M / S. Mehta And Modi Realty Kowkur LLP vs. Prem Kumar Sanghi

Held

The Court held that the Joint Development Agreement dated 09.07.2019 contained a clear arbitration clause (Clause 56) for the resolution of disputes arising out of or in connection with the agreement. The Court found that the applicant's claim for refund of the security deposit and payment of outstanding charges, contrasted with the respondents' dispute of contractual obligations and claim for penalty and damages, constituted genuine disputes arising from the agreement. The Court reasoned that questions concerning construction completion, Occupancy Certificate issuance, possession delivery, refund entitlement, and liability for claimed amounts were matters to be considered by an Arbitral Tribunal. The objections raised by the respondents on merits were deemed to be matters that could be urged before the Arbitrator. Consequently, the Court appointed Hon’ble Sri Justice B. Chandra Kumar, former Judge of the High Court, as the Arbitrator to decide the grievances and claims of both parties. The venue and fees of the Arbitrator were to be decided mutually by the parties in consultation with the Arbitrator.

Facts

M/s. Mehta and Modi Realty Kowkur LLP (applicant) filed an Arbitration Application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an Arbitrator to resolve disputes arising from a Joint Development Agreement dated 09.07.2019 with Mr. Prem Kumar Sanghi and others (respondents). The applicant alleged that they paid Rs. 1,00,00,000/- as a security deposit, which was to be refunded within 15 days of intimation of construction completion. The applicant claimed the respondents failed to refund the deposit and forcibly took possession of 5 flats the applicant was entitled to retain as security. The applicant also alleged non-payment of GST, electricity, water charges, and corpus fund by the respondents. The respondents denied these allegations, claimed penalty and damages, and disputed the applicant's claims regarding possession and completion of construction. They also disputed the issuance and service of the arbitration notice.

Key Issues

1. Whether the disputes arising between the applicant and respondents concerning the Joint Development Agreement dated 09.07.2019 are arbitrable under Clause 56 of the said agreement and the Arbitration and Conciliation Act, 1996? Petitioner's arguments: The applicant contended that disputes regarding the refund of the security deposit, possession of flats, and payment of outstanding charges directly arose from the Joint Development Agreement. They argued that Clause 56 of the agreement clearly stipulated arbitration in Hyderabad for all disputes arising out of or in connection with the agreement, with exclusive jurisdiction vested in Hyderabad courts. Therefore, an Arbitrator should be appointed to adjudicate these disputes. Respondents' arguments: The respondents argued that the applicant's statements regarding possession were contradictory, suggesting an attempt to mislead the court. They claimed the applicant had not specified dates for handing over or forcibly taking possession. The respondents denied the applicant's allegations, demanded completion of construction and Occupancy Certificate, and claimed penalty and damages of Rs. 2,43,41,760/-. They also disputed the issuance and service of the arbitration notice, alleging it was created and sent via private courier instead of postal service.