Sushma Shivkumar Daga & Anr. v. Madhurkumar Ramkrishnaji Bajaj & Ors

JUDGMENT SUDHANSHU DHULIA, J. 1. The appellants before this Court were the plaintiff s in a civil suit, fi led 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 & Conciliation Act, 1996 (hereinafter referred to as “Arbitration Act”) for referring the matt er 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 / plaintiff s before the Bombay High Court, whic h was dismissed vide order dated 10.12.2021. Aggrieved by these two orders, the appellants / plaintiff s 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: SUSHMA SHIVKUMAR DAGA & ANR. v. MADHURKUMAR RAMKRISHNAJI BAJAJ & ORS 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 Tripa rtite Agreements were signed between Shivkumar Daga (hereinafter referred to as ‘SD’), Madhurkumar Ramakrishnaji Bajaj & Ors. (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 p arties. 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 diff erences 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 diff erences to the arbitration under the provisions of the Arbitration & Conciliation Act, 1996 or any statutory modifi cation 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 fi led and as pe r the records before us the case is still pending. 4. The appellants i.e., SD’s wife and his son then fi led 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 fi ve 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 fi nd their source in the two Tripartite Agreements dated 31.03.2007 and 25.07.2008. 6. The fi rst 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 fi nd their source in the aforesaid two Tripartite Agreements. The Trial Court and the High 913 Court have rightly held that the broad language of the “arbitration clause” in the two Tripartite Agreements dated 31.03.2007 and 25.07.2008 would cover the dispute raised by the appellants before the Civil Court, and hence the case has been rightly referred for arbitration. 7. The role of a ‘Court’ is now in any case, extremely limi ted in arbitration matters. The underlying principles of arbitration as co ntained in the Arbitration and Conciliation Act, 1996, was always to have as little interference as possible by a judicial authority. Section 5 of the Arbitration Act reads as under: 5. Extent of judicial intervention.— Notwithstanding anything contained in any other law for the time being in force, in matt ers governed by this Part, no judicial authority shall intervene exce pt where so provided in this Part. Major amendments were made in the Arbitration Act in the year 2015, inter alia, both in Section 8 and Section 11 of the Act, in order to further reduce any chances of judicial interference and now the amended Section 8 of the Arbitration Act reads as under: 8. Power to refer parties to arbitration where there is an arbitration agreement.— (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his fi rst statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to arbitration unless it fi nds that prima facie no valid arbitration agreement exists. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the origina l arbitration agreement or a duly certifi ed copy thereof. Provided that where the original arbitration agreement or a certifi ed copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certifi ed copy is retained by the other party to that agreement, then, the party so SUSHMA SHIVKUMAR DAGA & ANR. v. MADHURKUMAR RAMKRISHNAJI BAJAJ & ORS [SUDHANSHU DHULIA, J.] applying shall fi le such application along with a copy of the arbitration agreement and a petition praying the court to call upon the other party to produce the original arbitration agreement or its duly certifi ed copy before that court. (3) Notwithstanding that an application has been made under sub- section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. The amendments in Section 8 and Section 11 of the Arbitration Act were based on the following recommendations made in the 246th Report of the Law Commission of India, 2014: “33. It is in this context, the Commission has recommended amendments to Sections 8 and 11 of the Arbitration and Conciliation Act, 1996. The scope of the judicial intervention is only restricted to situations where the court/judicial authority fi nds that the arbitration agreement does not exist or is null and void. Insofar as the nature of interventi on is concerned, it is recommended that in the event the court/ju dicial authority is prima facie satisfi ed against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it fi nds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that p rima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreem ent to be fi nally determined by the Arbitral Tribunal. However, if the judicial authority concludes that the agreement does not exist , then the conclusion will be fi nal and not prima facie.” Note to the clause for amendment of Section 8 by the Arbitration and Conciliation (Amendment) Bill, 2015 reads as under: Clause 4 of the Bill seeks to amend Section 8 of the principal Act to specify that the judicial authority shall refer the parties to arbitration unless it fi nds that prima facie no valid arbitration agreement exists. A proviso below sub-section (2) is inserted to provide that where the 915 original arbitration agreement or certifi ed copy thereof is not available with the party who apply under sub-section (1), and is retained by the other party, such party shall fi le a copy of the arbitration agreement along with application under sub-section (1) praying to the court to call upon the other party to produce the original arbitration agreement or its duly certifi ed copy before the court. The basic purpose for bringing an amendment in Section 8 (as wel l as Section 11 of the Arbitration Act) was to minimise the scope of judicial authority in matters of arbitration, except on the ground where prima facie, no valid arbitration agreement exists. 8. In the present case, the 2007 as well as the 20 08 Tripartite Agreement, forms the basis for all subsequent agreements, conveyance , etc. The arbitration clause is also very wide in its scope, as we have already seen. At the sake of repetition, the 2008 Tripartite Agreement s tates that “any dispute, in relation to these agreements or in relation to a ny matter touching or arising from this Agreement, shall be referred to arbitration.” The contention of the appellants therefore that the dispute raised in the civil suit is non- arbitrable is also not correct. The dispute relates to a property which is the subject matter of the two tripartite agreements dated 31.03.2007 and 25.07.2008. 9. In the Tripartite Agreement dated 31.03.2007 the intention of the parties was clearly to acquire and develop properties, which was indeed done through the development agreements (sought to be declared as validly terminated by the appellants). Clause 11 of the Tripartite Agreement dated 31.03.2007 reads as under: “SD and MB have in due course agreed to develop, further trade and deal with the Property and also to acquire such further properties as may be mutually agreed between the Parties and any such further acquisitions that may be made through a Special Purpose Vehicle viz. the Company wherein MB and SD shall have equity in the proportion of 90:10.” 10. It is true that in Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and Others, (2011) 5 SCC 532 this Court had set apart cases where the dispute was totally non-arbitrable, such as matrimonial SUSHMA SHIVKUMAR DAGA & ANR. v. MADHURKUMAR RAMKRISHNAJI BAJAJ & ORS [SUDHANSHU DHULIA, J.] disputes, guardianship dispute, or even we may add disput es relating to consumers, which are governed by an entirely diff erent P arliamentary legislation known as Consumer Protection Act, 2019: “35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their dispute s in place of courts and tribunals which are public fora constituted under t he laws of the country. Every civil or commercial dispute, eith er contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudicat ion by public fora (courts and tribunals), may by necessary impli cation stand excluded from the purview of private fora. Consequently, whe re the cause/dispute is inarbitrable, the court where a suit i s pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitrati on as the forum for settlement of such disputes.” 11. Thereafter, this Court in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1, laid down a fourfold test for determining when the subject-matter of a dispute in an arbitration agreement is not arbitrable. These were: “(1) When cause of action and subject-matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem. (2) When cause of action and subject-matter of the dispu te aff ects third-party rights; have erga omnes eff ect; require centralised adjudication, and mutual adjudication would not be a ppropriate and enforceable. (3) When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions o f the State and hence mutual adjudication would be unenforceable. 917 (4) When the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).” Nevertheless, the case before the Civil Court does not fall in any of the categories, visualised in either Booz Allen (supra) or Vidya Drolia (supra) referred above. 12. In Vidya Drolia (supra), this Court has held that Court will only decline reference under Section 8 or under Section 11 of the Act in rare cases where the Court is certain that either the arbitr ation agreement is non-existent, or the dispute is itself “manifestly non-arbitrable”. This was reiterated by this Court in NTPC Ltd. v. SPML Infra Ltd. (2023) 9 SCC 385. 13. In BSNL v. Nortel Networks (2021) 5 SCC 738, this court had held that reference to the Arbitral Tribunal can be declined by the Court, only if the dispute is non-arbitrable. For example, consumer disputes which are entirely diff erent nature of disputes, statutorily protected under a special legislation. (Smt. M. Hemalatha Devi & Ors. v. B. Udayasri 2023 INSC 870). 14. In any case, Section 16 of the Arbitration Act gives immense powers to the Arbitral Tribunal, including power to rule on its own jurisdictio n. Section 16 of the Arbitration Act reads as under: “16. Competence of arbitral tribunal to rule on its jurisdiction.—(1) The arbitral tribunal may rule on its own jurisdiction, i ncluding ruling on any objections with respect to the existence or val idity of the arbitration agreement, and for that purpose,— (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral tribunal does not have jurisdiction s hall be raised not later than the submission of the statement of defe nce; however , a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator . SUSHMA SHIVKUMAR DAGA & ANR. v. MADHURKUMAR RAMKRISHNAJI BAJAJ & ORS [SUDHANSHU DHULIA, J.] (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral tribunal may, in either of the cas es referred to in sub-section (2) or sub-section (3), admit a later p lea if it considers the delay justified. (5) The arbitral tribunal shall decide on a plea re ferred to in sub-section (2) or sub-section (3) and, where the a rbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral awar d in accordance with Section 34.” 15. All jurisdictional issues including the existen ce and the validity of an arbitration clause can be gone into by the Ar bitral Tribunal. In other words, the Arbitral Tribunal is competent to decide on its own competence. This aspect has been dealt with in a r ecent judgment of this Court in Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northe rn Coal Field Ltd. (2020) 2 SCC 455. This is what has been stated: “7.11. The doctrine of “kompetenz-kompetenz”, also referred to as “compétence-compétence”, or “compétence de la re cognized”, implies that the Arbitral Tribunal is empowered and has the competence to rule on its own jurisdiction, includi ng determining all jurisdictional issues, and the existence or val idity of the arbitration agreement. This doctrine is intended to minimise judicial intervention, so that the arbitral process is n ot thwarted at the threshold, when a preliminary objection is r aised by one of the parties. The doctrine of kompetenz-kompetenz is, however, subject to the exception i.e. when the arbitration agreement itself is impeached as being procured by fraud or deceptio n. This exception would also apply to cases where the parti es in the process of negotiation, may have entered into a dra ft agreement as an antecedent step prior to executing the final contract. The 919 draft agreement would be a mere proposal to arbitra te, and not an unequivocal acceptance of the terms of the agreemen t. Section 7 of the Contract Act, 1872 requires the acceptance of a contract to be absolute and unqualified [Dresser Rand S.A. v. Bind al Agro Chem Ltd., (2006) 1 SCC 751. See also BSNL v. Telephone Cables Ltd., (2010) 5 SCC 213 : (2010) 2 SCC (Civ) 352. Refer to PSA Mumbai Investments Pte. Ltd. v. Jawaharlal Nehru Port Trus t, (2018) 10 SCC 525 : (2019) 1 SCC (Civ) 1] . If an arbitration agreement is not valid or non-existent, the Arbitral Tribunal cann ot assume jurisdiction to adjudicate upon the disputes. Appoi ntment of an arbitrator may be refused if the arbitration agreem ent is not in writing, or the disputes are beyond the scope of th e arbitration agreement. Article V(1)(a) of the New York Conventi on states that recognition and enforcement of an award may be refu sed if the arbitration agreement “is not valid under the law t o which the parties have subjected it or, failing any indicatio n thereon, under the law of the country where the award was made”. 7.12. The legislative intent underlying the 1996 Ac t is party autonomy and minimal judicial intervention in the a rbitral process. Under this regime, once the arbitrator is appointed, or the tribunal is constituted, all issues and objecti ons are to be decided by the Arbitral Tribunal. 7.13. In view of the provisions of Section 16, and the legislative policy to restrict judicial intervention at the pre -reference stage, the issue of limitation would require to be decided by the arbitrator. Sub-section (1) of Section 16 provi des that the Arbitral Tribunal may rule on its own jurisdiction, “including any objections” with respect to the existence or va lidity of the arbitration agreement. Section 16 is as an inclusiv e provision, which would comprehend all preliminary issues touch ing upon the jurisdiction of the Arbitral Tribunal. The issu e of limitation is a jurisdictional issue, which would be required to be decided by the arbitrator under Section 16, and not the Hig h Court at the pre-reference stage under Section 11 of the Act. On ce the existence of the arbitration agreement is not disputed, all i ssues, including SUSHMA SHIVKUMAR DAGA & ANR. v. MADHURKUMAR RAMKRISHNAJI BAJAJ & ORS [SUDHANSHU DHULIA, J.] jurisdictional objections are to be decided by the arbitrator.” 16. The purpose behind giving these powers to the A rbitral Tribunal is to minimise judicial interference in ar bitration matters. In Weatherford Oil Tool Middle East Ltd. v. Baker Hugh es Singapore PTE 2022 SCC OnLine SC 1464, this court had observed that a bare perusal of Section 16 of the Arbitration Act would indicate that the arbitration clause in a contract would be an indepe ndent agreement in itself and the arbitrator is empowered to decide upon its existence and validity. 17. After the 2015 amendment, primarily the court o nly has to see whether a valid arbitration agreement exists. Addit ionally, the clear non-arbitrability of cases, such as where a party t o the agreement is statutorily protected, such as a consumer “has also to be seen by the Court” ( Booz Allen supra ). Short of the narrow field stated above, the scope of judicial scrutiny at the stage of Section 11 (6) or Section 8 is extremely limited. Objections will nevertheless be raised both on Sect ion 8 and Section 11 applications. These objections can be g enuine, such as where there is no arbitration clause or where the m atter is itself non- arbitrable, but often these objections could be onl y to wriggle out of the statutory commitment of parties to a defined pr ocess of redressal mechanism. 18. In the present case there are broadly three obj ections of the appellants on the Section 8 application moved by th e respondents which has already been allowed by the two courts below. The first objection regarding the absence of an arbitration clause in t he Conveyance Deed dated 17.12.2019 and the development agreements has already been discussed in detail in the preceding paragraphs. 19. The second is that the suit filed by the appell ants is for cancellation of a document relating to immovable pr operty i.e. land and it therefore amounts to an action in rem and hence arbitration is not the remedy. This question however, is no more res integra . Elaborate analysis on this aspect has been done by this Court in the case of Deccan Paper Mills v. Regency Mahavir Properties, ( 2021) 4 SCC 921SUSHMA SHIVKUMAR DAGA & ANR. v. MADHURKUMAR RAMKRISHNAJI BAJAJ & ORS [SUDHANSHU DHULIA, J.] 786, therein this court after referring to all the rele vant precedents and the case laws has held that whether it is a sui t for cancellation of a deed or a declaration of rights rising from the d eed, it would only be an action in personam and not in rem. The decision of the Division Bench of Andhra Pradesh High Court in Aliens Developers (P) Ltd. v. Janardhan Reddy, 2015 SCC Online Hyd 370, was held to be wrong wherein it was held that a suit under Section 31 of Spec ific Relief Act amounts to an action in rem and this adjudicatory function can only be done by the Competent Civil Court and the powers ca nnot be exercised by an Arbitrator. The basic foundation of the Court f or holding that a Section 31 suit for cancellation of a document amou nts to an action in rem was held to be wrong. The entire scope and ambit of the Specific Relief Act, 1963 was considered and in Deccan Paper Mills (supra), the anomalies in law for holding such to be an acti on in rem were discussed and it was held that a relief sought unde r the Specific Relief Act is nothing but an action in personam . 20. The third objection is regarding fraud. The ple a of fraud raised by the appellants in their objection to the Section 8 application has never been substantiated. Except for making a bald allegation of fraud there is nothing else. This Court has consistently held that a plea of fraud must be serious in nature in order to oust th e jurisdiction of an Arbitrator. In Rashid Raza v. Sadaf Akhtar, (2019) 8 SCC 710, this Court laid down two conditions which must be satisf ied before the Court can refuse to refer the matter to the Arbitrator, a forum consciously decided by parties in an agreement. The first is wh ether the plea permeates the entire contract and above all, the ar bitration agreement, rendering it void or secondly, whether the allegati on of fraud touches upon the internal affairs of the parties inter se having no implication in the public domain. The allegations must have som e implication in public domain to oust the jurisdiction of an Arbitr ator, if an allegation of fraud exists strictly between the parties concer ned, the same will not be termed to be as a serious nature of fraud an d hence would not be barred for arbitration. 21. In the present case, therefore there is absolut ely no ambiguity that both the Tripartite Agreements dated 31.03.200 7 and 25.07.2008 contain an arbitration clause, which forms the basi s of all subsequent agreements including the agreements sought to be dec lared as validly terminated by the appellants and the conveyance dee d sought to be declared as null and void. Both the trial court as well as the High Court have given a correct finding on facts as well as on law. We find no scope for interference in the matter. This appeal h ence has no force, and is hereby dismissed. No order as to costs.