|2023 SCC OnLine SC 1683
|Date of Judgment
|15 December 2023
|Supreme Court of India
|Sushama Shivkumar Daga
|Madhurkumar Ramkrishnaji Baja
|Aniruddha Bose and Sudhanshu Dhulia
The case Sushama Shivakumar Daga vs Madhurkumar Ramkrishnaji Bajaj revolves around the Arbitration and Conciliation Act, 1996. It deals with whether the matter in the present case could be referred to the arbitration. The appellants wanted the Conveyance Deed to be declared null and void and the Development Agreements to be declared validly terminated. The respondents wanted to take the matter before arbitration relying upon the arbitral clause mentioned in the two tripartite agreements and moved an application under the Arbitration Act. The trial court allowed the application of the respondent. A Writ Petition was filed by the appellant in the Bombay high court which rejected the writ. Finally, the appellant approached the Supreme Court, which held the findings of the trial court and the high court as correct in terms of law. The appeal was therefore dismissed.
Facts of the case
- M/s Emerald Acres Private Limited, respondent no. 2 was incorporated by Mr. Shivakumar Daga and his wife to carry out their real-estate business.
- Further, tripartite agreements 31.03.2007 and 25.07.2008 were signed between Shivkumar Daga, Madhurkumar Ramakrishnaji Bajaj and M/s Emerald Acres Private Limited. Both the agreements had arbitration clauses which stated that in case of any dispute, the parties shall refer the dispute to the arbitration.
- Shivkumar Daga died on 08.05.2011 and executed a will in the name of his wife (appellant 1) and his son (appellant 2). The appellants filed a suit for the declaration of the Conveyance Agreement as null and void and five development agreements to be validly terminated.
- The respondent wanted the dispute to be taken before the arbitration because there was an arbitration clause mentioned in the tripartite agreements.
- Whether the Trial court and the high court have rightly referred the matter to the arbitration?
- Can the dispute be referred to arbitration since the Conveyance Deed had no arbitration clause in it?
Contentions of Appellant
- The first contention raised by the appellant was that the dispute could not be taken before the arbitration because the Conveyance Deed dated 17.12.2019 and the five Development Agreements dated 17.09.2007, 20.11.2007, 30.11.2007, 03.12.2007 and 27.02.2008 respectively had no arbitration clause.
- The second contention was that the suit filed by him was related to the cancellation of the document related to an immovable property which is land. This resulted in an action in rem and not in personum. According to the Arbitration Act, when the subject matter of a dispute is related to right in rem it is not arbitral.
- The third contention raised by the appellant was related to fraud. A plea of fraud was raised by the appellant with respect to section 8 of the Arbitration Act.
Contentions of respondent
- The respondent contended that the Conveyance Deed dated 17.12.2019 and the five Development Agreements dated 17.09.2007, 20.11.2007, 30.11.2007, 03.12.2007 and 27.02.2008 respectively, find their source in the two Tripartite Agreements dated 31.03.2007 and 25.07.2008 signed between him and the appellant. And both the tripartite
agreements had the arbitral clause in them. So, it cannot be said that the Conveyance Deed and the Development Agreements had no arbitral clause.
The Trial Court and the Bombay High Court held that the arbitral clause mentioned in the two Tripartite Agreements signed between the appellant and the respondent would cover the Conveyance Deed and the five Development Agreements further signed between the two parties. The disputes raised by the appellant would come within the tripartite agreements. Hence, the dispute can be taken before the arbitration. The appellant had appealed in the Supreme Court. The Supreme Court held that the tripartite agreements had no ambiguity with respect to the arbitration clause. Moreover, the tripartite agreement formed the basis of all other agreements including the Conveyance Deed and the Development Agreements.
The Supreme Court agreed with the findings of the Trial Court and the Bombay High Court. The court ordered the matter to be taken before arbitration. The appeal was therefore dismissed.
The two Tripartite Agreements were the broader agreements and they formed the basis of the subsequent agreements including the Conveyance Deed and the Development Agreements signed between the appellant and the respondent. So, if there was an arbitral clause in the tripartite agreement it means that this clause applies to the Conveyance Deed as well as the Development Agreements also. There was no requirement of the two having separate arbitral clause in them. Secondly, the court referred to Deccan Paper Mills v. Regency Mahavir Properties, (2021) 4 SCC 786, where it was held that a suit for cancellation of a deed or a declaration of rights arising from the deed would only be an ‘action in personam and not in rem’. A similar reasoning was applied in the present case as well wherein the court held that the cancellation of the document related to an immovable property would amount in an action in personam and hence it is arbitral. Thirdly, the court held that the third contention raised by the appellant with respect to fraud was just a bald allegation. ‘The plea of fraud must be serious enough to oust the jurisdiction of an arbitrator.’ The court relied upon Rashid Raza v. Sadaf Akhtar, (2019) 8 SCC 710 where two conditions were laid down which must be satisfied before the Court can refuse to refer the matter to the Arbitrator. ‘The first condition is whether the plea permeates the entire contract and above all, the arbitration agreement, rendering it void. Secondly, whether the allegation of fraud touches upon the internal affairs of the parties inter se having no implication in the public domain. The allegations must have some implication in public domain to oust the jurisdiction of an Arbitrator, if an allegation of fraud exists strictly between the parties concerned, the same will not be termed to be as a serious nature of fraud and hence would not be barred for arbitration’.
The case revolved around the issue can the dispute arising out of the Conveyance Deed and the Development Agreements could be taken before arbitration even though they had no arbitration clause in them. The appellants filed a suit for the declaration of the Conveyance Agreement as null and void and five development agreements to be validly terminated. The respondent filed an application before the arbitration. According to the appellant since the Conveyance Deed and the Development Agreements had no arbitral clause hence the dispute arising out of them cannot be taken before the arbitration. But the court held that since the Tripartite Agreements signed between the appellant and the respondent had the arbitral clause and it also formed the basis of the Conveyance Deed and the Development Agreements so the dispute arising between the appellant and the respondent can be taken before the arbitration even though the Conveyance Deed and the Development Agreements had no arbitral clause.
- SCC Online
Written by Shraddha Thapar an intern under legal vidhiya.