V. Sreenivasa Reddy vs B. L. Rathnamma on 8 April, 2021


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Supreme Court of India

V. Sreenivasa Reddy vs B. L. Rathnamma on 8 April, 2021

Author: Hon’Ble The Justice

Bench: Hon’Ble The Justice, A.S. Bopanna, V. Ramasubramanian

                                                            NON­REPORTABLE


                                    IN THE SUPREME COURT OF INDIA
                                     CIVIL APPELLATE JURISDICTION
                                  CIVIL APPEAL NO.               OF 2021
                               (Arising out of SLP (CIVIL) No.11036 of 2019)


                         V. Sreenivasa Reddy                      .…Appellant(s)

                                                   Versus


                         B.L. Rathnamma                        …. Respondent(s)


                                            JUDGMENT

1. Leave granted.

2. The appellant is before this Court assailing the

order dated 31.12.2018 passed by the High Court of

Judicature at Hyderabad in Arbitration Application

No.52/2016 filed under Section 11(5) and (6) of the

Arbitration and Conciliation Act, 1996 (‘Act, 1996’ for

short) seeking appointment of a sole Arbitrator to resolve

the dispute between the parties.

Signature Not Verified

Digitally signed by
ASHWANI KUMAR
Date: 2021.04.08
18:17:14 IST
Reason:

Page 1 of 16

3. The present position leading to the impugned order

has a chequered history. The issue essentially arises

under the Agreement of Sale dated 23.03.2006 entered

into between the parties wherein the appellant is the

purchaser having agreed to purchase the property

bearing Survey No.35/2 (Old No.35) measuring 19 Acres

1 Gunta situate at Sathanur village, Jala Hobli,

Bangalore North Taluk, from the respondent herein for

the total sale consideration of Rs.5,53,90,000/­ (Rupees

five crores fifty­three lakhs and ninety thousand). The

appellant had paid the sum of Rs.1,50,00,000/­ (Rupees

one crore and fifty lakhs) as earnest money deposit. The

balance amount of Rs.4,03,90,000/­ (Rupees four crores

three lakhs and ninety thousand) was to be paid and the

transaction was to be completed in the manner agreed

therein. The said Agreement of Sale dated 23.11.2006

vide Clause 11 provided for resolution of dispute through

arbitration in the event of there being any dispute

between the parties.

Page 2 of 16

4. When the position stood thus, the respondent is

stated to have got issued a letter dated 09.02.2007 to the

appellant directing him to pay the balance sale

consideration and secure registration of the sale deed.

The appellant had replied to the same on 21.02.2007

raising certain issues relating to the transaction. In that

background, the respondent got issued a legal notice

dated 17.04.2008 informing the appellant that the

agreement of sale dated 23.11.2006 stood cancelled and

the advance amount paid is forfeited. The appellant

disputed the same through the reply notice dated

05.05.2008, which gave rise to a dispute between the

parties. The correctness or otherwise of the allegations

made by each party against the other and the appropriate

award to be passed was a matter to be considered by the

Arbitrator to be appointed by them. Since the same did

not happen, the appellant herein invoked Section 11(6) of

Act, 1996 and filed the petition bearing CMP

No.297/2009 in the High Court of Karnataka at

Bangalore. The respondent herein, who was the

Page 3 of 16
respondent to the said petition was served and

represented.

5. During the pendency of the petition, the learned

Judge noted the submission on behalf of the parties that

the matter has been settled out of Court and the petition

was disposed of through the order dated 05.07.2011.

When this was the position an application was filed by

the appellant on 27.06.2014 in the disposed of CMP

No.297/2009 seeking recall of the order dated

05.07.2011, to restore the petition and dispose of the

same on merits. The Registry, during the scrutiny of the

application had raised certain office objections for

compliance by the appellant. Since the office objections

had not been complied with, the application was placed

before the Court regarding non­compliance. The learned

Judge through the order dated 13.10.2014 apart from

noting that there is non­compliance of the office

objections, without indicating detailed reasons has barely

observed that the application does not merit

consideration as the main order merely records

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settlement of the matter out of court. Hence the

application was rejected.

6. In that background the appellant was left with no

other legal remedy to secure redressal of the grievance

and resolution of the dispute. According to the appellant,

the settlement though proposed had not fructified, and

hence, another petition under Section 11(6) of the Act,

1996 in CMP No.228/2015 was filed. When the said

petition was listed for consideration on 02.03.2016 the

learned senior counsel for the appellant, with the

permission of the Court withdrew the petition with liberty

to file a fresh petition before the appropriate court as it

was noticed that a petition seeking appointment of the

Arbitrator was to be filed before the High Court of

Judicature at Hyderabad. The learned Judge through

the order dated 02.03.2016 placed the submission on

record and dismissed the petition as withdrawn with

liberty to file a fresh Civil Miscellaneous Petition before

the appropriate court in accordance with law. It is in

that circumstance the petition in Arbitration Application

Page 5 of 16
No.52/2016 from which the impugned order arises was

filed before the High Court of Judicature at Hyderabad.

7. The said application was opposed by the

respondent referring to the earlier proceedings noted

above, more particularly the disposal of the first

application by recording that the matter is settled

between the parties. In the said situation the learned

Chief Justice, High Court of Judicature at Hyderabad,

having noted the rival contentions was of the view that

though the Karnataka High Court had permitted

withdrawal of CMP No.228/2015 to file the petition before

the appropriate Court, the same is not seen to be one

with the consent of the respondent and the earlier orders

would continue to evidence that the Karnataka High

Court had recorded the submission on behalf of the

applicant and the respondent that the matter has been

settled out of the court. In that circumstance, the

learned Chief Justice was of the opinion that the matter

having already been settled out of the court which is

noted in the judicial order would be sufficient to decline

Page 6 of 16
the request for appointment of Arbitrator. Accordingly,

the application was dismissed.

8. In the above backdrop, we have heard the learned

counsel for the appellant, the learned senior counsel for

the respondent and perused the appeal papers.

9. The entire issue would revolve around the factual

aspect involved in the instant case to come to a

conclusion as to whether there was a concluded

settlement between the parties after the application in

CMP No.297/2009 was filed and, therefore in that

circumstance, whether it should be construed that the

dispute which had arisen between the parties should be

deemed as not subsisting for resolution through

arbitration? Whether there is settlement in the nature of

Novation of the agreement of sale dated 23.11.2006?

10. In order to arrive at a conclusion on this aspect of

the matter, it is necessary to take note of the order dated

05.07.2011 in CMP No.297/2009 which reads as

hereunder:

Page 7 of 16
“The counsel for the petitioner and the
respondent would submit that the matter has
been settled out of the court. Recording this
submission, the petition is disposed of.

Sd/­
Judge”

In the said petition, subsequently an application was filed

and the same was rejected in terms of the following order:

“There is non­compliance with the office
objections on the application in IA No.1/2014.
In any event, the application does not merit
consideration, as the order merely records the
settlement of the matter out of court.
The application is rejected.

Sd/­
Judge.”

Both the aforestated orders do not throw light on the

nature of the settlement or the conclusiveness of the

same so as to bind the parties to the same.

11. On the other hand the settlement proposed itself

not being finalized, not just the original dispute had

remained unresolved but the non­settlement of the

matter as proposed had given rise to a fresh dispute in

relation to the same agreement which required resolution

Page 8 of 16
through arbitration. In that view the appellant filed the

subsequent petition in CMP No.228/2015 under Section

11(6) of Act, 1996 seeking appointment of Arbitrator to

resolve the dispute which subsisted. However, since the

appointment of Arbitrator was to be made by the High

Court of Judicature at Hyderabad, the petition in CMP

No.228/2015 was withdrawn with liberty and the

Application No.52/2016 was filed before the High Court

of Judicature at Hyderabad.

12. In the said application i.e., Arbitration Application

No.52/2016 a detailed affidavit was filed by the

appellant. The statement contained in paragraphs 18

and 22 explains the crux of the matter which read as

hereunder:

“18. I submit that pursuant to the orders of the
Tahsildar, the Respondent herein was duty­
bound to execute a Sale Deed in my favour as
per the terms of Agreement of Sale dated
23.11.2006. However, the Respondent once
again refused to perform her part, as obligated.

I submit that I had approached the Respondent
on several occasions and the Respondent time
and again, has avoided complying with the
terms of the Agreement. I further submit that
the efforts put forth by me, with the help of

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mediators who have helped in settling the
differences during the pendency of C.M.P
No.297 of 2009, have also gone in vain. The
Applicant herein undertook extensive oral
discussions and visited the Respondent on
numerous occasions seeking to settle dispute
amicably. Respondent though reported
intention to settle before the Hon’ble High
Court, the same were not acted upon. It is
further submitted that the issue of preliminary
objection about the jurisdiction was not raised
or contended by the Respondent in the said
CMP No.297 of 2009.

22. I submit that pursuant to the said order
dated 02.03.2016, I caused a fresh notice to the
Respondent herein on 09.03.2016, informing
the Respondent to appoint an Arbitrator, within
seven (7) days from the date of receipt of notice,
as per the terms of the Agreement of Sale dated
23.11.2006. I submit that the Respondent,
despite the service of said notice, had not
consented to the appointment of the sole
arbitrator with in the specified time of 7 days. I
submit that I am therefore constrained to
approach this Hon’ble Court and file the instant
application u/s 11(2) & (6) of the Arbitration
and Conciliation Act, 1996 praying for the
nomination and appointment of sole arbitrator
by this Hon’ble Court. A copy of the notice
dated 09.03.2016 is filed herewith as Annexure
P­14. It is further submitted that the clause of
Arbitration encompasses all disputes arising out
of the agreement as ‘dispute’ mentioned in the
said clause, and as such, any dispute that
arises out of the agreement or connected to the
agreement in any manner is referable to
Arbitration to resolve such dispute. Therefore,
the dispute which arose out of the failure to
settle is a ‘dispute’ as mentioned in the clause of

Page 10 of 16
Arbitration. In the alternative, it is submitted
that failure to resolve the ‘dispute’ amicably as
agreed to, revives the original dispute which
arose between the parties as the ‘dispute’
referable in the clause of Arbitration.”
(emphasis supplied)

13. The learned Chief Justice, High Court of

Judicature, Hyderabad while disposing of the application

by noting that the High Court of Karnataka had recorded

the settlement had obviously not taken into consideration

the sworn statements to the effect that the settlement

which was proposed with the help of the mediators had

not fructified and that the non­adherence to the proposed

settlement itself is a dispute or in the least will revive the

original dispute which requires resolution through

arbitration.

14. We note that in the said background there is no

definite material on record to indicate that there was a

concluded settlement between the parties based on which

the petition was disposed and, therefore there is no

reason to hold that there is no dispute which required

resolution through arbitration; nor are we in a position to

Page 11 of 16
hold that there is Novation of the earlier agreement.

Though the learned Judge of the High Court of Karnataka

through the order dated 05.07.2011 had disposed of the

petition under Section 11(6) of the Act, 1996 by recording

the submission that the matter has been settled out of

court, the so­called settlement has not been recorded nor

made a part of the order so as to bind the parties and to

indicate that the dispute had been resolved and had

accordingly erased the original dispute or amounted to

Novation. That apart, no material is placed on record to

show that the settlement had been reduced into writing

and had been placed before the Court when the petition

was disposed of so as to indicate that the right to

arbitration under the original agreement cannot be

claimed. If that be the position, the rejection of the IA

also on the ground that the original order had merely

recorded the settlement will not indicate that a concluded

settlement was placed before the Court.

15. If that be the position, the observation of the

learned Chief Justice, High Court of Judicature at

Page 12 of 16
Hyderabad that the settlement was recorded by the

Karnataka High Court and therefore it would not be

proper to sit in judgment on the correctness or otherwise

of that order does not stand to reason. Further, while

referring to the aspect that the application was filed

before it after withdrawing the CMP No.228/2015 before

the High Court of Karnataka and though noting that

liberty had been granted through the order dated

02.03.2016, it is observed that such permission to

withdraw with liberty was not with the consent of the

respondent. However, what is to be noticed from the

order dated 02.03.2016 of the High Court of Karnataka

(Annexure P­17) is that the respondent herein who was

the respondent in the said petition was represented by

her counsel. Even though there is no express consent as

noted by the learned Chief Justice, the counsel has

neither objected to the withdrawal or the grant of liberty

to file the petition before the appropriate court. At that

stage it was not even contended on behalf of the

respondent that such liberty does not arise since the

Page 13 of 16
matter has been settled, nor were the details of the

settlement reached between the parties brought on record

in the concerned proceedings. In addition, we also note

that though a counter affidavit is filed on behalf of the

respondent to this petition and reference is made to the

earlier proceedings wherein it is contended that CMP

No.297/2009 was disposed of by order dated 05.07.2011

without giving liberty to either of the parties to seek

appointment of an Arbitrator in future, it is to be seen

that no material is brought on record to indicate the

nature of settlement entered into between the parties due

to which the dispute does not subsist and the arbitration

clause agreed therein cannot be invoked in view of the

settlement ending in resolution of the dispute.

16. That apart, as rightly portrayed in the affidavit of

the appellant filed in Arbitration Application No.52/2016,

not just the original dispute but even the fact as to

whether the matter was settled amongst themselves or

not is a dispute arising out of and in connection with the

agreement dated 23.11.2006 entered into between the

Page 14 of 16
parties. If that be the position, the learned Chief Justice,

High Court of Judicature at Hyderabad was not justified

in rejecting the application only on the contentions urged

therein on behalf of the respondent about the petition

being hit by Order II Rule 2 of CPC and also the

principles of res­judicata. It cannot be accepted in the

present facts that there was abandonment of part of any

claim nor was there a conclusive adjudication of the

dispute between the same parties on merits to constitute

res­judicata. As already indicated above, the so­called

settlement has neither been recorded in the earlier

proceedings nor any document brought on record to

indicate that factually the settlement had taken place so

as to wipe out the original dispute. In such

circumstance, a party to the arbitration agreement

contending that there was a dispute amongst them

cannot be left without a forum for resolution of the

dispute by taking a hyper technical view of the matter. In

any event, whether the dispute which had arisen at the

first instance has been settled; if the dispute subsisted,

Page 15 of 16
whether the claim is within the period of limitation, the

nature of relief if any and all other contention on merits

are to be considered in the arbitral proceedings. Hence,

keeping open all contentions on merits, we are of the view

that the sole Arbitrator is to be appointed to resolve the

dispute between the parties.

17. Accordingly, the appeal is allowed, the order dated

31.12.2018 passed in AA No.52/2016 is set aside.

Consequently Mr. Justice Ramesh Ranganathan Former

Chief Justice of the High Court of Uttarakhand is

appointed as the sole Arbitrator.

18. Pending application, if any, shall stand disposed of.

..…………………………..CJI.

(S. A. Bobde)

…..…………………………..J.

(A. S. Bopanna)

..…..………………………….J.

(V.Ramasubramanian)

New Delhi,
April 08, 2021

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