TMI Blog2011 (3) TMI 1496X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent, developer and the appellant, and if the first respondent had made claims or raised disputes against both the developer and the appellant with reference to such tripartite agreement, the position would have been different. But that is not so. The petition under section 11 of the Act against the appellant was therefore misconceived as the appellant was not a party to the construction agreement dated 21.2.2008. - C.A. 2691 OF 2011 - - - Dated:- 29-3-2011 - R. V. Raveendran A. K. Patnaik, JJ. JUDGMENT Leave granted. 2. The second respondent (referred to as the `Developer') entered into a development agreement with the owners of certain lands at Bachupally village, Qutubullapur Mandal, Ranga Reddy District, for constructing independent houses and multistoried Apartment buildings with common facilities in a layout known as `Hill County township'. The landowners as the first party, the developer as the second party and the first respondent who wanted to acquire an apartment therein as the third party entered into an agreement for sale dated 16.10.2006 under which the land-owners agreed to sell an undivided share equivalent to 87 sq.yds. out of a total extent of 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nveying to the first respondent, an undivided share in the land equivalent to 87 sq.yds. with the semi finished apartment bearing No.3E in the third floor of Nainital Block of Hill County with one reserved parking space. On the same day the first respondent entrusted the construction of the unfinished flat to the developer under a construction agreement dated 21.2.2008, under which the developer acknowledged the receipt of the total cost of construction, that is Rs.33,22,226 from the first respondent and agreed to complete the construction of the apartment and deliver the same to the first respondent by 16.10.2008 with a grace period of three months. Clause 7 of the said construction agreement dated 21.2.2008 between the first respondent and the developer provided for arbitration and is extracted below : 7. Arbitration a. In the event of any dispute between the parties in connection with the validity, interpretation, implementation or breach of any provision of this agreement or any other disputes including the question of whether there is proper termination of the agreement shall be resolved through arbitration by appointing a sole arbitrator by the Vice Chairman of the Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibilities as a lender. He contended that the circumstances disclosed collusion, fraud and misrepresentation on the part of the developer and the appellant. First respondent further alleged that the following disputes had arisen between him on the one hand, and the respondents therein (the developer and the appellant) on the other, which required to be decided by arbitration : a) The developer committed breach of contract in not fulfilling its part of contractual obligations and consequently was liable to refund all the amounts collected from him and the appellant, together with interest thereon at 24% per annum with monthly rests from the date of its respective dates of collections till payment, besides the interest and damages that may be charged by the appellant. b) The appellant clandestinely and deliberately released the entire payments to the developer without verifying the ground realities about the progress of construction and without intimation to him (first respondent) and thus committed breach of trust and was liable for all consequences. c) In view of the breach of trust and non-fulfillment of the obligations, the developer was also liable to pay a sum of Rs.15 lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order is challenged by the appellant urging the following contentions : (i) As the first respondent and the developer were the only parties to the construction agreement dated 21.2.2008 containing the arbitration agreement, the appellant could not be dragged into a dispute between them, by impleading it as a party to the petition under section 11 of the Act. (ii) The designate of the Chief Justice ought to have examined whether both respondents in the petition under section 11 of the Act were parties to the arbitration agreement (clause 7 of the construction agreement dated 21.2.2008) before making an order appointing an arbitrator under section 11 of the Act. On the contentions urged, the question that arises for our consideration is whether the appellant could be made a party to the arbitration, even though the appellant was not a party to the arbitration agreement contained in clause (7) of the construction agreement dated 21.2.2008. 11. In this case, the first respondent made a demand for damages against the developer in his notice dated 31.7.2009. As the developer refused to comply, the first respondent invoked the arbitration agreement contained in clause (7) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding for settlement of disputes arising under the respective contract, in a claim for arbitration by `X' against `M' in regard to the contract with `M', `X' cannot implead `D' as a party on the ground that there is an arbitration clause in the agreement between `X' and `D'. 13. The existence of an arbitration agreement between the parties to the petition under section 11 of the Act and existence of dispute/s to be referred to arbitration are conditions precedent for appointing an Arbitrator under section 11 of the Act. A dispute can be said to arise only when one party to the arbitration agreement makes or asserts a claim/demand against the other party to the arbitration agreement and the other party refuses/denies such claim or demand. If a party to an arbitration agreement, files a petition under section 11 of the Act impleading the other party to the arbitration agreement as also a non-party to the arbitration agreement as respondents, and the court merely appoints an Arbitrator without deleting or excluding the non-party, the effect would be that all parties to the petition under section 11 of the Act (including the non-party to arbitration agreement) will be parties to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout verifying the ground realities about the progress and construction and without intimation to him, had committed breach of trust and therefore liable to pay compensation for the financial and mental suffering of the first respondent as also the legal and other expenses. No such claim was ever been made against the appellant before filing the petition under section 11 of the Act, nor did the first respondent at any time seek arbitration in regard to such claims against the appellant. The said claims against the appellant cannot be arbitrated in an arbitration in pursuance of clause (7) of the construction agreement between the first respondent and the developer. 16. The first respondent did not issue any notice or demand making any claim against the appellant nor did he issue any notice claiming that the appellant is liable for the consequences of non-performance by the developer, of its obligations. Nor did the first respondent issue any notice to the appellant seeking reference of any disputes to arbitration. Therefore it could not be said that any dispute existed between the first respondent and appellant, when the petition under section 11 of the Act was filed. Even in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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