(This Civil Misc. Petition is filed u/S.11(6) of the Arbitration and Conciliation Act, 1996 praying to appoint an arbitrator to resolve the dispute between the petitioners and the respondents as per clause 20 of the joint development agreement dated 12/06/2006 produced at Annexure-a and as per clause 3 of the memorandum of understanding dated 25/02/2009, in the interest of justice and equity.)
1. The petitioners are before this Court praying that an Arbitrator be appointed to resolve the disputes between the petitioners and the respondents as per Clause 20 of the Joint Development Agreement dated 12.06.2006 and Clause 3 of the Memorandum of Understanding dated 25.02.2009. The respondents on being served with the notice have appeared and filed their objection statement to the petition.
2. The case of the petitioners is that the petitioners and the respondents herein had entered into a Joint Development Agreement dated 12.06.2006, whereunder the petitioners had agreed to develop the property belonging to the respondents. In that regard, though certain payments have been made by the petitioners to the respondents, the lands which were the subject matter of the said agreement came to be notified for acquisition. In that circumstance, the petitioners and the respondents thereafter entered into a Memorandum of Understanding dated 25.02.2009, whereby certain other requirements to satisfy the agreement were agreed therein.
3. The petitioners claim that as per Clause 20 of the Joint Development Agreement and Clause 3 of the Memorandum of Understanding, the parties had agreed that in the event of there being dispute, the matter would be referred to three Arbitrators in the manner in which it has been agreed therein. It is the case of the petitioners that subsequently since the respondents herein had committed default, legal notices were exchanged and since the claims put-forth by the petitioners had been disputed by the respondents, a notice dated 14.02.2011 was issued by the petitioners invoking the arbitration clause and indicating the name of the Arbitrator on behalf of the petitioners. The respondents have once again disputed the same and had suggested a different name. It is in that circumstance, the petitioners are before this Court seeking for the relief in the instant petition.
4. The learned counsel for the respondents while relying on the objection statement would further contend that the petition is opposed by the respondents, firstly on the ground that the arbitration clause cannot be considered as one agreed upon by the parties inasmuch as the same cannot be construed as a clause, whereby the parties have agreed to refer the matter to arbitration. Secondly, it is contended that the nature of the agreement itself is contrary to law and therefore such agreement in any event cannot be enforced.
5. Further, it is also the case of the respondents that the agreement had been terminated by the respondents by issue of notice and in such circumstance, the clause itself was got terminated even if the said clause is treated as a arbitration clause and therefore the question of appointing an Arbitrator in the proceedings of the present nature would not arise at all. Furthermore, the nature of the dispute which has been raised itself would require detailed investigation by a Civil Court and not by the Arbitrator in the present facts and circumstances.
6. In order to support the contention put-forth by the respondents, the learned counsel has relied on the decision of this Court in the case of Durha Constructions Private Limited v. Bateman Engineering (India) Private Limited reported in ILR 2012 KAR SERIES 1242 to contend that the nature of the arbitration clause should be determined at the outset to come to a conclusion as to whether the arbitration clause is in existence and as to whether the parties have agreed to such arbitration clause.
7. I have perused the decision of this Court. No doubt, this Court after referring to several earlier decisions of the Hon'ble Supreme Court has formulated the nature in which an arbitration clause is to be construed. In the said case, the indication was only in a Letter of Intent (LOI), where parties had agreed with regard to place of arbitration with agreeing on other aspects of arbitration and therefore in that circumstance, this Court was of the view that it cannot not be considered as a arbitration clause. There can be no dispute that a decision rendered in the earlier case was based on the facts of the said case and the clause contained therein. Even if the legal position which has been discussed there is kept in view and if the clause herein is perused at clause 20 of the agreement, the parties have agreed to resolve the disputes, if any by arbitration and have agreed that it would be in terms of the provisions contained in the Arbitration and Conciliation Act, 1996.
8. Furthermore, in the Memorandum of Understanding which has been entered into between the parties, clause 3 is even more explicit, wherein all requirements as indicated in the said judgment has been incorporated including the manner in which the arbitration award would be binding and would become final. Therefore, I am unable to accept the contention put-forth by the learned counsel for the respondents.
9. Further, with regard to the contention that the agreement had been terminated, in my opinion, when there are certain demand by the petitioners and that has been disputed by the respondents, the very manner as to whether the termination of the agreement was proper or not and as to whether any rights would flow under the agreement or under the Memorandum of Understanding is an issue which requires consideration by the Arbitrator to be appointed and not by this Court.
10. Further, reliance is placed on the judgment of this Court in the case of Smt. Narasamma & Ors. v. K.V. Ramprasad (W.P. No. 12971/2012 & connected petitions) disposed of on 10.07.2012 wherein it is held that an agreement which is contrary to law or public policy cannot be enforced and in that regard, this Court while considering Section 23 of the Contract Act had arrived at such conclusion. In the instant case, the learned counsel for the respondents contend that the land in question were agricultural land and therefore any agreement entered into would be contrary to Sections 79 (a), (b) and 80 of the Karnataka Land Reforms Act. At this juncture, it is to be stated that no concluded transaction has taken place between the parties with regard to the said lands. Furthermore, even if such contention is to be raised as to whether a specific performance of the agreement could be granted or any other relief under such agreement is to be granted or not, it is an issue that is to be considered by the Arbitrator and not for this Court to arrive at a conclusion.
11. Therefore, keeping all these aspects in view, I am of the opinion that insofar as the scope of the instant petition, there can be no dispute that there is a valid arbitration clause and by the nature of the contentions which have been put-forth by the parties, there is dispute which is necessary to be adjudicated by an Arbitrator. In that view, though the clause contains that the parties would suggest the name of one Arbitrator each and the sa
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id Arbitrators would appoint the third Arbitrator, it would be in the interest of the parties to appoint a Sole Arbitrator who shall enter reference. 12. Hence, Sri. Kukkaji Ramakrishna Bhat, Retired District and Sessions Judge, having his office at F-113, SC, 4th Floor, Central Chambers, 2nd Main Road, Gandhinagar, Bangalore-560 009 is appointed to be the Sole Arbitrator to arbitrate upon the disputes between the parties. The petitioners shall now file the claim petition and the documents before the learned Arbitrator who shall enter upon reference, issue notice to the respondents, settle the terms of arbitration and proceed further with the matter in accordance with law. 13. In terms of the above, the petition is allowed. Registry to return the original papers sought for by the petitioners.