itself seeks invocation of an arbitration agreement. In
both the scenarios, the referral court will be required to prima facie rule
on the existence of the arbitration agreement and whether the non-
signatory is a veritable party to the arbitration agreement. In view of the
complexity of such a determination, the referral court should leave it for
the Arbitral Tribunal to decide whether the non-signatory party is indeed
a party to the arbitration agreement on the basis of the factual evidence
and application of legal doctrine. The Tribunal can delve into the factual,
circumstantial, and legal aspects of the matter to decide whether its
jurisdiction extends to the non-signatory party. In the process, the
Tribunal should comply with the requirements of principles of natural
justice such as giving opportunity to the non-signatory to raise objections
with regard to the jurisdiction of the Arbitral Tribunal. This interpretation
also gives true effect to the doctrine of competence-competence by leaving
the issue of determination of true parties to an arbitration agreement to be
decided by the Arbitral Tribunal under Section 16.
H. Conclusions
170 […]
170.12. At the referral stage, the referral court should leave it for the
Arbitral Tribunal to decide whether the non-signatory is bound by the
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arbitration agreement […]”
After the aforesaid decision of the Constitution Bench, the matter was
placed before the regular bench of the Supreme Court for adjudication, and
in Cox & Kings Ltd. v. SAP India (P) Ltd., 22 on the issue of impleadment of
non-signatory, it has held as under:
“34. Further, on the issue of impleadment of respondent no. 2, which is
not a signatory to the arbitration agreement, elaborate submissions have
been made on both the sides, placing reliance on terms of the agreements,
email exchanges, etc. In view of the complexity involved in the
determination of the question as to whether the respondent no. 2 is a party
to the arbitration agreement or not, we are of the view that it would be
appropriate for the arbitral tribunal to take a call on the question after
taking into consideration the evidence adduced before it by the parties and
the application of the legal doctrine as elaborated in the decision in Cox
and Kings (supra).”
16. In the present case, the existence of an arbitration agreement in the
Third Collaboration Agreement is not in dispute. The petitioners and
respondent nos.1 and 2 have also consented to refer the disputes arising
between them out of the Third Collaboration Agreement and the Plot Buyers
Agreement to arbitration. Consequently, there is no impediment to refer the
said parties to arbitration.
17. Respondent nos. 3 to 5 are non-signatories to the Third Collaboration
Agreement. The petitioners have to at least demonstrate, prima facie that the
impleadment of non-signatories parties to arbitration is warranted based on a
cognizable legal theory/doctrine.
18. It is well settled now that the definition of “parties” under Section
2(1)(h) read with Section 7 of the A&C Act can include both, signatory as
well as non-signatory parties.
22
2024 INSC 670
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19. In the present case, the petitioners claim that the respondent nos. 3 to
5 have derived rights from the respondent no.1/developer and are the
“assignees” of the rights/ benefits which have accrued in favour of the
respondent no.1 under the Third Collaboration Agreement. It is submitted
that the definition of “developer” under the Third Collaboration Agreement
includes its assigns. It is further submitted that respondent no. 3 to 5 claims
title to the Plots on the strength of the Third Collaboration Agreement and
thus have impliedly consented to remain bound by the arbitration clause
contained in the Third Collaboration Agreement.
20. Apart from the aforesaid aspect, the petitioners have also relied upon
other legal basis to implead respondent no.3 to 5 in the arbitration
proceedings. It has been pointed out that the judgment of the Supreme Court
in Chloro Controls India (supra) recognizes that the impleadment of non-
signatories can be based on non-consensual theories/doctrines, particularly,
if the non-signatories are beneficiaries of the rights and obligations created
under the principal contract (Collaboration Agreement). In this regard,
reliance has been placed on the Paragraph 103.1 23 and 103.2 24 of the
judgment of the Supreme Court in Chloro Controls India (supra).
21. In Shapoorji Pallonji (supra), it has been expressly noticed that
several jurisdictions have drawn heavily on the principle of estoppel to
include non-signatories within the sweep of an arbitration agreement.
Particularly so, when the rights created in favour of the non-signatories are
23
“103.1. The first theory is that of implied consent, third-party beneficiaries, guarantors, assignment and
other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the
parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities.”
24
103.2. The second theory includes the legal doctrines of agent-principal relations, apparent authority,
piercing of veil (also called “the alter ego”), joint venture relations, succession and estoppel. They do not
rely on the parties’ intention but rather on the force of the applicable law.”
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pursuant to the benefits derived under the main agreement containing the
arbitration clause. In this regard reference may be made to Paragraph 30 to
32 of the judgment in case of Shapoorji Pallonji (supra) as under:
“30. Courts in several jurisdictions have drawn heavily on the principle of
estoppel and have compelled non-signatories to arbitrate.
31. In Avila Group Inc. v. Norma J. of California : 426 F. Supp. 537
(S.D.N.Y. 1977) the court found that a party cannot assert the existence of
a valid contract to base its claims and at the same time deny the contract’s
existence to avoid arbitration. The court observed that “to allow
[plaintiff] to claim the benefit of [a] contract and simultaneously avoid its
burdens would both disregard equity and contravene the purposes
underlying enactment of the Arbitration Act.”
32. In Life Techs. Corp. v. AB Sciex Prop. Ltd. : 803 F. Supp. 2d 270, 273-
274 (S.D.N.Y. 2011) it was held that “a non-signatory may be estopped
from avoiding arbitration where it knowingly accepted the benefits of an
agreement with an arbitration clause. The benefits must be direct – which
is to say, flowing directly from the agreement”.”
22. In ONGC Ltd. v. Discovery Enterprises (P) Ltd., 25 the Supreme Court
has taken note of the fact that there are at least two distinct estoppel
doctrines that apply in the non-signatories context, that is, ‘the direct
benefits’ estoppel theory and the ‘intertwined’ estoppel theory. It is noticed
that ‘intertwined estoppel theory’ looks at the nature of the disputes between
the signatories and the non-signatories and in particular whether “issues the
non-signatories seeking to resolve in arbitration are intertwined with the
agreement with estoppel (signatory party) signed”. The relevant
observations of the Supreme Court in ONGC Ltd. (supra) are reproduced as
under:-
“37. Gary B. Born in his treatise on International Commercial
Arbitration indicates that:
25
(2022) 8 SCC 42
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“The principal legal basis for holding that a non-signatory is
bound (and benefited) by an arbitration agreement … include both
purely consensual theories (e.g., agency, assumption, assignment)
and non-consensual theories (e.g. estoppel, alter ego).”
38. Explaining the application of the alter ego principle in arbitration,
Born also notes:
“Authorities from virtually all jurisdictions hold that a party who
has not assented to a contract containing an arbitration clause
may nonetheless be bound by the clause if that party is an ‘alter
ego’ of an entity that did execute, or was otherwise a party to, the
agreement. This is a significant, but exceptional, departure from
the fundamental principle … that each company in a group of
companies (a relatively modern concept) is a separate legal entity
possessed of separate rights and liabilities.
***
“the group of companies doctrine is akin to principles of agency or
implied consent, whereby the corporate affiliations among distinct
legal entities provide the foundation for concluding that they were
intended to be parties to an agreement, notwithstanding their
formal status as non-signatories.”
39. Recently, John Fellas elaborated on the principle of binding a non-
signatory to an arbitration agreement from the lens of the doctrine of
estoppel. He situated the rationale behind the application of the principle
of direct estoppel against competing considerations of party autonomy
and consent in interpreting arbitration agreements. Fellas observed that
non-signatory parties can be bound by the principle of direct estoppel to
prohibit such a party from deriving the benefits of a contract while
disavowing the obligations to arbitrate under the same:
“There are at least two distinct types of estoppel doctrine that
apply in the non-signatory context: “the direct benefits” estoppel
theory and the “intertwined” estoppel theory. The direct benefits
theory bears the hallmark of any estoppel doctrine-prohibiting a
party from taking inconsistent positions or seeking to “have it both
ways” by “rely[ing] on the contract when it works to its advantage
and ignor[ing] it when it works to its disadvantage.” Tepper
Realty Co. v. Mosaic Tile Co. The direct benefits doctrine reflects
that core principle by preventing a party from claiming rights
under a contract but, at the same time, disavowing the obligation
to arbitrate in the same contract.
***
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By contrast, the intertwined estoppel theory looks not to whether
any benefit was received by the non-signatory, but rather at the
nature of the dispute between the signatory and the non-signatory,
and, in particular whether “the issues the non-signatory is seeking
to resolve in arbitration are intertwined with the agreement that
the estoppel [signatory party] has signed….the intertwined
estoppel theory has as its central aim the perseveration of the
efficacy of the arbitration process is clear when one looks at the
typical fact pattern of an intertwined estoppel case.”
23. In the present case, it has been brought out that the subject matter of
the Third Collaboration Agreement and also all the subsequent agreements
entered into inter se the respondents is the very same land parcel. All the
agreements are stated to be in pursuance of each other. As such, it is
contended that the necessary parameters/requirements for impleadment of
respondent no.3 to 5 are satisfied despite the said respondents being non-
signatories.
24. In Cox & Kings (5J) (supra), a Five Judge Bench of the Supreme
Court while taking note of the observations in ONGC Ltd. (supra) has also
observed that “the doctrine of arbitral estoppel suggests that a party is
estopped from denying its obligation to arbitrate when it received a “direct
benefit” from a contract containing an arbitration agreement”.(Paragraph
59)
25. Cox & Kings (5J) (supra) also clearly acknowledges that “the issue of
binding a non-signatory to an arbitration agreement is more of a fact-
specific aspect” (para 60) and in this light, has clearly laid down that once
existence of an arbitration agreement is established, the referral court can
leave it to the Arbitral Tribunal to decide whether impleadment of non-
signatory parties is warranted on application of the parameters laid down in
Chloro Control India (supra), ONGC Ltd.(supra) & Cox & Kings (5J)
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(supra).
26. In view of the extensive adjudicatory exercise involved in
determination of the above aspects, and in view of decision of the Supreme
Court in Cox & Kings (5J) (supra), all these issues are best left to be
decided by a duly constituted arbitral tribunal. It is neither apposite nor
permissible for this Court to virtually conduct a mini trial for adjudication of
these issues.
27. I have also considered the judgments cited by the respondents nos.3 to
5, the same do not advance their case in view of the recent authoritative
pronouncements of the Supreme Court in In Re: Interplay (supra) and Cox
and Kings (5J) (supra).
28. In the aforesaid circumstances, at this stage, this Court is inclined to
refer respondent nos. 3 to 5 to arbitration, however, granting liberty to the
said respondents to raise appropriate jurisdictional objections as regards
substantive existence of the arbitration agreement qua the said respondents,
all contentions of the said respondents in this regard shall be duly considered
by the arbitral tribunal, and only if the said objections are rejected, the
tribunal shall proceed to adjudicate the claims of the petitioners against the
respondent nos.3 to 5.
29. Accordingly, the ARB.P. 721/2022 is allowed, Justice (Retd.) D.K
Jain, former Judge, Supreme Court of India (Mob.: 9999922288) is
appointed as the sole arbitrator to adjudicate the disputes between the
parties.
30. All other issues raised by the respondent nos.3 to 5 viz. (i) the
disputes, if any, arising out of Plot Buyer Agreements and not the Third
Collaboration Agreement; (ii) the disputes raised against the said
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respondents are beyond the scope of the arbitration clause;(iii) the said
respondents are bonafide purchasers of the Plots and are protected under the
Transfer of Property Act; (iv) the respondent no. 1 had transferred
ownership of the Plots to respondent no. 3 in accordance with law, shall also
be considered by the learned sole arbitrator in accordance with law.
31. The learned Sole Arbitrator may proceed with the arbitration
proceedings subject to furnishing to the parties requisite disclosures as
required under Section 12 of the A&C Act.
32. The learned Sole Arbitrator shall fix his fees in consultation with the
parties.
33. All rights and contentions of the parties in relation to the
claims/counter-claims are kept open, to be decided by the learned Arbitrator
on their merits, in accordance with law.
ARB. P. 722/2022
34. This is a petition under Section 11 of the A&C Act seeking
appointment of a sole arbitrator to adjudicate the disputes between the
parties. This petition was heard alongside ARB. P. 721/2022.
Factual Background
35. The factual background of the present case is identical to that in
ARB.P No. 721/2022. This petition is concerned with the First Collaboration
Agreement dated 14.10.2010 (hereafter ‘First Collaboration
Agreement’).The First Collaboration Agreement has been executed
between petitioner no.1 and respondent no.1 in respect of land admeasuring
6 Kanal, 9 Marla (0.8062 Acre) situated in the Revenue Estate of Village
Badshahpur, Sector 67, Gurgaon. The purport of the said agreement was that
the respondent no.1 would develop on the said land and construct a
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Residential/Group Housing/Commercial Colony thereon. Clause 7 of the
said agreement mentions that the petitioner/owner’s share in the said project
shall be an area of 1169 Sq Yd. of developed residential plot/s and the
respondent no.1/developer’s share shall be balance area of the residential
plots and the entire community, commercial and other sites including sites
for EWS/LIG categories.
36. Pursuant to execution of the aforesaid First Collaboration Agreement
on 14.10.2010, a Nomination and Assignment Letter dated 20.12.2010 was
issued by petitioner no.1 in favour of petitioner no.2 thereby transferring all
his rights in respect of First Collaboration Agreement to the petitioner no.2.
In furtherance of the First Collaboration Agreement, Plot Buyers
Agreements dated 23.12.2010 came to be executed between the petitioner
no.2, respondent no. l and a group company of respondent no. l i.e. M/s
Ansal Townships & Infrastructure Ltd., (the respondent no.2 herein), as a
Confirming Party, whereby specific plots i.e. plot No(s). C-1204 and A-
0018, Esencia, Sector-67, Gurugram, Haryana were allotted to the petitioner
no.2. Plot No. C-1204 was transferred by petitioner no.2 to Mr. Mahesh
Kumar Raghav through an Agreement to Sell dated 10.04.2012. However,
neither the possession of the plot No. A-0018 was handed over to the
petitioner nor the sale deed was executed.
37. Certain disputes also arose between the parties in relation to land
admeasuring 9 Kanal& 1 Marla (1.1312 acres) situated in revenue estate of
village Badshahpur, Tehsil & Distt. Gurgaon in Sector 67, Gurgaon,
purportedly forming part of the Fourth Collaboration Agreement.
Consequently, vide letter dated 29.11.2018 the respondent no.1
froze/suspended the allotment and handing over of possession of the
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aforesaid plot No. A-0018 to the petitioners.
38. Disputes having arisen between the parties, the petitioners sent a
notice invoking arbitration dated 14.04.2022 to the respondent no.1 and 2,
invoking the arbitration clause contained in the First Collaboration
Agreement dated 14.10.2010. The arbitration clause reads as under:
“29. That the dispute, if any, arising out of this agreement, the same shall be
referred for arbitration to a sole arbitrator. The proceeding of arbitration
shall be in accordance with Arbitration and Conciliation Act, the
language of arbitration shall be English and the venue shall be New
Delhi/Delhi only. The Courts having jurisdiction at Delhi/New Delhi shall
be competent to entertain and dispose any issue arising out of this
indenture.”
39. After filing of the present petition, it has emerged that vide sale deed
dated 15.01.2019, the said Plot No. A-0018 has been sold by respondent
no.1 to Mrs. Anjali Bhasin And Mr. Tejendra Mohan Bhasin. The said
parties have been arrayed as respondent no.3 & 4 respectively in the present
petition. The petitioners have sent a notice invoking arbitration to
respondent no. 3 & 4 on 11.10.2023.
Submissions of the parties
40. The submissions made by learned counsel for the petitioner are
completely identical to the submissions made in ARB.P No. 721/2022.
41. Learned senior counsel for the respondent nos.1 and 2 had initially
opposed the appointment of an arbitrator. However, as recorded in order
dated 03.10.2023, learned senior counsel submitted that the said respondents
have no objection to the constitution of an arbitral tribunal to
comprehensively adjudicate the disputes between the parties.
42. Learned counsel for the respondent no.3 and 4 has submitted that the
said respondents are bonafide purchasers of Plot No. A-0018 having
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purchased it from respondent no.1, without any knowledge of the First
Collaboration Agreement or the existence of disputes between the
petitioners and respondent no.1. It is submitted that sine qua non for any
arbitration is the existence of an arbitration agreement in writing between
the parties which is absent in the present case, as respondent nos. 3 and 4,
are not signatories to the First Collaboration Agreements dated 14.10.2010.
It is submitted that the present petitions are not maintainable against the
respondent no.3 and 4. It is emphasised that the said respondents have not by
any act, explicitly or impliedly, agreed to be parties to the arbitration
agreement.
Findings
43. As noticed, the factual conspectus of this petition, is identical in all
respects with the factual conspectus in ARB.P. No. 721/2022. The
submissions of respective counsel are also identical. Accordingly, the
reasoning set out while disposing of ARB. P. 721/2022 squarely applies to
the present case as well.
44. There is no controversy about the existence of the arbitration
agreement in the concerned Collaboration Agreement.
45. In the aforesaid circumstances, at this stage, this Court is inclined to
refer the parties, including respondent nos. 3 and 4 to arbitration, however,
granting liberty to the respondent nos. 3 and 4 to raise appropriate
jurisdictional objections as regards substantive existence of the arbitration
agreement qua the said respondents. All contentions of the said respondents
in this regard shall be duly considered by the arbitral tribunal, and only if the
said objections are rejected, the tribunal shall proceed to adjudicate the
claims of the petitioners against the respondent nos.3 and 4.
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46. Accordingly, the ARB.P. 722/2022 is allowed and Justice (Retd.) D.K
Jain, former Judge, Supreme Court of India (Mob.: 9999922288) is
appointed as the sole arbitrator to adjudicate the disputes between the
parties.
47. The learned Sole Arbitrator may proceed with the arbitration
proceedings subject to furnishing to the parties requisite disclosures as
required under Section 12 of the A&C Act.
48. The learned Sole Arbitrator shall fix his fees in consultation with the
parties.
49. All rights and contentions of the parties in relation to the
claims/counter-claims are kept open, to be decided by the learned Arbitrator
on their merits, in accordance with law.
O.M.P.(I) (COMM.) 14/2022 and O.M.P.(I) (COMM.) 15/2022
50. These petitions under Section 9 of the A&C Act are directed to be
treated as applications under Section 17 of the A&C Act to be decided by
learned sole arbitrator, in accordance with law. The subsisting interim orders
shall continue to operate till the matter is considered by the learned sole
arbitrator.
51. Needless to say, nothing in this order shall be construed as an
expression of opinion of this court on the merits of the case.
52. The present petitions stand disposed of in the above terms. Pending
applications also stand disposed of.
SACHIN DATTA, J
OCTOBER 29, 2024/hg
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