# DLF HOME DEVELOPERS LIMITED v. RAJAPURA HOMES PRIVATE LIMITED & ANR

- **Citation:** [2021] 12 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2021-09-22
- **Bench:** N.V. Ramana, Surya Kant
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/dlf-home-developers-limited-v-rajapura-homes-private-limited-anr-34798
- **Pages:** 27

## Headnote

Arbitration and Conciliation Act, 1996 - s.11(6) r/w s.11(12)
- Appointment of Arbitrator - In terms of Share Purchase
Agreements, the parties entered into Construction Management
Agreements - Both sets of agreements contained arbitration clauses
not similar to one another - Disputes arose - Respondents refused
to appoint Arbitrator under the Construction Management
Agreements - Present petitions filed by the Petitioner for appointment
of a sole arbitrator for resolution of all disputes arising from the
Construction Management Agreements - Held: Notwithstanding
certain overlaps between the Share Purchase Agreements and
Construction Management Agreements, their object and field of
operation is different and distinct - It cannot be accepted outrightly
that the respective Share Purchase Agreements are the 'principal
agreements governing the transaction' between the parties or that
the present disputes can be resolved solely under the arbitration
clause contained therein - Neither party pleaded the infringement
of the core provisions of the said Agreements, thus it cannot be
accepted that the subject controversy falls within the ambit of Clause
9 thereof and can be adjudicated only under the rules of Singapore
International Arbitration Centre (SIAC), with seat and venue at
Singapore - Further, parties have neither denied that there is no
arbitrable dispute between them nor have they challenged the
existence of the arbitration clause(s) in the Construction
Management Service Agreements - The nature of disputes that have
arisen between the parties can thus, be adjudicated in the arbitral
proceedings u/Clause 11 of the Construction Management
Agreements - Primary twin-test u/s.11(6) satisfied by the Petitioner
- Sole arbitrator appointed to resolve all disputes between the
parties.
[2021] 12 S.C.R. 1
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SUPREME COURT REPORTS
[2021] 12 S.C.R.
Arbitration and Conciliation Act, 1996 - ss.11, 11(6-A) -
Scope of interference by Court at the stage of referral - Held: Courts
are obliged to apply their mind to the core preliminary issues within
the framework of s.11(6-A) - Thus, even when an arbitration
agreement exists, it would not prevent the Court to decline a prayer
for reference if the dispute does not correlate to the said agreement
- Arbitration and Conciliation (Amendment) Act, 2015 - Arbitration
and Conciliation (Amendment) Act, 2019 - s.11(6-A).
Allowing the petitions, the Court
HELD 1. The jurisdiction of this Court under Section 11 is
primarily to find out whether there exists a written agreement
between the parties for resolution of disputes through arbitration
and whether the aggrieved party has made out a prima facie
arbitrable case. The limited jurisdiction, however, does not
denude this Court of its judicial function to look beyond the bare
existence of an arbitration clause to cut the deadwood. This Court
or a High Court, as the case may be, are not expected to act
mechanically merely to deliver a purported dispute raised by an
applicant at the doors of the chosen Arbitrator. On the contrary,
the Court(s) are obliged to apply their mind to the core preliminary
issues, albeit, within the framework of Section 11(6-A) of the Act.
Such a review is not intended to usurp the jurisdiction of the
Arbitral Tribunal but is aimed at streamlining the process of
arbitration. Therefore, even when an arbitration agreement exists,
it would not prevent the Court to decline a prayer for reference if
the dispute in question does not correlate to the said agreement.
[Paras 18, 19][14-B-C; 16-A-C]
2.1 In terms of Clauses 3.1, 6.1 and 6.2 of Share Purchase
Agreements, the parties entered into two Construction
Management Service Agreements dated 25.01.2017. The 'Share
Purchase Agreements' as well as the 'Construction Management
Agreements' are subsisting and have not been repudiated by the
Parties. Both sets of agreements contain arbitration clauses that
are not similar to one another. Upon perusing the Share Purchase
Agreement

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DLF HOME DEVELOPERS LIMITED
v.
RAJAPURA HOMES PRIVATE LIMITED & ANR.
(Arbitration Petition (Civil) No. 17 of 2020)
SEPTEMBER 22, 2021
[N.V. RAMANA, CJI AND SURYA KANT, J.]
Arbitration and Conciliation Act, 1996 - s.11(6) r/w s.11(12)
- Appointment of Arbitrator - In terms of Share Purchase
Agreements, the parties entered into Construction Management
Agreements - Both sets of agreements contained arbitration clauses
not similar to one another - Disputes arose - Respondents refused
to appoint Arbitrator under the Construction Management
Agreements - Present petitions filed by the Petitioner for appointment
of a sole arbitrator for resolution of all disputes arising from the
Construction Management Agreements - Held: Notwithstanding
certain overlaps between the Share Purchase Agreements and
Construction Management Agreements, their object and field of
operation is different and distinct - It cannot be accepted outrightly
that the respective Share Purchase Agreements are the 'principal
agreements governing the transaction' between the parties or that
the present disputes can be resolved solely under the arbitration
clause contained therein - Neither party pleaded the infringement
of the core provisions of the said Agreements, thus it cannot be
accepted that the subject controversy falls within the ambit of Clause
9 thereof and can be adjudicated only under the rules of Singapore
International Arbitration Centre (SIAC), with seat and venue at
Singapore - Further, parties have neither denied that there is no
arbitrable dispute between them nor have they challenged the
existence of the arbitration clause(s) in the Construction
Management Service Agreements - The nature of disputes that have
arisen between the parties can thus, be adjudicated in the arbitral
proceedings u/Clause 11 of the Construction Management
Agreements - Primary twin-test u/s.11(6) satisfied by the Petitioner
- Sole arbitrator appointed to resolve all disputes between the
parties.
[2021] 12 S.C.R. 1
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SUPREME COURT REPORTS
[2021] 12 S.C.R.
Arbitration and Conciliation Act, 1996 - ss.11, 11(6-A) -
Scope of interference by Court at the stage of referral - Held: Courts
are obliged to apply their mind to the core preliminary issues within
the framework of s.11(6-A) - Thus, even when an arbitration
agreement exists, it would not prevent the Court to decline a prayer
for reference if the dispute does not correlate to the said agreement
- Arbitration and Conciliation (Amendment) Act, 2015 - Arbitration
and Conciliation (Amendment) Act, 2019 - s.11(6-A).
Allowing the petitions, the Court
HELD 1. The jurisdiction of this Court under Section 11 is
primarily to find out whether there exists a written agreement
between the parties for resolution of disputes through arbitration
and whether the aggrieved party has made out a prima facie
arbitrable case. The limited jurisdiction, however, does not
denude this Court of its judicial function to look beyond the bare
existence of an arbitration clause to cut the deadwood. This Court
or a High Court, as the case may be, are not expected to act
mechanically merely to deliver a purported dispute raised by an
applicant at the doors of the chosen Arbitrator. On the contrary,
the Court(s) are obliged to apply their mind to the core preliminary
issues, albeit, within the framework of Section 11(6-A) of the Act.
Such a review is not intended to usurp the jurisdiction of the
Arbitral Tribunal but is aimed at streamlining the process of
arbitration. Therefore, even when an arbitration agreement exists,
it would not prevent the Court to decline a prayer for reference if
the dispute in question does not correlate to the said agreement.
[Paras 18, 19][14-B-C; 16-A-C]
2.1 In terms of Clauses 3.1, 6.1 and 6.2 of Share Purchase
Agreements, the parties entered into two Construction
Management Service Agreements dated 25.01.2017. The 'Share
Purchase Agreements' as well as the 'Construction Management
Agreements' are subsisting and have not been repudiated by the
Parties. Both sets of agreements contain arbitration clauses that
are not similar to one another. Upon perusing the Share Purchase
Agreements, it is clear that the primary purpose of these
agreements is to effectuate the change of ownership of
Respondent No.1 and the Begur Company from DHDL to
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Resimmo PCC. The Rajapura SPA and the Southern Homes SPA
as per their Clause 6.1 and 6.2, do provide for the completion of
the respective residential projects as a post-closing obligation,
however, these construction obligations had to be fulfilled in
accordance with the terms of the 'Construction Agreements'.
The very purpose of the RCMA and SCMA was, on the other
hand, to operationalise the manner in which the Petitioner-DHDL
would achieve the said construction related obligations. The
construction agreements not only contemplate the scope of
services to be provided by the petitioner but also lay down the
obligation on Respondent No.2 to pay "Fee" to the PetitionerDHDL upon completion of the residential projects. A prima facie
reading of 'Share Purchase Agreements' and `Construction
Management Agreements', does suggest that notwithstanding
certain overlaps between these agreements, their object and field
of operation is different and distinct in nature. It is therefore
difficult to accept it outrightly that the respective Share Purchase
Agreements are the 'principal agreements governing the
transaction' between the parties or that the present disputes can
be resolved solely under the arbitration clause contained therein.
[Paras 24-26][20-D-E; 23-B-G]
2.2 The dispute sought to be referred to arbitration by the
Petitioner DHDL pertains to non-deposit of agreed amount by
Respondent No.2 and resultant payment thereof as 'Fee' which
the Petitioner claims in terms of clause 4 of RCMA/SCMA.
Whether or not the Petitioner has complied with the 'condition
precedent' under Rajapura SPA and thus has become entitled to
'fee' as per clause referred to above, is purely a question of fact
to be determined by the Arbitral Tribunal. The arbitration Clause
9 of the Rajapura SPA/Southern Homes SPA does not have any
overriding effect and is in no way broader or wider when compared
to Clause 11 of the RCMA/SCMA. Therefore, even if it is
assumed that the present differences between the parties are
incidental to the terms of the Share Purchase Agreements, it is
difficult to construe that Clause 9 of Share Purchase Agreements
contemplates adjudication of the issues that are "connected with"
or are "in relation" to the subject matter of the Share Purchase
Agreements. [Paras 27, 29][23-H; 24-A-B, E-G]
DLF HOME DEVELOPERS LTD. v. RAJAPURA HOMES PVT. LTD.
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SUPREME COURT REPORTS
[2021] 12 S.C.R.
Olympus Superstructure Pvt. Ltd. v. Meena Vijay
Khetan and Others (1999) 5 SCC 651: [1999] 3 SCR
490 - distinguished.
2.3 If the Respondent(s) plea, that present dispute(s) should
be arbitrated only under the Rajapura SPA/Southern Homes SPA
is accepted at face value, the eventual result would be that any
and all disputes relating to the Petitioner's construction obligation
would be arbitrable under the provisions of the Share Purchase
Agreements only. But then, what would be the purpose of having
a separate arbitration clause 11 under the RCMA/SCMA? The
parties do not seem to have rendered the arbitration clause in
RCMA and SCMA as redundant, more so when these are the
agreements later in time. The scope of the arbitration clause in
Rajapura SPA/Southern Homes SPA is limited to issues relating
to the agreement's primary subject matter, i.e., any dispute arising
out of the transaction of sale and purchase of shares. The
provisions of the RCMA/SCMA, and the arbitration clause
therein, would as a logical corollary then be applicable to any
dispute/difference concerning the performance of the construction
related obligations and deposit of agreed amount by Respondent
No.2 or payment thereof to the Petitioner-DHDL. The Petitioner
has not once alleged in these Petitions that the dispute sought to
be referred to Arbitration emanates from the Share Purchase
Agreements. As far as the share transactions between the
Petitioner and Respondent No.2 is concerned, it has been
unequivocally submitted on behalf of the Petitioner that the
purchase of shares by Respondent No.2 has been duly completed.
There is nothing on record to suggest that Respondent No.2 is
aggrieved by non-compliance, deviation or breach of promise to
sell its shares by the Petitioner-DHDL. On the contrary, the
counter-affidavit filed by the Respondent(s) indicates that the sale
of the shares of Respondent No.1 and the Begur Company have
been completed. Still further, it is not the case that Ressimo PCC
has already invoked Clause 9 of the Rajapura SPA or of the
Southern Homes SPA. Thus, when neither party has pleaded the
infringement of the core provisions of the Share Purchase
Agreements, it is difficult to accept outrightly that the subjectcontroversy falls within the ambit of Clause 9 of the said
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agreements and can be adjudicated only under the rules of SIAC,
with seat and venue at Singapore. [Paras 30, 31][24-G-H;
25-A-F]
2.4 The Parties have neither denied that there is no
'arbitrable dispute' between them nor have they challenged the
existence of the arbitration clause(s) in the Construction
Management Service Agreements. The primary twin-test
envisioned under Section 11(6) of the Act has been satisfied by
the Petitioner-DHDL, thus the instant application(s) are
maintainable. The nature of disputes that have arisen between
the parties, thus, can be adjudicated in the arbitral proceedings
under Clause 11 of the RCMA and SCMA. The RCMA and
SCMA, though interlinked and connected, are still two separate
agreements. If on appreciation of the facts and law, the arbitrator
finds that the 'real dispute' between the parties stems from the
Share Purchase Agreements, the arbitrator shall be free to wind
up the proceedings with liberty to the Parties to seek redressal
under the rules of Singapore International Arbitration Centre
(SIAC). The case of the Respondent(s) is that the Petitioner has
committed breaches under both RCMA as well as SCMA, and
that the genesis of the disputes lies in separate and distinct facts.
Save where the parties have resolved to the contrary, it would be
inappropriate to consolidate the proceedings originating out of
two separate agreements. However, since the Fee Agreement
provides that the "Fee" can only be calculated after taking into
consideration various financial components of both the Rajapura
Homes Projects and the Southern Homes Project, it would be
necessary for the sake of avoiding wastage of time and resources,
and to avoid any conflicting awards, that the disputes under
Arbitration Petition No.17 and Arbitration Petition No.16 are
referred to a sole Arbitrator. Sole arbitrator appointed to resolve
all disputes/differences between the parties. [Paras 32, 33, 35
and 36][25-F-H; 26-A-B; E-H]
Duro Felgura, S.A. v. Gangavaram Port Limited (2017)
9 SCC 729 : [2017] 10 SCR 285; Garware Wall Ropes
Limited v. Coastal Marine Constructions and
Engineering Limited (2019) 9 SCC 209 : [2019] 5 SCR
579; Mayavati Trading Private Limited v. Pradyuat Deb
DLF HOME DEVELOPERS LTD. v. RAJAPURA HOMES PVT. LTD.
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SUPREME COURT REPORTS
[2021] 12 S.C.R.
Burman (2019) 8 SCC 714 : [2019] 12 SCR 123; Vidya
Drolia and Others v. Durga Trading Corporation (2021)
2 SCC 1 : 2021 (6) JT 460; Uttarakhand Purv Sainik
Kalyan Nigam Limited v. Northern Coal Field Limited
(2020) 2 SCC 455; P.R. Shah, Shares and Stock Brokers
Private Limited v. BHH Securities Private Limited and
Others (2012) 1 SCC 594 : [2011] 16 SCR 87; Indus
Biotech Private Limited v. Kotak India Venture
(Offshore) Fund and Ors 2021 SCC Online SC 268 -
referred to.
Case Law Reference
[2017] 10 SCR 285
referred to
Para 13
[2019] 5 SCR 579
referred to
Para 13
[2019] 12 SCR 123
referred to
Para 13
[2011] 16 SCR 87
referred to
Para 14
[1999] 3 SCR 490
distinguished
Para 16
CIVIL ORIGINAL JURISDICTION: Arbitration Petition (Civil)
No.17 of 2020.
Petition under section 11(6) read with section 11(12) of the
Arbitration and Conciliation Act, 1996, for Appointment of Sole Arbitrator.
With
Arbitration Petition (Civil) No. 16 of 2020.
Dr. A. M. Singhvi, Sr. Adv., Amit Dhingra, Shivam Kumar Raheja,
Amit Bhandari, Pranav Kamnani, M/s Dua Associates, Advs. for the
Petitioner.
Nikhil Nayyar, Sr. Adv., Gyandendra Kumar, Ms. Shikha Tandon,
Robin Grover, Ms. Shree Sinha, Sumit Attri, M/s Cyril Amarchand
Mangaldas, Advs. for the Respondents.
The Judgment of the Court was delivered by
SURYA KANT, J.
1. The Petitioner DLF Home Developers Limited (hereinafter,
"DHDL") has filed Arbitration Petition No. 16 of 2020 and Arbitration
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Petition No. 17 of 2020 under Section 11(6) read with Section 11(12) of
the Arbitration and Conciliation Act, 1996 (hereinafter, "Act") for
appointment of sole arbitrator to adjudicate the differences between the
parties that have arisen out of the two Construction Management
Agreements dated 25.01.2017.
FACTS
2. DHDL is a limited liability involved in the business of providing
development, management, and investment services concerning real
estate projects. The Petitioner and one Ridgewood Holdings Limited
entered into a joint venture, in the year 2007-2008, wherein Ridgewood
Holdings Limited invested in four Special Purpose Vehicles, including
Rajapura Homes Private Limited (Respondent No.1 in Arbitration
Petition No.17 of 2020; hereinafter, "Respondent No.1") and Begur OMR
Homes Private Limited (Respondent No.1 in Arbitration Petition No.16
of 2020; in short "Begur Company"), for developing residential projects
in various cities across India. Respondent No.1 is a company engaged in
the construction, development, operations, and maintenance of residential
projects, namely, 'DLF Maiden Heights' and 'DLF Woodland Heights,'
both of which are in Bangalore, Karnataka (collectively called "Rajapura
Project"). Similarly, the Begur Company is engaged in the business of
construction, development, operations, and maintenance of residential
projects, namely, 'DLF Garden City' situated at Kanchipuram District,
Tamil Nadu, and 'DLF Westend Heights' situated in Bengaluru District,
Karnataka (collectively called "Southern Homes Project").
3. In June 2008, Ridgewood Holdings Limited transferred its stake
in the joint venture to its affiliates, Resimmo PCC (in short, "Respondent
No.2") in both the Petitions and Clogs Holding BV (hereinafter, "Clogs").
Thereafter, in terms of the arrangement, upon expiry of the exit period,
Respondent No.2 and Clogs were inter alia entitled to a put option on
the Petitioner, which they exercised from January to May 2014. However,
the Petitioner was unable to provide an exit to Respondent No.2 and
Clogs. Subsequently, in 2015, the parties agreed to a negotiated settlement,
in terms of which, Respondent No.2 was to acquire sole ownership and
control of two Special Purpose Vehicles, namely, Respondent No.1 and
the Begur Company. It may be noted that Respondent No.2 is a company
incorporated under the laws of Mauritius and is engaged in the business
of providing investment management services.
DLF HOME DEVELOPERS LTD. v. RAJAPURA HOMES PVT. LTD.
[SURYA KANT, J.]
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SUPREME COURT REPORTS
[2021] 12 S.C.R.
4. To effect the change of ownership of the First Respondent, the
Petitioner, Respondent No.1, and Respondent No.2 executed a Share
Purchase Agreement dated 08.07.2016 (hereinafter, "Rajapura SPA")
for the transfer of Petitioner's entire shareholding in Respondent No.1
to Respondent No.2. Likewise, a Share Purchase Agreement dated
25.01.2017 was also executed between the Petitioner, the Begur
Company and Respondent No.2 to transfer the Petitioner's entire holding
in the Begur Company to Respondent No.2 (hereinafter, "Southern Homes
SPA"). While the primary subject matter of the Share Purchase
Agreements was the transfer of shares from the Petitioner - DHDL to
Respondent No.2, both the Share Purchase Agreements also stipulated
certain additional obligations that would have to be undertaken by the
Petitioner. Clause 3.1 read with Schedule-II of the agreements
contemplated that the parties were to execute a construction
management agreement as a 'condition precedent' to the closing of the
transactions. Further, in terms of Clause 6 of the respective agreements,
the Petitioner had to undertake certain construction related obligations,
which were to be performed "in accordance with the terms of the
Construction Agreement". We may note that both the Share Purchase
Agreements also contained an arbitration clause which are identical.
Clause 9 of the agreements contemplate that all disputes arising out of
the contract shall be submitted for arbitration at the request of the parties.
The arbitration is to be conducted in accordance with the rules of the
Singapore International Arbitration Centre (hereinafter, "SIAC"), with
the seat and venue of the arbitration being Singapore.
5. Thus, in terms of the agreement and in pursuance of the
construction obligations under the Rajapura SPA and the Southern Homes
SPA, the Parties on 25.01.2017 executed the DLF-Rajapura Homes
Construction Management Services Agreement (hereinafter, "RCMA")
and the DLF-Southern Homes Construction Management Services
Agreement (hereinafter, "SCMA"). Under the RCMA, the Petitioner
was to provide, inter alia, construction management services to
Respondent No.1 for completion of the Rajapura Homes Project and in
connection with the handover of sold units of the Rajapura Homes Project.
Likewise, under the SCMA, the Petitioner had to provide similar services
to the Begur Company for the completion of the Southern Homes Project
and in connection with the handover of the sold units. It is pertinent to
mention that both the aforementioned Agreements also contained
selfsame arbitration clauses. Clause 11 of the Agreements contemplate
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that the seat and venue of Arbitration would be New Delhi, and the
arbitration would be governed by the Arbitration and Conciliation Act,
1996.
6. As a consideration for the construction management services
to be provided by it under the SCMA and the RCMA, the Petitioner -
DHDL in terms of Clause 4 of the respective agreement, was entitled to
a "Fee". Clause 4.1 and 4.2 of the SCMA and RCMA, stipulated that
upon concluding its construction obligations, DHDL would submit a written
notice of completion to Respondent No.1 and the Begur Company.
Thereafter, Respondent No. 1 or the Begur Company, as the case may
be, shall have the right to reject or confirm the completion of the Rajapura
Homes Project and the Southern Homes Project. The agreements further
specify that once Respondent No.1 and the Begur Company accepted
the notice of completion, Ressimo PCC would be obligated to invest a
sum of Rs.75 crores (75,00,00,000/-) in the Begur Company. The said
amount is to be dealt with in the manner prescribed under the SCMA
and RCMA. It is not in dispute that petitioner-DHDL intended to be the
indirect beneficiary of the said Rs.75 crores. To further clarify the
modalities of the "Fee" payable to DHDL under the SCMA and RCMA,
a Fee Computation Agreement dated 25.01.2017 was also executed
between Respondent No.1, the Begur Company and Respondent No.2
(hereinafter, "Fee Agreement").
7. The Petitioner-DHDL issued a written notice dated 16.08.2019
certifying the completion of the Southern Homes Project pursuant to
Clause 4.2 of the SCMA and called upon the Begur Company to fulfill
its subsequent obligation. However, the Begur Company vide reply dated
30.08.2019, refused to accept it as a Valid Notice of completion under
clause 4.2 of the SCMA. The Begur Company alleged that there had
been a delay in completing the construction projects and that the Petitioner
had not complied with the "Information Covenant" contemplated in Clause
3.1 of the SCMA. The Begur Company further stated that the notice
was incomplete and lacked the necessary documents. Hence, while
refusing to accept the notice, the Begur Company called upon the
Petitioner to provide the required information and documents.
8. The Petitioner also issued written notice dated 26.10.2019,
certifying the completion of the Rajapura Project pursuant to Clause 4.2
of the RCMA. Respondent No.1 vide its reply dated 27.01.2020 again
refused to accept it as a valid notice of completion and cited reasons of
DLF HOME DEVELOPERS LTD. v. RAJAPURA HOMES PVT. LTD.
[SURYA KANT, J.]
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SUPREME COURT REPORTS
[2021] 12 S.C.R.
delay and non-completion of the Rajapura Homes Project, incomplete
notice, amongst others. The record reveals that after the rejection of the
notices dated 16.08.2019 and 26.12.2019, there were several
communications between the parties; however, they were unable to
resolve their differences.
9. The Petitioner subsequently vide letter dated 26.05.2020 issued
a notice invoking arbitration under Clause 11 of the SCMA and RCMA.
The Petitioner's case was that the notice of completion dated 16.08.2019
and 26.12.2019, which were issued pursuant to Clause 4.2 of the SCMA/
RCMA, were unreasonably rejected by the Respondent(s). The
Petitioner-DHDL alleged that the refusal of the Respondent Companies
to accept the notice of completion was a breach under the SCMA and
RCMA and was aimed at avoiding Respondent No.2's obligation to invest
Rs.75 crores in the Begur Company as contemplated under the SCMA,
RCMA and the Fee Agreement. The Petitioner further referred all
disputes arising out of the RCMA and SCMA to a common and composite
Arbitral Tribunal comprising a sole arbitrator. The Petitioner also proposed
two names, for one of them to be appointed as the sole arbitrator.
10. The Respondents (i.e. Respondent No.1, the Begur Company
and Respondent No.2) vide two separate emails, both dated 12.06.2020,
however, refused to appoint a sole arbitrator. They stated that the dispute
between the parties was not whether Respondent No.2 had any obligation
after accepting the respective notice of completions but whether or not
completion in respect of the Rajapura Project and the Southern Homes
Project has been achieved, which is an obligation on DHDL under Clause
6 of the Rajapura SPA and Southern Homes SPA. It was thus claimed
that the differences between the parties have arisen under the Rajapura
SPA and Southern Homes SPA and not under the RCMA/SCMA. The
Respondents further refused to have the disputes consolidated into a
common and composite tribunal and instead asserted that the same would
have to be resolved under separate arbitration proceedings. Thereafter,
on 13.06.2020, the Respondents issued two more letters through their
Counsel, Fresh fields Bruckhaus Deringer Singapore Pte. Ltd., reiterating
that the disputes between the parties do not fall within the terms of the
SCMA and RCMA. Further, the Respondent(s) reserved their right to
invoke the dispute resolution provisions under the Southern Homes SPA
and Rajapura SPA, respectively by instituting arbitral proceedings under
the rules of SIAC.
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11. Aggrieved by the refusal of the Respondent(s) to appoint an
Arbitrator under the RCMA and SCMA, the Petitioner has preferred
these two separate petitions under Section 11(6) read with Section 11(12)
of the Act, praying for appointment of a sole arbitrator for resolution of
all disputes arising from the SCMA and RCMA. It may be highlighted
that since Respondent No.2 is not a body incorporated in India, the
arbitration between the Parties falls within the ambit of 'international
commercial arbitration' as defined under Section 2(1)(f) of the Act.
CONTENTIONS
12. We have heard learned Senior Counsels appearing for the
parties at considerable length. Learned Senior Counsel appearing on
behalf of the Petitioner-DHDL contended that the Begur Company and
Respondent No.1 acted unreasonably in not accepting the notice of
completion. The rejection of the notice certifying the completion of
Rajapura Homes Project and Southern Homes Project was allegedly
done with the sole purpose of avoiding Respondent No.2's obligation to
pay "Fee" to the Petitioner. He further pressed that the contention of
the Respondents that the disputes in question cannot be arbitrated under
the RCMA and SCMA is legally and factually misconceived.
13. Drawing force from the decisions of this Court in the cases of
(i) Duro Felgura, S.A. v. Gangavaram Port Limited1, (ii) Garware
Wall Ropes Limited v. Coastal Marine Constructions and
Engineering Limited2, (iii) Mayavati Trading Private Limited v.
Pradyuat Deb Burman3, and (iv) Vidya Drolia and Others v. Durga
Trading Corporation4, learned Senior Counsel for the Petitioner
submitted that this Court while dealing with an application under Section
11(6) of the Act has a narrow scope of examination, confined only to
trace out whether there exists an 'arbitrable dispute' and a 'written
contract' providing 'arbitration' as the Dispute Resolution Mechanism.
He canvassed that since the parties have not disputed the existence of
arbitration agreement or its core contractual ingredients contained in the
SCMA and RCMA, the present dispute, in terms of the settled law,
should be referred to arbitration. The recent decision of this Court in
1 (2017) 9 SCC 729, ¶ 48 & 59
2 (2019) 9 SCC 209, ¶14
3 (2019) 8 SCC 714, ¶10
4 (2021) 2 SCC 1, ¶236, 237, 244.3, 244.4, 244.5, 244.5.1-244.5.3
DLF HOME DEVELOPERS LTD. v. RAJAPURA HOMES PVT. LTD.
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Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal
Field Limited5, has also been relied upon to contend that once the
existence of the arbitration agreement was established, all other incidental
issues should be left to be decided by the arbitrator as prescribed under
Section 16 of the Act, which enshrines the principle of "Kompetenz
Kompetenz". The contention appears to be that the Arbitral Tribunal
would eventually rule whether or not the disputes between the instant
parties fall under the terms of the SCMA and the RCMA.
14. Learned Senior Counsel for the Petitioner further contended
that although the RCMA and SCMA are two separate agreements, they
are inextricably interlinked, and since the dispute in question relates to
payment of 'Fees' to the Petitioner for its services under both the
Construction Management Agreements, the disputes may be referred to
a common and consolidated arbitral tribunal. Reliance has been placed
on the judgment of this Court in P.R. Shah, Shares and Stock Brokers
Private Limited v. BHH Securities Private Limited and Others6, to
urge that proceedings ought to be consolidated to avoid multiplicity of
arbitrations and conflicting decisions, which would have the potential to
cause injustice. In the alternative, it was prayed that this Court may
appoint the same sole arbitrator in both the Arbitration Petitioner No.17
of 2020 and Arbitration Petition No.16 of 2020, and leave the decision
relating to consolidation of the arbitral proceedings to the discretion of
the sole arbitrator.
15. Per Contra, learned Senior Counsel appearing on behalf of
the Respondents vehemently controverted the case of DHDL and
reiterated that the dispute sought to be raised in the present Arbitration
Petitions exclusively falls within the ambit of Rajapura SPA and Southern
Homes SPA; therefore, the differences between the parties could not
be referred to arbitration under the RCMA and SCMA. He argued that
the Rajapura SPA and the Southern Homes SPA are the principal
agreements governing the transaction between the parties, and the
RCMA/SCMA were subsequently executed only to operationalise the
manner in which the Petitioner would fulfill its construction obligation as
per Clause 6 of the respective Share Purchase Agreements. It was
further alleged that while DHDL is intended to be the beneficiary of
Rs.75 crores to be deposited by Respondent No.2, the economic interest
5 (2020) 2 SCC 455, ¶7.10, 7.11
6 (2012) 1 SCC 594, ¶ 19
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of the Respondent(s) is confined to the undeveloped land, and the
breaches on the part of the Petitioner concerning its obligations under
Clause 6 of the Share Purchase Agreements have made it difficult for
them to monetise the undeveloped land. It was therefore contended that
the instant disputes could only be arbitrated as per the dispute resolution
mechanism specified in Clause 9 of the Rajapura SPA/Southern Homes
SPA, namely, the Rules of SIAC with seat and venue of Arbitration at
Singapore. He urged that if the seat of Arbitration were to be found
outside India, i.e, Singapore, the instant Applications under Section 11(6)
of 1996 Act are not maintainable7.
16. Citing the decisions of this Court in Duro Felgura, S.A.
(supra)8 and Vidya Droila (supra)9, Senior Counsel for the
Respondentscontended that while deciding an application under Section
11(6), this Court cannot act cursorily and an absolute 'hands off' approach
would be counterproductive. He drew support from the afore-cited
decisions to emphasise that this Court is required to examine whether
the agreement(s) in question contain a clause that provides for arbitration
in respect of the disputes which have actually arisen between the parties.
He drew our attention to the judgement in Olympus Superstructure
Pvt. Ltd. v. Meena Vijay Khetan and Others10, wherein, this Court
held that in a situation where there are disputes and differences in
connection with the main agreement and also disputes regarding other
matters connected thereto, the arbitration would be governed by the
general arbitration clause of the main agreement. Lastly, it was submitted
that in the event the present arbitration petitions are allowed, this Court
while following the principles laid down in Duro Felguero, S.A., (Supra)
and Indus Biotech Private Limited v. Kotak India Venture (Offshore)
Fund and Ors11, need to appoint separate arbitral tribunals under the
RCMA and SCMA, though it may comprise of the same sole arbitrator.
ANALYSIS
17. There is no gainsaying that by virtue of the Arbitration and
Conciliation (Amendment) Act, 2015, by which Section 11 (6-A) was
7 Bharat Aluminum Company v. Kaiser Aluminum Technical Services Inc., (2012) 9
SCC 552, ¶117; Mankatsu Impex Private Limited v. Airvisual Limited (2020) 5 SCC
399,¶ 14, 16, 18-28
8 ¶48
9 ¶132, 134, 139, 147.2, 147.6, 147.7 & 147.10
10 (1999) 5 SCC 651, ¶ 27, 28 & 30
11 2021 SCC Online SC 268, ¶ 39
DLF HOME DEVELOPERS LTD. v. RAJAPURA HOMES PVT. LTD.
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introduced, the earlier position of law as to the scope of interference by
this Court at the stage of referral has been substantially restricted. It is
also no more res integra that despite the subsequent omission of Section
11(6-A) by the Arbitration and Conciliation (Amendment) Act, 2019, the
legislative intent behind thereto continues to be a guiding force for the
Courts while examining an application under Section 11 of the Act.
18. The jurisdiction of this Court under Section 11 is primarily to
find out whether there exists a written agreement between the parties
for resolution of disputes through arbitration and whether the aggrieved
party has made out a prima facie arbitrable case. The limited jurisdiction,
however, does not denude this Court of its judicial function to look beyond
the bare existence of an arbitration clause to cut the deadwood. A threejudge bench in Vidya Drolia (Supra), has eloquently clarified that this
Court, with a view to prevent wastage of public and private resources,
may conduct 'prima facie review' at the stage of reference to weed out
any frivolous or vexatious claims. In this context, the Court, speaking
through Sanjiv Khanna, J. held that:
"154.2. Scope of judicial review and jurisdiction of the court under
Sections 8 and 11 of the Arbitration Act is identical but extremely
limited and restricted.
154.3. The general rule and principle, in view of the legislative
mandate clear from Act 3 of 2016 and Act 33 of 2019, and the
principle of severability and competence-competence, is that the
Arbitral Tribunal is the preferred first authority to determine and
decide all questions of non-arbitrability. The court has been
conferred power of "second look" on aspects of non-arbitrability
post the award in terms of sub-clauses (i), (ii) or (iv) of Section
34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration
Act.
154.4. Rarely as a demurrer the court may interfere at Section 8
or 11 stage when it is manifestly and ex facie certain that the
arbitration agreement is non-existent, invalid or the disputes are
non-arbitrable, though the nature and facet of non-arbitrability
would, to some extent, determine the level and nature of judicial
scrutiny. The restricted and limited review is to check and protect
parties from being forced to arbitrate when the matter is
demonstrably "non-arbitrable" and to cut off the deadwood. The
court by default would refer the matter when contentions relating
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to non-arbitrability are plainly arguable; when consideration in
summary proceedings would be insufficient and inconclusive; when
facts are contested; when the party opposing arbitration adopts
delaying tactics or impairs conduct of arbitration proceedings. This
is not the stage for the court to enter into a mini trial or elaborate
review so as to usurp the jurisdiction of the Arbitral Tribunal but
to affirm and uphold integrity and efficacy of arbitration as an
alternative dispute resolution mechanism."
N.V. Ramana, J. (as His Lordship then was) in his supplementary
opinion further crystalised the position as follows:
"244. Before we part, the conclusions reached, with respect to
Question 1, are:
244.1. Sections 8 and 11 of the Act have the same ambit with
respect to judicial interference.
244.2. Usually, subject-matter arbitrability cannot be decided at
the stage of Section 8 or 11 of the Act, unless it is a clear case of
deadwood.
244.3. The court, under Sections 8 and 11, has to refer a matter to
arbitration or to appoint an arbitrator, as the case may be, unless a
party has established a prima facie (summary findings) case of
non-existence of valid arbitration agreement, by summarily
portraying a strong case that he is entitled to such a finding.
244.4. The court should refer a matter if the validity of the
arbitration agreement cannot be determined on a prima facie basis,
as laid down above i.e. "when in doubt, do refer".
244.5. The scope of the court to examine the prima facie validity
of an arbitration agreement includes only:
244.5.1. Whether the arbitration agreement was in writing?
Or
244.5.3. Whether the core contractual ingredients qua the
arbitration agreement were fulfilled?
244.5.4. On rare occasions, whether the subject-matter of
dispute is arbitrable?"
[Emphasis Applied]
DLF HOME DEVELOPERS LTD. v. RAJAPURA HOMES PVT. LTD.
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19. To say it differently, this Court or a High Court, as the case
may be, are not expected to act mechanically merely to deliver a
purported dispute raised by an applicant at the doors of the chosen
Arbitrator. On the contrary, the Court(s) are obliged to apply their mind
to the core preliminary issues, albeit, within the framework of Section
11(6-A) of the Act. Such a review, as already clarified by this Court, is
not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed
at streamlining the process of arbitration. Therefore, even when an
arbitration agreement exists, it would not prevent the Court to decline a
prayer for reference if the dispute in question does not correlate to the
said agreement.
20. Keeping the settled position of law in mind, the foremost
question that arises for our consideration is whether the nature of dispute
sought to be referred for arbitration in these petitions fall under the
Arbitration Clause(s) of RCMA and SCMA, governed by the Arbitration
and Conciliation Act, 1996, with the seat and venue for arbitration at
New Delhi or such disputes can be arbitrated only in terms of the dispute
resolution mechanism specified in Clause 9 of the Rajapura SPA/Southern
Homes SPA i.e. under the rules of the Singapore International Arbitration
Centre and the seat and venue of the arbitration at Singapore?
21. With a view to analyse and answer the afore-stated question,
it is essential to understand the nature of the two sets of agreements
executed between the parties from time to time and the subsequent
amendments thereof.
22. The first set of agreements comprises of two Share Purchase
Agreements. Rajapura SPA was executed on 08.07.2016, whereunder
the Petitioner, Respondent No.1 and Respondent No.2 agreed to the
sale of shares of Respondent No.1 by DHDL in favour of Respondent
No.2/Resimmo PCC as 'the purchaser'. The Southern Homes SPA dated
25.01.2017 also pertains to the sale of shares of the Begur Company by
DHDL to Respondent No.2. Although these are two agreements but the
agreed terms are materially same except the total equity shares agreed
to be sold and the location of the residential projects. We thus, for the
sake of brevity, propose to re-produce the following relevant clauses
from the Rajapura SPA:-
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"1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
...
"Rajapura Projects Completion" shall have the meaning
ascribed in Clause 6.3;
...
2. AGREEMENT TO SELL AND PURCHASE THE SALE
SHARES
2.1 Subject to the terms and conditions of this Agreement,
the Seller agrees to sell the Purchaser, and the Purchaser
agrees to purchase from the Seller, on the Closing Date,
the Sale Shares free and clear from all Encumbrances,
together with all rights, title and interests arising therefrom
(including all rights and advantages now and hereafter
attaching or accruing thereto), such that the Purchaser shall,
upon completion of the sale of the Sale Shares in its name,
receive full legal and beneficial ownership of the said Sale
Shares and all rights and benefits relating thereto and arising
thereof.
2.2 The Sale Shares shall be purchased by the Purchaser in their
entirety on the Closing Date. The Seller shall have the right to
refuse to sell the Sale Shares to the Purchasers if the Purchasers
is unwilling to purchase or does not purchase in entirety the Sale
Shares on the Closing Date.
...
3. CONDITIONS PRECEDENTS
3.1 The Seller shall do all acts, deeds and things (including
by exercising their voting rights at Board and shareholder
meetings) and shall execute all documents necessary,
incidental or ancillary to the fulfillment of the conditions
set out in SCHEDULE II (the "Conditions Precedent"). If
any Party becomes aware of any event or circumstance that will
or may prevent any of the Conditions Precedent from being
satisfied, on or prior to the Closing Date, it shall forthwith notify
DLF HOME DEVELOPERS LTD. v. RAJAPURA HOMES PVT. LTD.
[SURYA KANT, J.]
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the other Parties in writing of such event or circumstance and the
Parties shall take such action and steps as may be required (to
the extent within a Party's control) to remove the event/
circumstances without imposing any liability on any other Party
and without the prior written consent of such other Party.
...
3.3 The obligation of the Purchaser to purchase Sale Shares and
pay the Sale Consideration on the Closing Date in the manner
specified in this Agreement, shall be conditional upon fulfilment
by the Seller (or where permissible under applicable Law, waiver
in writing by the Purchaser in its sole discretion) of the Conditions
Precedent.
...
6.