TMI Blog1999 (5) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 34 of the Act? Held that:- Appeal dismissed. we do not think it necessary to decide this question in view of the fact that though Section 16 was referred to during the course of the hearing, the learned senior counsel for respondents had argued on merits that the arbitrator had Jurisdiction to decide the disputes/differences concerning the Interior Design agreements also and that even if the appellant could be permitted to raise these issues at the stage of Section 34, there was no substance in the said contentions. There are several items in Schedule E of the main agreement which overlap the items in Schedule A of the Interior Design Agreement. In view of the overlapping, in our opinion it has to be said that several items in the Schedule A of the Interior Design Agreement are in modification/substitution of the items in the Main Agreement. Therefore the coverage of the two agreements makes it clear that the execution of the Interior Design Agreement is connected with the execution of the main Agreement. It may also be noted that the date of the main agreement and the Interior Design Agreement is the same in each of the three cases and clause 3 of the Interior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retired Judge of that Court on 13.6.1997 as sole arbitrator and the said arbitrator had passed the three awards on 13.11.1997. The facts are as follows: There were three main agreements dated 9.3.94, 9.3.94 and 29.6.1994 under which the appellant agreed to sell Flat Nos. 101-102, 201-202 and 301-302 on first, second and third floors of the proposed building Wembley at, Play ground Road, Vile Parle (East) Bombay to the respondents on the terms contained in the agreements. The consideration was Rs.76, 72 and 74 lakhs respectively. The possession of the flats was to be handed over alongwith amenities by 30.10.94. The terms of the contract provided the time- schedule for payments by the purchasers and said time was to be the essence of the contract and it was stated that failure to pay would entail termination of the agreement. The purchasers were to pay 21% interest in case of default. There were various other terms. Clause 7 provided that the power of termination should not be exercised by the appellant unless and until the appellant had given to the purchasers 15 days prior notice in writing of the intention to terminate the agreement and given the purchasers opportunity to set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nection with the rights and obligations of the parties hereto shall be referred to the Joint Arbitration of Shri P.N. Nanavati (Solicitor) and Mr.Rashmi Mehta (Solicitor). If the aforesaid Arbitrators then and in such event such disputes and differences shall be referred to arbitration of two arbitrators, one to be appointed by each of the parties hereto. The Arbitrators so appointed shall appoint an umpire before entering upon the reference. The Arbitrators of the umpire as the case may be shall be governed by the provisions of the Indian Arbitration Act, 1940 or any statutory modification or re-enactment thereof from time to time in force." It will be noticed that this clause required reference to specific named arbitrators. On 24.4.95, the respondent wrote to the appellant seeking information as to the stage of the construction and as to when the appellant would be handing over possession of the flats. The appellant replied on 6.6.95 complaining default on the part of the purchasers as some cheques were dishonored and stated that he was terminating the three agreements giving 15 days notice. On 22.6.95 the respondents wrote to the appellant that considerable amounts were pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenge the order of the arbitrator dated 9.10.97. Adjournment was refused. The arbitrator took up the matter for evidence. On 16.10.97, the respondents (i.e. claimants before arbitrator) examined their witnesses in chief and the appellant s counsel partly cross-examined them and sought time and the matter was adjourned for 21.10.97. There were some winding up proceedings against the appellant and a provisional liquidator was appointed on 30.4.97. On an application by the respondents, the arbitrator, after hearing the counsel for the parties, passed an order on 22.10.97 that no leave of the company court was required at the stage of appointment of a provisional liquidator. The appellant s advocate sought further time and the same was refused. The appellant s advocate then filed three IAs for condoning delay in filing the written statement dated 22.10.97 in all three matters. Delay was condoned. Further adjournment sought by appellant was refused. On 27.10.97 evidence was recorded but there was no cross examination by the appellants counsel and the evidence was closed. On 13.11.97, the award was passed granting relief of specific performance in respect of the three main agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not also raised before the learned Single Judge. For the first time the point was raised before the Division Bench. The same could not be permitted to be raised after the award. An arbitrator could grant specific performance of an agreement of sale. So far as the other points raised on the merits of the award were concerned, the same could not have been raised in view of the narrow scope of objections permitted by sub-clause (2)(b) of Section 34 of the new Act. It was contended that the challenge to the award was rightly rejected by the High Court. It was prayed that the appeals be dismissed. On these contentions, the following points arise for consideration: (1) Whether the appellant is right in contending that the arbitration clause 39 in the main agreement did not permit the arbitrator to deal with the disputes relating to the Interior Design Agreement which contained a different arbitration clause and whether the award, in respect of the Interior Design Agreement was void? (2) Whether the appellant who did not raise any question of jurisdiction under Section 16 of the Act in relation to the disputes under the Interior Design Agreements, could have raised a question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents witnesses upto a stage and even then no such objection as to scope of reference was raised. The arbitrator referred in his award to the sole contention of the appellant before him so far as the Interior Design Agreements were concerned and that was that the said agreements were void inasmuch as no amount was paid at the time of the agreements (though Rs.10 lakhs each was agreed to be paid). That was the only contention concerning these three Interior Design agreements. No dispute as to the power of the arbitrator to deal with disputes under these three agreements was raised. That means that the appellant accepted that disputes under these agreements were also covered by the reference. In the objections to the award filed in the Court under section 34 no such point was raised except a general ground (j) that the entire proceedings of arbitration were illegal and bad in law, null and void and that the award was liable to be set aside. In the order of the learned Single Judge in para 5 it was stated that only 3 points were raised and we find that this was not one of those points argued before the learned Single Judge. For the first time this point relating to the scope of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of Article 16 of the Model Law occur in sub- clauses (2) and (3) of section 16 of the Act. It will be noticed that under the Act of 1996 the arbitral tribunal is now invested with power under sub-clause (1) of section 16 to rule on its own Jurisdiction including ruling on any objection with respect to the existence or validity of the arbitration agreement and for that purpose, the arbitration clause which forms part of the contract shall be treated as an agreement independent of other terms of the contract and any decision by the arbitral tribunal that the contract is null and void shall not entail ipso Jure affect the validity of the arbitration clause. This is clear from sub- clause (b) of Section 16(1) which states that a decision by the arbitral tribunal that the main contract is null and void shall not entail ipso Jure the invalidity of the arbitration clause. In the present context sub-clauses (2) and (3) of Section 16 are relevant. They refer to two types of pleas and the stages at which they can be raised. Under sub-clause (2) a plea that the arbitral tribunal does not have Jurisdiction shall be raised not later than the submissions of the statement of defence: however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the court finds that - (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force; or (ii) the arbitral award is in conflict with the public policy of India. Explanation.- Without prejudice to the generality of sub-clause (ii) of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81." Section 34 of the Act is based on Article 34 of the UNCITRAL Model Law and it will be noticed that under the 1996 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing these questions at the stage of Section 34 though these issues have not been raised before the arbitration as per sub-clause (2) and (3) Section 16. Before we do so, we shall advert to a recent decision of this Court in Rajinder Krishan Khanna vs. Union of India [1998 (7) SCC 129] wherein this Court referred to Section 16 and Section 34 (2)(a)(iv) of the Act. In that case a reference was made to arbitrators when the appeal was being heard by this Court. The appellant was the claimant. The opposite party raised a specific plea before the arbitrators that they had no Jurisdiction to decide about the value of the potentiality of the land and that the claim petition before the arbitrator could not have included the above claim, which was outside the reference and outside the writ petition and the Civil Appeal from which the reference arose by consent. It was argued for the appellant in reply that the respondents did not have a specific issue framed by the arbitrators in regard to the scope of the reference and the respondents were estopped from contending that the arbitrators could not have dealt with the question. This Court held that this case was not a case where no objection wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before one arbitral tribunal. As to the meaning of the words "connected with, arising out of or in relation thereto", we may refer to Renusagar Power Co.Ltd. vs. General Electric Co. [1984 (4) SCC 679]. It was held that these words "are of the widest amplitude and content and include even questions as to the existence and effect (scope) of the arbitration agreement. Question is whether the disputes and differences arising under the Interior Design Agreement are integrally "connected with" the disputes and differences arising from the main contract? In our view, they are. The main agreement refers to the payment of the last instalment of Rs.17 lakhs against taking of possession of the flats. Therefore the main agreements extended upto the time of taking of possession by the purchasers. Para 8 of the main agreement states that the fixtures, fittings and ameneties to be provided by the Developers in the said building and the flat/unit are those that are set out in Annexure E annexed to the main agreement. Now annexure E refers not only to the building but to the type of doors, corridors, fixtures, the nature of the flooring, the bathroom tiles and fittings, the Kitchen, the W.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement which can be referred to named arbitrators and said clause 5, in our opinion, comes into play only in a situation where there are no disputes and differences in relation to the main agreement and the disputes and differences are solely confined to the Interior Design Agreement. That, in our view, is the true intention of parties and that is the only way by which the general arbitration provision in clause 39 of the main agreement and the arbitration provision for named arbitrator contained in clause 5 of the Interior Design Agreement can be harmonised or reconciled. Therefore, in a case like the present where the disputes and differences cover the main agreement as well as the Interior Design Agreement, - (that there are disputes arising under the main agreement and the Interior Design Agreement is not in dispute) - it is the general arbitration clause 39 in the main agreement that governs because the questions arise also in regard to disputes relating to the overlapping items in the Schedule to the main agreement and the Interior Design Agreement, as detailed earlier. There cannot be conflicting awards in regard to items which, overlap in the two agreements. Such a situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of India vs. Chemical Construction Corporation [ILR 1974 Bombay 856/858 (DB)] and the Calcutta High Court in Keventer Agro Ltd. vs. Seegram Comp. Ltd. [Apo 498 of 1997 Apo 449 of (401)] (dated 27.1.98) have taken the view that an arbitrator can grant specific performance of a contract relating to immovable property under an award. No doubt, the Delhi High Court in M/s PNB Finance Limited vs. Shital Prasad Jain Others [AIR 1991 Del. 13] has however held that the arbitrator cannot grant specific performance. The question arises as to which view is correct. In our opinion, the view taken by the Punjab, Bombay and Calcutta High Courts is the correct one and the view taken by the Delhi High Court is not correct. We are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the partiess to agree - with a view to shorten litigation in regular courts - to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Section 34(2)(b)(i) is not attracted. We overrule the view of the Delhi High Court. Point 3 is decided in favour of respondents. Point 4: This point concerns the issues between the parties on the merits of the award relating to deafult, time being exercise, readiness and willingness etc. These are all issues of fact. If we examine section 34(2) of the Act, the relevant provisions of which have already been extracted under Point 1 and 2, it will be seen that under sub-clause (b) of section 34(2), interference is permissible by the Court only if (i) the subject matter of the dispute is non capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral amount is in conflict with the public policy in India. The Explanation to the provisions says that without prejudice to the generality of sub-clause (ii) of clause (b), it is declared for the avoidance of any doubt, that an award is to be treated as in conflict with the public policy of India if the making of the award was induced or affected by fraud, or corruption or was in violation of sections 75 or 81. Section 75 deals with confidentiality while section 81 deals with admissibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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