Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996= appointment of a sole Arbitrator to resolve the dispute between the parties.= The issue essentially arises under the Agreement of Sale dated 23.03.2006 entered into between the parties wherein the appellant is the purchaser having agreed to purchase the property bearing Survey No.35/2 (Old No.35) measuring 19 Acres 1 Gunta situate at Sathanur village, Jala Hobli, Bangalore North Taluk, from the respondent herein for the total sale consideration of Rs.5,53,90,000/ (Rupees five crores fiftythree lakhs and ninety thousand). The appellant had paid the sum of Rs.1,50,00,000/ (Rupees one crore and fifty lakhs) as earnest money deposit. The balance amount of Rs.4,03,90,000/ (Rupees four crores three lakhs and ninety thousand) was to be paid and the transaction was to be completed in the manner agreed therein. The said Agreement of Sale dated 23.11.2006 vide Clause 11 provided for resolution of dispute through arbitration in the event of there being any dispute between the parties. =the learned Chief Justice, High Court of Judicature at Hyderabad was not justified in rejecting the application only on the contentions urged therein on behalf of the respondent about the petition being hit by Order II Rule 2 of CPC and also the principles of resjudicata. It cannot be accepted in the present facts that there was abandonment of part of any claim nor was there a conclusive adjudication of the dispute between the same parties on merits to constitute resjudicata. As already indicated above, the socalled settlement has neither been recorded in the earlier proceedings nor any document brought on record to indicate that factually the settlement had taken place so as to wipe out the original dispute. In such circumstance, a party to the arbitration agreement contending that there was a dispute amongst them cannot be left without a forum for resolution of the dispute by taking a hyper technical view of the matter. In any event, whether the dispute which had arisen at the first instance has been settled; if the dispute subsisted, whether the claim is within the period of limitation, the nature of relief if any and all other contention on merits are to be considered in the arbitral proceedings. Hence, keeping open all contentions on merits, we are of the view that the sole Arbitrator is to be appointed to resolve the dispute between the parties.
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2021
(Arising out of SLP (CIVIL) No.11036 of 2019)
V. Sreenivasa Reddy .…Appellant(s)
Versus
B.L. Rathnamma …. Respondent(s)
J U D G M E N T
1. Leave granted.
2. The appellant is before this Court assailing the
order dated 31.12.2018 passed by the High Court of
Judicature at Hyderabad in Arbitration Application
No.52/2016 filed under Section 11(5) and (6) of the
Arbitration and Conciliation Act, 1996 (‘Act, 1996’ for
short) seeking appointment of a sole Arbitrator to resolve
the dispute between the parties.
Page 1 of 16
3. The present position leading to the impugned order
has a chequered history. The issue essentially arises
under the Agreement of Sale dated 23.03.2006 entered
into between the parties wherein the appellant is the
purchaser having agreed to purchase the property
bearing Survey No.35/2 (Old No.35) measuring 19 Acres
1 Gunta situate at Sathanur village, Jala Hobli,
Bangalore North Taluk, from the respondent herein for
the total sale consideration of Rs.5,53,90,000/ (Rupees
five crores fiftythree lakhs and ninety thousand). The
appellant had paid the sum of Rs.1,50,00,000/ (Rupees
one crore and fifty lakhs) as earnest money deposit. The
balance amount of Rs.4,03,90,000/ (Rupees four crores
three lakhs and ninety thousand) was to be paid and the
transaction was to be completed in the manner agreed
therein. The said Agreement of Sale dated 23.11.2006
vide Clause 11 provided for resolution of dispute through
arbitration in the event of there being any dispute
between the parties.
Page 2 of 16
4. When the position stood thus, the respondent is
stated to have got issued a letter dated 09.02.2007 to the
appellant directing him to pay the balance sale
consideration and secure registration of the sale deed.
The appellant had replied to the same on 21.02.2007
raising certain issues relating to the transaction. In that
background, the respondent got issued a legal notice
dated 17.04.2008 informing the appellant that the
agreement of sale dated 23.11.2006 stood cancelled and
the advance amount paid is forfeited. The appellant
disputed the same through the reply notice dated
05.05.2008, which gave rise to a dispute between the
parties. The correctness or otherwise of the allegations
made by each party against the other and the appropriate
award to be passed was a matter to be considered by the
Arbitrator to be appointed by them. Since the same did
not happen, the appellant herein invoked Section 11(6) of
Act, 1996 and filed the petition bearing CMP
No.297/2009 in the High Court of Karnataka at
Bangalore. The respondent herein, who was the
Page 3 of 16
respondent to the said petition was served and
represented.
5. During the pendency of the petition, the learned
Judge noted the submission on behalf of the parties that
the matter has been settled out of Court and the petition
was disposed of through the order dated 05.07.2011.
When this was the position an application was filed by
the appellant on 27.06.2014 in the disposed of CMP
No.297/2009 seeking recall of the order dated
05.07.2011, to restore the petition and dispose of the
same on merits. The Registry, during the scrutiny of the
application had raised certain office objections for
compliance by the appellant. Since the office objections
had not been complied with, the application was placed
before the Court regarding noncompliance. The learned
Judge through the order dated 13.10.2014 apart from
noting that there is noncompliance of the office
objections, without indicating detailed reasons has barely
observed that the application does not merit
consideration as the main order merely records
Page 4 of 16
settlement of the matter out of court. Hence the
application was rejected.
6. In that background the appellant was left with no
other legal remedy to secure redressal of the grievance
and resolution of the dispute. According to the appellant,
the settlement though proposed had not fructified, and
hence, another petition under Section 11(6) of the Act,
1996 in CMP No.228/2015 was filed. When the said
petition was listed for consideration on 02.03.2016 the
learned senior counsel for the appellant, with the
permission of the Court withdrew the petition with liberty
to file a fresh petition before the appropriate court as it
was noticed that a petition seeking appointment of the
Arbitrator was to be filed before the High Court of
Judicature at Hyderabad. The learned Judge through
the order dated 02.03.2016 placed the submission on
record and dismissed the petition as withdrawn with
liberty to file a fresh Civil Miscellaneous Petition before
the appropriate court in accordance with law. It is in
that circumstance the petition in Arbitration Application
Page 5 of 16
No.52/2016 from which the impugned order arises was
filed before the High Court of Judicature at Hyderabad.
7. The said application was opposed by the
respondent referring to the earlier proceedings noted
above, more particularly the disposal of the first
application by recording that the matter is settled
between the parties. In the said situation the learned
Chief Justice, High Court of Judicature at Hyderabad,
having noted the rival contentions was of the view that
though the Karnataka High Court had permitted
withdrawal of CMP No.228/2015 to file the petition before
the appropriate Court, the same is not seen to be one
with the consent of the respondent and the earlier orders
would continue to evidence that the Karnataka High
Court had recorded the submission on behalf of the
applicant and the respondent that the matter has been
settled out of the court. In that circumstance, the
learned Chief Justice was of the opinion that the matter
having already been settled out of the court which is
noted in the judicial order would be sufficient to decline
Page 6 of 16
the request for appointment of Arbitrator. Accordingly,
the application was dismissed.
8. In the above backdrop, we have heard the learned
counsel for the appellant, the learned senior counsel for
the respondent and perused the appeal papers.
9. The entire issue would revolve around the factual
aspect involved in the instant case to come to a
conclusion as to whether there was a concluded
settlement between the parties after the application in
CMP No.297/2009 was filed and, therefore in that
circumstance, whether it should be construed that the
dispute which had arisen between the parties should be
deemed as not subsisting for resolution through
arbitration? Whether there is settlement in the nature of
Novation of the agreement of sale dated 23.11.2006?
10. In order to arrive at a conclusion on this aspect of
the matter, it is necessary to take note of the order dated
05.07.2011 in CMP No.297/2009 which reads as
hereunder:
Page 7 of 16
“The counsel for the petitioner and the
respondent would submit that the matter has
been settled out of the court. Recording this
submission, the petition is disposed of.
Sd/
Judge”
In the said petition, subsequently an application was filed
and the same was rejected in terms of the following order:
“There is noncompliance with the office
objections on the application in IA No.1/2014.
In any event, the application does not merit
consideration, as the order merely records the
settlement of the matter out of court.
The application is rejected.
Sd/
Judge.”
Both the aforestated orders do not throw light on the
nature of the settlement or the conclusiveness of the
same so as to bind the parties to the same.
11. On the other hand the settlement proposed itself
not being finalized, not just the original dispute had
remained unresolved but the nonsettlement of the
matter as proposed had given rise to a fresh dispute in
relation to the same agreement which required resolution
Page 8 of 16
through arbitration. In that view the appellant filed the
subsequent petition in CMP No.228/2015 under Section
11(6) of Act, 1996 seeking appointment of Arbitrator to
resolve the dispute which subsisted. However, since the
appointment of Arbitrator was to be made by the High
Court of Judicature at Hyderabad, the petition in CMP
No.228/2015 was withdrawn with liberty and the
Application No.52/2016 was filed before the High Court
of Judicature at Hyderabad.
12. In the said application i.e., Arbitration Application
No.52/2016 a detailed affidavit was filed by the
appellant. The statement contained in paragraphs 18
and 22 explains the crux of the matter which read as
hereunder:
“18. I submit that pursuant to the orders of the
Tahsildar, the Respondent herein was dutybound to execute a Sale Deed in my favour as
per the terms of Agreement of Sale dated
23.11.2006. However, the Respondent once
again refused to perform her part, as obligated.
I submit that I had approached the Respondent
on several occasions and the Respondent time
and again, has avoided complying with the
terms of the Agreement. I further submit that
the efforts put forth by me, with the help of
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mediators who have helped in settling the
differences during the pendency of C.M.P
No.297 of 2009, have also gone in vain. The
Applicant herein undertook extensive oral
discussions and visited the Respondent on
numerous occasions seeking to settle dispute
amicably. Respondent though reported
intention to settle before the Hon’ble High
Court, the same were not acted upon. It is
further submitted that the issue of preliminary
objection about the jurisdiction was not raised
or contended by the Respondent in the said
CMP No.297 of 2009.
22. I submit that pursuant to the said order
dated 02.03.2016, I caused a fresh notice to the
Respondent herein on 09.03.2016, informing
the Respondent to appoint an Arbitrator, within
seven (7) days from the date of receipt of notice,
as per the terms of the Agreement of Sale dated
23.11.2006. I submit that the Respondent,
despite the service of said notice, had not
consented to the appointment of the sole
arbitrator with in the specified time of 7 days. I
submit that I am therefore constrained to
approach this Hon’ble Court and file the instant
application u/s 11(2) & (6) of the Arbitration
and Conciliation Act, 1996 praying for the
nomination and appointment of sole arbitrator
by this Hon’ble Court. A copy of the notice
dated 09.03.2016 is filed herewith as Annexure
P14. It is further submitted that the clause of
Arbitration encompasses all disputes arising out
of the agreement as ‘dispute’ mentioned in the
said clause, and as such, any dispute that
arises out of the agreement or connected to the
agreement in any manner is referable to
Arbitration to resolve such dispute. Therefore,
the dispute which arose out of the failure to
settle is a ‘dispute’ as mentioned in the clause of
Page 10 of 16
Arbitration. In the alternative, it is submitted
that failure to resolve the ‘dispute’ amicably as
agreed to, revives the original dispute which
arose between the parties as the ‘dispute’
referable in the clause of Arbitration.”
(emphasis supplied)
13. The learned Chief Justice, High Court of
Judicature, Hyderabad while disposing of the application
by noting that the High Court of Karnataka had recorded
the settlement had obviously not taken into consideration
the sworn statements to the effect that the settlement
which was proposed with the help of the mediators had
not fructified and that the nonadherence to the proposed
settlement itself is a dispute or in the least will revive the
original dispute which requires resolution through
arbitration.
14. We note that in the said background there is no
definite material on record to indicate that there was a
concluded settlement between the parties based on which
the petition was disposed and, therefore there is no
reason to hold that there is no dispute which required
resolution through arbitration; nor are we in a position to
Page 11 of 16
hold that there is Novation of the earlier agreement.
Though the learned Judge of the High Court of Karnataka
through the order dated 05.07.2011 had disposed of the
petition under Section 11(6) of the Act, 1996 by recording
the submission that the matter has been settled out of
court, the socalled settlement has not been recorded nor
made a part of the order so as to bind the parties and to
indicate that the dispute had been resolved and had
accordingly erased the original dispute or amounted to
Novation. That apart, no material is placed on record to
show that the settlement had been reduced into writing
and had been placed before the Court when the petition
was disposed of so as to indicate that the right to
arbitration under the original agreement cannot be
claimed. If that be the position, the rejection of the IA
also on the ground that the original order had merely
recorded the settlement will not indicate that a concluded
settlement was placed before the Court.
15. If that be the position, the observation of the
learned Chief Justice, High Court of Judicature at
Page 12 of 16
Hyderabad that the settlement was recorded by the
Karnataka High Court and therefore it would not be
proper to sit in judgment on the correctness or otherwise
of that order does not stand to reason. Further, while
referring to the aspect that the application was filed
before it after withdrawing the CMP No.228/2015 before
the High Court of Karnataka and though noting that
liberty had been granted through the order dated
02.03.2016, it is observed that such permission to
withdraw with liberty was not with the consent of the
respondent. However, what is to be noticed from the
order dated 02.03.2016 of the High Court of Karnataka
(Annexure P17) is that the respondent herein who was
the respondent in the said petition was represented by
her counsel. Even though there is no express consent as
noted by the learned Chief Justice, the counsel has
neither objected to the withdrawal or the grant of liberty
to file the petition before the appropriate court. At that
stage it was not even contended on behalf of the
respondent that such liberty does not arise since the
Page 13 of 16
matter has been settled, nor were the details of the
settlement reached between the parties brought on record
in the concerned proceedings. In addition, we also note
that though a counter affidavit is filed on behalf of the
respondent to this petition and reference is made to the
earlier proceedings wherein it is contended that CMP
No.297/2009 was disposed of by order dated 05.07.2011
without giving liberty to either of the parties to seek
appointment of an Arbitrator in future, it is to be seen
that no material is brought on record to indicate the
nature of settlement entered into between the parties due
to which the dispute does not subsist and the arbitration
clause agreed therein cannot be invoked in view of the
settlement ending in resolution of the dispute.
16. That apart, as rightly portrayed in the affidavit of
the appellant filed in Arbitration Application No.52/2016,
not just the original dispute but even the fact as to
whether the matter was settled amongst themselves or
not is a dispute arising out of and in connection with the
agreement dated 23.11.2006 entered into between the
Page 14 of 16
parties. If that be the position, the learned Chief Justice,
High Court of Judicature at Hyderabad was not justified
in rejecting the application only on the contentions urged
therein on behalf of the respondent about the petition
being hit by Order II Rule 2 of CPC and also the
principles of resjudicata. It cannot be accepted in the
present facts that there was abandonment of part of any
claim nor was there a conclusive adjudication of the
dispute between the same parties on merits to constitute
resjudicata. As already indicated above, the socalled
settlement has neither been recorded in the earlier
proceedings nor any document brought on record to
indicate that factually the settlement had taken place so
as to wipe out the original dispute. In such
circumstance, a party to the arbitration agreement
contending that there was a dispute amongst them
cannot be left without a forum for resolution of the
dispute by taking a hyper technical view of the matter. In
any event, whether the dispute which had arisen at the
first instance has been settled; if the dispute subsisted,
Page 15 of 16
whether the claim is within the period of limitation, the
nature of relief if any and all other contention on merits
are to be considered in the arbitral proceedings. Hence,
keeping open all contentions on merits, we are of the view
that the sole Arbitrator is to be appointed to resolve the
dispute between the parties.
17. Accordingly, the appeal is allowed, the order dated
31.12.2018 passed in AA No.52/2016 is set aside.
Consequently Mr. Justice Ramesh Ranganathan Former
Chief Justice of the High Court of Uttarakhand is
appointed as the sole Arbitrator.
18. Pending application, if any, shall stand disposed of.
..…………....................CJI.
(S. A. Bobde)
…..…………....................J.
(A. S. Bopanna)
..…..………......................J.
(V.Ramasubramanian)
New Delhi,
April 08, 2021
Page 16 of 16
