Dlf Home Developers Limited vs Rajapura Homes Private Limited on 22 September, 2021
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Supreme Court of India
Dlf Home Developers Limited vs Rajapura Homes Private Limited on 22 September, 2021
Author: Surya Kant
Bench: Hon’Ble The Justice, Surya Kant, Hon’Ble Ms. Kohli
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
ARBITRATION PETITION (CIVIL) NO. 17 OF 2020
DLF Home Developers Limited
..... Petitioner
VERSUS
Rajapura Homes Private Limited & Anr. ..... Respondent(s)
WITH
ARBITRATION PETITION (CIVIL) NO. 16 OF 2020
DLF Home Developers Limited
..... Petitioner
VERSUS
Begur OMR Homes Pvt. Limited & Anr. ..... Respondent(s)
JUDGMENT
Surya Kant, J.
The Petitioner DLF Home Developers Limited (hereinafter,
“DHDL”) has filed Arbitration Petition No. 16 of 2020 and Arbitration
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
Signature Not Verified
Digitally signed by
differences between the parties that have arisen out of the two
Vishal Anand
Date: 2021.09.22
16:23:41 IST
Reason:
Page | 1
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”).
Page | 2
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.
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
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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
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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 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
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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.
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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 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
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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, Freshfields Bruckhaus
Deringer Singapore Pte. Ltd., reiterating that the disputes between
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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.
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
Page | 9
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 Limited 1, (ii)
Garware Wall Ropes Limited v. Coastal Marine Constructions
and Engineering Limited2, (iii) Mayavati Trading Private
Limited v. Pradyuat Deb Burman 3, and (iv) Vidya Drolia and
Others v. Durga Trading Corporation 4, 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 Uttarakhand
Purv Sainik Kalyan Nigam Limited v. Northern Coal Field
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
Page | 10
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 Others 6, 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
5
(2020) 2 SCC 455, ¶7.10, 7.11
6
(2012) 1 SCC 594, ¶ 19
Page | 11
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 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
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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
Respondents contended 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 Others 10, wherein, this Court held
that in a situation where there are disputes and differences in
connection with the main agreement and also disputes regarding
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, 1828
8
¶48
9
¶132, 134, 139, 147.2, 147.6, 147.7 & 147.10
10
(1999) 5 SCC 651, ¶ 27, 28 & 30
Page | 13
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 Ors 11, 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
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
11
2021 SCC Online SC 268, ¶ 39
Page | 14
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 three-judge 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
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relating 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, subjectmatter 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
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244.5.3. Whether the core contractual ingredients qua the
arbitration agreement were fulfilled?
244.5.4. On rare occasions, whether the subjectmatter of
dispute is arbitrable?”
[Emphasis Applied]
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
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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:-
“1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
…
“Rajapura Projects Completion” shall have the meaning
ascribed in Clause 6.3;
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…
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 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
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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. CONSTRUCTION RELATED OBLIGATIONS OF THE SELLER
6.1 The Seller shall, through appropriate contractors to be
appointed by the Company (in accordance with the terms of the
Construction Agreement), as per the terms set out in
SCHEDULE V and to be set out in the Construction Agreement
proposed to be executed as a Condition Precedent, ensure (i)
completion of construction of the Rajapura Phase II Project on or
prior to December 31, 2016, (ii) obtain the occupation certificate for
the Project on or prior to December 31, 2016; and (iii) where
applicable, hand over possession of units of the Rajapura Projects to
the purchasers of units or the Company (as and when required
pursuant to the applicable sales contracts and/or Law but subject
to the aforementioned time limit) until the later of (i) 12 (twelve
months) from receipt of the occupation certificate for the Rajapura
Phase II Project, the timeline for completion of the Rajapura Phase II
Project shall, subject to the Seller taking reasonable steps to
minimize the impact of the Force Majeure event, be extended from
December 31, 2016 by such period as for which such Force Majeure
event subsists. The obligation of the Seller with respect to handover
after expire of the aforementioned time period shall be as set out in
the Construction Agreement. Provided however that any unit for
which final demand has been raised by the Company but for which
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possession has not been taken over by the customer despite 2 (two)
written reminders and passage of 4 (four) months from the raising
of the final demand shall be deemed to have been handed over for
the purpose of completion of the Construction Covenant. Further,
Seller shall write to the Anekal Planning Authority in relation to the
completion certificate for Rajapura Phase II Project, requesting that
the completion certificate dated December 12, 2016 reference
number APA/LAO/59/201112 be deemed final as Company has
decided to abandon the construction of towers W and X in Building
No. 6 of the Rajapura Phase II Project, get an acknowledgment of
receipt of the application from Anekal Planning Authority, and make
reasonable efforts to obtain an endorsement on the application from
Anekal Planning Authority.
6.2 In addition, the Seller shall, through appropriate
contractors to be appointed by the Company (in accordance
with the terms of the Construction Agreement), on or prior to
March 31, 2018, as per the terms to be set out in the
Construction Agreement proposed to be executed as a
Condition Precedent, ensure completion of construction of the
club house of 2,469.33 (two thousand four hundred sixty nine
point three three) square metres built up area and 2,469.33 (two
thousand four hundred sixty nine point three three) square metres
built up area and 2,446.25 (two thousand four hundred forty six
point two five) square metres FAR area in the Rajapura Projects as
per the terms set out in SCHEDULE V (“Club Construction”);
provided that in the event that a Force Majeure event materially
impacts the Club Construction, the timeline for completion of the
Club Construction shall, subject to the Seller taking reasonable
steps to mitigate the impact of the Force Majeure event, be extended
from March 31, 2018 by such period as for which such Force
Majeure event subsists.
…
Page | 21
9. DISPUTE RESOLUTION
All disputes or differences regarding this Agreement shall be
submitted to final and binding arbitration at the request of any of
the disputing Parties upon written notice to that effect to the other
Parties. In the event of such arbitration:
(i) The arbitration shall be in accordance with the rules of
the Singapore International Arbitration Centre (“SIAC”), in
force at the relevant time (which is deemed to be
incorporated into this Agreement by reference);
(ii) All proceedings of such arbitration shall be in the English
language. The venue of the arbitration shall be Singapore,
which shall be the seat of the arbitration;
…
[Emphasis Applied]
23. It may be mentioned that the Rajapura SPA was mutually
amended by agreements dated 25.01.2017 and 16.03.2017.
Similarly, the Southern Homes SPA was also amended by an
agreement dated 16.03.2017. The relevant clauses extracted above
have taken notice of the amendments conjointly carried out by the
parties.
24. In terms of Clauses 3.1, 6.1 and 6.2 of Share Purchase
Agreements, as re-produced above, the parties entered into two
Construction Management Service Agreements dated 25.01.2017 in
respect of Rajapura Project (RCMA) and Southern Homes Project
(SCMA). Since both these agreements are also in boilerplate
language, the following relevant clauses of the RCMA are extracted:
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“2. ENGAGEMENT & SCOPE OF SERVICES
2.1 On the terms and subject to the conditions set out in this
Agreement DHDL undertakes to provide construction management
services to the Company in relation to the completion (pursuant to
the receipt of appropriate occupation certificates) of the Rajapura
Projects and services in connection with the handover of sold units
in the Rajapura Projects and Construction Covenant (collectively,
the “Services”). The scope of the Services shall include:
(i) Monitoring and supervising the work being undertaken by the
project management consultant appointed for the Rajapura
Projects in accordance with the terms of the PMC Contract:
(ii) Monitoring and supervising of works being undertaken by the
various contractors appointed in accordance with the terms of
the Existing Construction Contracts and Sub-Contracts:
(iii) Evaluation of prospective contractors for award of construction
works for the Rajapura Projects Completion:
(iv) Finalization and execution, on behalf of the Company, of
construction contracts with identified contractors for Rajapura
Projects Completion; (“New Construction Contracts”), in
accordance with the Approved Budget, provided that the cost
pursuant to this Clause 2.1 (iv) may exceed up to a cap of
25% (twenty five per cent) over the cost estimates in the
Approved Budget:
(v) Monitoring and supervising of works being undertaken by the
various contractors appointed in accordance with the terms of
the New Construction Contracts:
…
4. FEES AND EXPENSES
4.1 In consideration of the Services to be provided by DHDL
and performance of the terms of this Agreement, DHDL shall be
entitled subject to the terms and conditions contained in this
Agreement, to the Fees and the Company shall pay to DHDL the
Fees (in the manner set out in this Clause 4), after deduction of
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any withholding tax required to be withheld deducted in
accordance with Applicable Law.
4.2 Forthwith upon completion of the Construction Covenant
and receipt of the occupation certificate in respect of each of the
projects comprised in the Rajapura Projects, DHDL shall send a
written notice to the Company certifying fulfilment of completion
of the Rajapura Projects, and enclose certified true copies of all
necessary documents evidencing fulfilment of the same and the
Company shall have the right to reject or confirm the fulfilment,
within a period of 15 (fifteen) days from the date of receipt of the
aforementioned written notice from DHDL, provided that the
Company shall act reasonably in exercising such right, and
receipt of occupation certificate from an appropriate
Governmental Authority will signify completion of any building.
In case the Company fails to respond to the said certificate within
a period of 15 (fifteen) days, then the Company shall be deemed to
have accepted the fulfilment of completion of the relevant project
comprised in the Rajapura Projects.
4.3 Immediately upon receipt of the Rs.750,000,000 (Rupees
Seven Hundred and Fifty Million) by Southern Homes in the manner
contemplated under Clauses 4.3 or
4.4 (as the case may be) of the Southern Homes Construction
Agreement, the Company shall deposit an amount of Rs.150,000,000
(Rupees One Hundred and Fifty Million) into a separate bank account
of the Company identified by Resimmo and, notwithstanding anything
to the contrary contained in the Agreement, the Company shall be
entitled to deal with this amount of Rs.150,000,000 (Rupees One
Hundred and Fifty Million) in such manner as determined by its Board
and the balance shall be dealt with as per the hierarchy of payment
set out in Clause 3.8 above.
11. DISPUTE RESOLUTION
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Subject to Clause 4.6, all disputes or differences regarding this
Agreement shall be submitted to final and binding arbitration at the
request of any of the Parties upon written notice to that effect to the
other Party. In the event of such arbitration:
(i) The arbitration shall be in accordance with the
Arbitration and Conciliation Act, 1996, in force at the
relevant time (which is deemed to be incorporated into
this Agreement by reference);
(ii) All proceedings of such arbitration shall be in the
English language. The venue of the arbitration shall be
New Delhi, which shall be the seat of the arbitration
and the courts of New Delhi shall have exclusive
jurisdiction over the arbitration proceedings;
(iii) The arbitration shall be conducted before a sole
arbitrator appointed jointly collectively by the Parties.
In the event that the Parties are unable to agree on a
sole arbitrator within 15 (fifteen) Business Days
following submission of the dispute to arbitration, the
arbitrator shall be appointed in the manner prescribed
under the Arbitration and Conciliation Act, 1996.”
…
[Emphasis Applied]
25. 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. We are,
therefore, of the considered opinion that in order to determine the
nature of arbitral proceedings, the two groups of agreements will
have to be read in harmony and reconciled so as to avoid any head
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on collision, and thereafter a conclusion as to which of the clauses
would be applicable in the present case, needs to be drawn.
26. 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 Resimmo PCC. No doubt, 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 lays down the
obligation on Respondent No.2 to pay “Fee” to the Petitioner-DHDL
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 for us to
accept it outrightly that the respective Share Purchase Agreements
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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.
27. 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.
28. We may at this stage also briefly refer to the judgment of this
Court in Olympus Superstructure (Supra), wherein this Court
faced two different arbitration clauses in two related agreements
between the same parties. The main agreement therein was
concerned with the selling of certain flats, and the related
agreement was an Interior Design Agreement, both of which
contained an arbitration clause that was not similar to each other.
Since two valid arbitration clauses existed and the parties were
relying upon the different arbitration clauses, this Court harmonised
both the clauses and viewed that the arbitration clause in the main
agreement was worded in wide terms and specifically contemplated
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issues that were in “any way connected with, arising out of or
in relation to the subject matter of the arbitration
agreement”. This Court, therefore, aptly held that since the
disputes arising from the Interior Design Agreement were
intrinsically “connected with” the disputes and differences arising
out of the main contract, such dispute could also be adjudicated
under the main agreement itself.
29. The nature of arbitration clauses in the present case are
substantially different when compared with the dispute resolution
clause of the main agreement in Olympus Superstructure
(Supra). 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 we were to assume 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.
30. Further, 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
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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. It, thus, appears to us that 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.
31. 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, learned
Senior Counsel for the Petitioner has unequivocally submitted that
the purchase of shares by Respondent No.2 has been duly
completed. There is nothing on record to suggest that Respondent
Page | 29
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 subject-controversy falls within
the ambit of Clause 9 of the said agreements and can be
adjudicated only under the rules of SIAC, with seat and venue at
Singapore.
32. At the cost of repetition, we may re-iterate that 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.
Considering that the primary twin-test envisioned under Section
11(6) of the Act has been satisfied by the Petitioner-DHDL, we are of
the view that 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.
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33. It goes without saying, that if on appreciation of the facts and
law, the arbitrator finds that the ‘real dispute’ between the parties
stems from the Share Purchase Agreements dated 08.07.2016 and
25.01.2017, the arbitrator shall be free to wind up the proceedings
with liberty to the Parties to seek redressal under the rules of SIAC.
34. We may now briefly deal with the question whether the
disputes should be referred to a consolidated and composite
tribunal or should there be two different arbitral tribunals to resolve
the same. It was urged on behalf of the Petitioner that since the
RCMA and SCMA are inextricably interlinked to each other, the
dispute/difference cannot be segregated into two separate
proceedings. It was pointed out that the obligation of
computation/determination and payment of “Fee” to the Petitioner
arises out of the SCMA, the RCMA and the Fee Agreement, and
under the Fee Agreement, the parties have to calculate the “DLF
Receivables”. Such DLF Receivables have to be computed taking
into account financial components/accounts of both, the Southern
Homes Project and the Rajapura Homes Projects. It was thus
submitted that in order to avoid multiplicity of proceedings which
may result in conflicting awards, the sum of disputes may be
referred to a single and composite arbitral tribunal.
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35. The fact remains that the RCMA and SCMA, though interlinked
and connected, are still two separate agreements. We also cannot
lose sight of the fact that 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. We leave it to the wisdom of the sole arbitrator
to decide whether the disputes should be consolidated and
adjudicated under one composite award or otherwise. The
modalities and manner in which the two separate arbitral
proceedings shall be conducted shall also be resolved by the sole
arbitrator.
CONCLUSION
36. In light of above discussion, Arbitration Petition No. 16 of 2020
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and Arbitration Petition No.17 of 2020 are allowed. This Court
appoints Mr. Justice (Retd.) R.V. Raveendran, Former Judge, Supreme
Court of India as the sole arbitrator to resolve all
disputes/differences between the parties. The arbitrator will be paid
fees in accordance with the Fourth Schedule of the Arbitration and
Conciliation Act, 1996 as amended from time to time.
37. A copy of this order be dispatched to Mr. Justice (Retd.) R.V.
Raveendran, Former Judge, Supreme Court of India at the following
address:
“Mr. Justice (Retd.) R. V. Raveendran
Former Judge, Supreme Court of India
No. 8/2, Krishna Road, Basavangudi
Bangalore 560004.
Telephone Number: 08026601279
Mobile Number: 09654500060”..…………………….. CJI.
(N.V. RAMANA)
………..………………… J.
(SURYA KANT)
NEW DELHI
DATED : 22.09.2021
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