2019 (9) TMI 321 - SC - Indian Laws

Reference of dispute between the parties to the Arbitrator - scope of the terms of the agreement - Section 8 of the Arbitration and Conciliation Act, 1996 - application filed under Section 23 of the Societies Registration Act to Arbitration - HELD THAT - Clause 19 shall be applicable in the event of any dispute and difference arising among the parties out of, in connection with or relating to the agreement - In the present case, the developers, owners, societies and the original owners and even subsequent societies formed are parties to the agreement and the Addendum. It is also required to be noted and, as observed hereinabove, the dispute is with respect to sharing of the rent of the leased space and it can be said that the respondents are also claiming the share relying upon the Development Agreements; Supplementary Development Agreements and the Addendum. Therefore, the dispute can be said to in connection with or relating to the Agreements also. Clause 19 of the Addendum to the Supplementary Development Agreement shall be squarely applicable and therefore the disputes between the respondents and the appellants for which the respondents initiated proceedings under the Societies Registration Act, are required to be referred to the Arbitration and/or to the Arbitral Tribunal - both the High Court and the learned District Judge have committed grave error in not referring the dispute between the appellants and the respondents to the arbitration.

Summary

Issues Involved:
1. Applicability of Clause 19 of the Addendum to the Supplementary Development Agreement for arbitration.
2. Jurisdiction of disputes under Section 23 of the Andhra Pradesh Societies Registration Act, 2001.
3. Interpretation of Clause 19 of the Addendum regarding disputes between owners and societies.

Issue-wise Detailed Analysis:

1. Applicability of Clause 19 of the Addendum to the Supplementary Development Agreement for arbitration:

The appellants argued that Clause 19 of the Addendum to the Supplementary Development Agreement mandates arbitration for disputes arising out of or in connection with the agreements. The clause states, "any dispute between the Owners, including the dispute relating to this Addendum and all questions relating to its interpretation shall be construed in accordance with the laws of India." The appellants contended that the dispute over the sharing of lease rents falls within the scope of this clause and should be referred to arbitration.

The respondents, however, argued that the disputes did not fall under the specific sub-clauses of Clause 19, which outline different arbitration procedures for disputes between owners, societies, or members of different societies. They maintained that the High Court correctly upheld the District Judge's decision not to refer the dispute to arbitration.

2. Jurisdiction of disputes under Section 23 of the Andhra Pradesh Societies Registration Act, 2001:

The respondents filed petitions under Section 23 of the Andhra Pradesh Societies Registration Act, 2001, alleging non-payment of their share of rentals and seeking the production of accounts and audit reports. They also requested the court to split the appellant society into two different societies due to a loss of faith in the executive committee's integrity.

The appellants countered by filing petitions under Section 8 of the Arbitration and Conciliation Act, 1996, seeking to refer the dispute to arbitration as per Clause 19 of the Addendum. The District Judge dismissed these applications, stating that the disputes under Section 23 were not covered by Clause 19.

3. Interpretation of Clause 19 of the Addendum regarding disputes between owners and societies:

The High Court upheld the District Judge's decision, interpreting Clause 19 as applicable only to disputes specifically between owners or between societies and their members. The High Court observed that the dispute over rental sharing did not fall within these categories.

The Supreme Court, however, disagreed with this interpretation. It noted that the developers, owners, societies, and original owners were all parties to the agreements and the Addendum. The Court emphasized that the dispute over rental sharing was related to the agreements, thereby falling within the scope of Clause 19.

The Supreme Court concluded that both the High Court and the District Judge erred in not referring the dispute to arbitration. It held that Clause 19 of the Addendum was applicable and that the disputes should be referred to arbitration as mandated by the clause.

Conclusion:

The Supreme Court allowed the appeals, setting aside the High Court's judgment and the District Judge's order. It directed that the disputes between the respondents and the appellants be referred to arbitration as per Clause 19 of the Addendum. The Court emphasized that the arbitration clause should be given effect, ensuring that the disputes arising out of or in connection with the agreements are resolved through arbitration.