Delhi High Court while relying on a landmark judgement of the Hon’ble Supreme Court reiterated that for a dispute to be referred to the arbitrator, it should correlate to the Arbitration Agreement between the parties.
Table of Contents
Facts
The petitioner, GTM Residency, a construction company, launched a Project to construct a Housing Society in Gurgaon, for which it entered into a contract with the respondent, Sneh Development Pvt. Ltd (also a construction company). They entered into an agreement in 2005. During the Project, several disputes arose between the parties, which were time and again settled by the Sole Arbitrator appointed by the Court itself in accordance with the Arbitration Agreement between the parties.
While the disputes were going on, in 2013, certain homebuyers filed a complaint against the petitioners before the State Consumer Disputes Redressal Commission (SCDRC) alleging delay in completion of the Project and handling over the possession. The SCDRC dismissed the complaint, hence the complainants preferred an appeal before the National Consumer Disputes Redressal Commission, New Delhi (NCDRC), which held the petitioners liable and ordered it to pay compensation accordingly.
In the present case, the petitioner relied on the Arbitration Agreement between the petitioner and the respondent and prayed for appointment of an arbitrator to settle the dispute amicably.
Submissions by the petitioner
Learned Counsel, Ashish Kumar, appearing on behalf of the petitioner submitted that NCDRC has erroneously held that the petitioner is liable for delay in handing over the possession.
He further submitted that, the respondent by way of undertakings in 2007 and 2008, had specifically agreed that if the petitioner suffers any loss which includes interest or harm on account of the respondent, the respondent shall pay the petitioner to the extent of the harm and loss suffered.
Hence, in furtherance of the NCDRC order, the petitioner sent a notice to the respondent on 27th December, 2022, that the amount is recoverable from the respondents and if they fail to pay, the petitioner shall seek the recourse to Arbitration procedure. The petitioner has relied on the Agreement dated 10th March 2005, which consists of an Arbitration Clause (Clause 16) , which provides for resolution of disputes amicably.
Perusal of facts by the Court
The Delhi High Court bench, presided by Justice Chandra Dhari Singh, examined the facts presented by the petitioner and observed the following points:
- That the petitioner is invoking Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act) for the appointment of an arbitrator.
- The Court then acknowledged clause 16 and extracted out the keywords “dispute arising out of this Agreement” and observed that before seeking the intervention of the Court and subsequently of an arbitrator, it is a crucial and indispensable requirement that the disputes between the parties must arise out of the Agreement.
- The undertakings between the parties do not link the Respondent to the penalty imposed by NCDRC.
Judgement
The Delhi HC while dismissing the petition relied on a landmark decision of the Supreme Court, DLF Home Developers Limited v. Rajapura Homes Private Limited and Another (2021 SC) and held that mere existence of an arbitration agreement or arbitration clause would not be sufficient to allow the prayer for reference to an arbitrator. The Court held that “the petitioner is seeking recovery in the guise of reference to an arbitrator from the respondent for a cost which is neither arising out of the Agreement, nor is covered in the undertakings furnished by the respondent qua the amount involved in the Agreement.”
Case Title: GTM Builders and Promoters Pvt Ltd v. Sneh Development Pvt Ltd (2024 LiveLaw SC)
