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TMI Blog2021 (9) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... of arbitral proceedings, the two groups of agreements will have to be read in harmony and reconciled so as to avoid any head on collision, and thereafter a conclusion as to which of the clauses would be applicable in the present case, needs to be drawn. Upon perusing the Share Purchase Agreements, it is clear that the primary purpose of these agreements is to effectuate the change of ownership of Respondent No.1 and the Begur Company from DHDL to Resimmo PCC. No doubt, the Rajapura SPA and the Southern Homes SPA as per their Clause 6.1 and 6.2, do provide for the completion of the respective residential projects as a postclosing obligation, however, these construction obligations had to be fulfilled in accordance with the terms of the Construction Agreements - A prima facie reading of `Share Purchase Agreements and `Construction Management Agreements , does suggest that notwithstanding certain overlaps between these agreements, their object and field of operation is different and distinct in nature. It is therefore difficult for us to accept it outrightly that the respective Share Purchase Agreements are the principal agreements governing the transaction between the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d invested in four Special Purpose Vehicles, including Rajapura Homes Private Limited (Respondent No.1 in Arbitration Petition No.17 of 2020; hereinafter, Respondent No.1 ) and Begur OMR Homes Private Limited (Respondent No.1 in Arbitration Petition No.16 of 2020; in short Begur Company ), for developing residential projects in various cities across India. Respondent No.1 is a company engaged in the construction, development, operations, and maintenance of residential projects, namely, DLF Maiden Heights and DLF Woodland Heights, both of which are in Bangalore, Karnataka (collectively called Rajapura Project ). Similarly, the Begur Company is engaged in the business of construction, development, operations, and maintenance of residential projects, namely, DLF Garden City situated at Kanchipuram District, Tamil Nadu, and DLF Westend Heights situated in Bengaluru District, Karnataka (collectively called Southern Homes Project ). 3. In June 2008, Ridgewood Holdings Limited transferred its stake in the joint venture to its affiliates, Resimmo PCC (in short, Respondent No.2 ) in both the Petitions and Clogs Holding BV (hereinafter, Clogs ). Thereafter, in terms of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuance of the construction obligations under the Rajapura SPA and the Southern Homes SPA, the Parties on 25.01.2017 executed the DLF-Rajapura Homes Construction Management Services Agreement (hereinafter, RCMA ) and the DLF-Southern Homes Construction Management Services Agreement (hereinafter, SCMA ). Under the RCMA, the Petitioner was to provide, inter alia, construction management services to Respondent No.1 for completion of the Rajapura Homes Project and in connection with the handover of sold units of the Rajapura Homes Project. Likewise, under the SCMA, the Petitioner had to provide similar services to the Begur Company for the completion of the Southern Homes Project and in connection with the handover of the sold units. It is pertinent to mention that both the aforementioned Agreements also contained selfsame arbitration clauses. Clause 11 of the Agreements contemplate that the seat and venue of Arbitration would be New Delhi, and the arbitration would be governed by the Arbitration and Conciliation Act, 1996. 6. As a consideration for the construction management services to be provided by it under the SCMA and the RCMA, the Petitioner - DHDL in terms of Clause 4 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communications between the parties; however, they were unable to resolve their differences. 9. The Petitioner subsequently vide letter dated 26.05.2020 issued a notice invoking arbitration under Clause 11 of the SCMA and RCMA. The Petitioner s case was that the notice of completion dated 16.08.2019 and 26.12.2019, which were issued pursuant to Clause 4.2 of the SCMA/RCMA, were unreasonably rejected by the Respondent(s). The Petitioner-DHDL alleged that the refusal of the Respondent Companies to accept the notice of completion was a breach under the SCMA and RCMA and was aimed at avoiding Respondent No.2 s obligation to invest ₹ 75 crores in the Begur Company as contemplated under the SCMA, RCMA and the Fee Agreement. The Petitioner further referred all disputes arising out of the RCMA and SCMA to a common and composite Arbitral Tribunal comprising a sole arbitrator. The Petitioner also proposed two names, for one of them to be appointed as the sole arbitrator. 10. The Respondents (i.e. Respondent No.1, the Begur Company and Respondent No.2) vide two separate emails, both dated 12.06.2020, however, refused to appoint a sole arbitrator. They stated that the dispute betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the decisions of this Court in the cases of (i) Duro Felgura, S.A. v. Gangavaram Port Limited (2017) 9 SCC 729, 48 59 , (ii) Garware Wall Ropes Limited v. Coastal Marine Constructions and Engineering Limited (2019) 9 SCC 209, 14 , (iii) Mayavati Trading Private Limited v. Pradyuat Deb Burman (2019) 8 SCC 714, 10 , and (iv) Vidya Drolia and Others v. Durga Trading Corporation (2021) 2 SCC 1, 236, 237, 244.3, 244.4, 244.5, 244.5.1 244.5.3 , learned Senior Counsel for the Petitioner submitted that this Court while dealing with an application under Section 11(6) of the Act has a narrow scope of examination, confined only to trace out whether there exists an arbitrable dispute and a written contract providing arbitration as the Dispute Resolution Mechanism. He canvassed that since the parties have not disputed the existence of arbitration agreement or its core contractual ingredients contained in the SCMA and RCMA, the present dispute, in terms of the settled law, should be referred to arbitration. The recent decision of this Court in Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited (2020) 2 SCC 455, 7.10, 7.11 , has also been relied upon to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d land, and the breaches on the part of the Petitioner concerning its obligations under Clause 6 of the Share Purchase Agreements have made it difficult for them to monetise the undeveloped land. It was therefore contended that the instant disputes could only be arbitrated as per the dispute resolution mechanism specified in Clause 9 of the Rajapura SPA/Southern Homes SPA, namely, the Rules of SIAC with seat and venue of Arbitration at Singapore. He urged that if the seat of Arbitration were to be found outside India, i.e, Singapore, the instant Applications under Section 11(6) of 1996 Act are not maintainable Bharat Aluminum Company v. Kaiser Aluminum Technical Services Inc., (2012) 9 SCC 552, 117; Mankatsu Impex Private Limited v. Airvisual Limited (2020) 5 SCC 399, 14, 16, 1828 . 16. Citing the decisions of this Court in Duro Felgura, S.A. (supra) 48 and Vidya Droila (supra) 132, 134, 139, 147.2, 147.6, 147.7 147.10 , Senior Counsel for the Respondents contended that while deciding an application under Section 11(6), this Court cannot act cursorily and an absolute hands off approach would be counterproductive. He drew support from the afore-cited decisions to emphasis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted. 154.3. The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-competence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of second look on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act. 154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably non-arbitrable and to cut off the deadwood. The court by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement. 20. Keeping the settled position of law in mind, the foremost question that arises for our consideration is whether the nature of dispute sought to be referred for arbitration in these petitions fall under the Arbitration Clause(s) of RCMA and SCMA, governed by the Arbitration and Conciliation Act, 1996, with the seat and venue for arbitration at New Delhi or such disputes can be arbitrated only in terms of the dispute resolution mechanism specified in Clause 9 of the Rajapura SPA/Southern Homes SPA i.e. under the rules of the Singapore International Arbitration Centre and the seat and venue of the arbitration at Singapore? 21. With a view to analyse and answer the afore-stated question, it is essential to understand the nature of the two sets of agreements executed between the parties from time to time and the subsequent amendments thereof. 22. The first set of agreements comprises of two Share Purchase A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may be required (to the extent within a Party s control) to remove the event/circumstances without imposing any liability on any other Party and without the prior written consent of such other Party. 3.3 The obligation of the Purchaser to purchase Sale Shares and pay the Sale Consideration on the Closing Date in the manner specified in this Agreement, shall be conditional upon fulfilment by the Seller (or where permissible under applicable Law, waiver in writing by the Purchaser in its sole discretion) of the Conditions Precedent. 6. CONSTRUCTION RELATED OBLIGATIONS OF THE SELLER 6.1 The Seller shall, through appropriate contractors to be appointed by the Company (in accordance with the terms of the Construction Agreement), as per the terms set out in SCHEDULE V and to be set out in the Construction Agreement proposed to be executed as a Condition Precedent, ensure (i) completion of construction of the Rajapura Phase II Project on or prior to December 31, 2016, (ii) obtain the occupation certificate for the Project on or prior to December 31, 2016; and (iii) where applicable, hand over possession of units of the Rajapura Projects to the purchasers of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Club Construction, the timeline for completion of the Club Construction shall, subject to the Seller taking reasonable steps to mitigate the impact of the Force Majeure event, be extended from March 31, 2018 by such period as for which such Force Majeure event subsists. 9. DISPUTE RESOLUTION All disputes or differences regarding this Agreement shall be submitted to final and binding arbitration at the request of any of the disputing Parties upon written notice to that effect to the other Parties. In the event of such arbitration: (i) The arbitration shall be in accordance with the rules of the Singapore International Arbitration Centre ( SIAC ), in force at the relevant time (which is deemed to be incorporated into this Agreement by reference); (ii) All proceedings of such arbitration shall be in the English language. The venue of the arbitration shall be Singapore, which shall be the seat of the arbitration; [Emphasis Applied] 23. It may be mentioned that the Rajapura SPA was mutually amended by agreements dated 25.01.2017 and 16.03.2017. Similarly, the Southern Homes SPA was also amended by an agreement dated 16.03.2017. The rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be withheld deducted in accordance with Applicable Law. 4.2 Forthwith upon completion of the Construction Covenant and receipt of the occupation certificate in respect of each of the projects comprised in the Rajapura Projects, DHDL shall send a written notice to the Company certifying fulfilment of completion of the Rajapura Projects, and enclose certified true copies of all necessary documents evidencing fulfilment of the same and the Company shall have the right to reject or confirm the fulfilment, within a period of 15 (fifteen) days from the date of receipt of the aforementioned written notice from DHDL, provided that the Company shall act reasonably in exercising such right, and receipt of occupation certificate from an appropriate Governmental Authority will signify completion of any building. In case the Company fails to respond to the said certificate within a period of 15 (fifteen) days, then the Company shall be deemed to have accepted the fulfilment of completion of the relevant project comprised in the Rajapura Projects. 4.3 Immediately upon receipt of the ₹ 750,000,000 (Rupees Seven Hundred and Fifty Million) by Southern Homes in the manner conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments, it is clear that the primary purpose of these agreements is to effectuate the change of ownership of Respondent No.1 and the Begur Company from DHDL to Resimmo PCC. No doubt, the Rajapura SPA and the Southern Homes SPA as per their Clause 6.1 and 6.2, do provide for the completion of the respective residential projects as a postclosing obligation, however, these construction obligations had to be fulfilled in accordance with the terms of the Construction Agreements . The very purpose of the RCMA and SCMA was, on the other hand, to operationalise the manner in which the Petitioner- DHDL would achieve the said construction related obligations. The construction agreements not only contemplate the scope of services to be provided by the petitioner but also lays down the obligation on Respondent No.2 to pay Fee to the Petitioner-DHDL upon completion of the residential projects. A prima facie reading of `Share Purchase Agreements and `Construction Management Agreements , does suggest that notwithstanding certain overlaps between these agreements, their object and field of operation is different and distinct in nature. It is therefore difficult for us to accept it outrightly th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplates adjudication of the issues that are connected with or are in relation to the subject matter of the Share Purchase Agreements. 30. Further, if the Respondent(s) plea, that present dispute(s) should be arbitrated only under the Rajapura SPA/Southern Homes SPA is accepted at face value, the eventual result would be that any and all disputes relating to the Petitioner s construction obligation would be arbitrable under the provisions of the Share Purchase Agreements only. But then, what would be the purpose of having a separate arbitration clause 11 under the RCMA/SCMA? The parties do not seem to have rendered the arbitration clause in RCMA and SCMA as redundant, more so when these are the agreements later in time. It, thus, appears to us that the scope of the arbitration clause in Rajapura SPA/Southern Homes SPA is limited to issues relating to the agreement s primary subject matter, i.e., any dispute arising out of the transaction of sale and purchase of shares. The provisions of the RCMA/SCMA, and the arbitration clause therein, would as a logical corollary then be applicable to any dispute/difference concerning the performance of the construction related obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to resolve the same. It was urged on behalf of the Petitioner that since the RCMA and SCMA are inextricably interlinked to each other, the dispute/difference cannot be segregated into two separate proceedings. It was pointed out that the obligation of computation/determination and payment of Fee to the Petitioner arises out of the SCMA, the RCMA and the Fee Agreement, and under the Fee Agreement, the parties have to calculate the DLF Receivables . Such DLF Receivables have to be computed taking into account financial components/accounts of both, the Southern Homes Project and the Rajapura Homes Projects. It was thus submitted that in order to avoid multiplicity of proceedings which may result in conflicting awards, the sum of disputes may be referred to a single and composite arbitral tribunal. 35. The fact remains that the RCMA and SCMA, though interlinked and connected, are still two separate agreements. We also cannot lose sight of the fact that the case of the Respondent(s) is that the Petitioner has committed breaches under both RCMA as well as SCMA, and that the genesis of the disputes lies in separate and distinct facts. Save where the parties have resolved to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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