Full Judgment Text
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.2927 OF 2023
M/S. ASIAN AVENUES PVT LTD. … APPELLANT
versus
SRI SYED SHOUKAT HUSSAIN ... RESPONDENT
J U D G M E N T
ABHAY S. OKA, J.
FACTS
The present appeal is by the defendant in a suit filed by
1.
the respondent. The respondent-plaintiff claims to be the
owner of the suit property, more particularly described in the
plaint. There was a Development Agreement-cum-General
Power of Attorney (for short, ‘the Development Agreement’)
rd
executed on 23 October 2008 by and between the appellant
and the respondent. By the Development Agreement, the
Signature Not Verified
Digitally signed by
Anita Malhotra
Date: 2023.04.28
17:20:11 IST
Reason:
appellant was granted permissive possession for the purposes
of carrying out development work on the property subject
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matter of the Development Agreement. There was a dispute
between the parties, which led to the respondent cancelling the
Development Agreement. The respondent issued a legal notice
to the appellant calling upon him to execute a deed of
cancellation of the Development Agreement. The prayer in the
suit is for a decree directing the appellant to execute a deed of
cancellation in respect of the Development Agreement. There is
also a prayer for the delivery of possession of the suit property.
After the suit summons was served, the appellant filed an
2.
application under Rule 11 of Order VII of the Code of Civil
Procedure, 1908 (for short, ‘CPC’). The application was filed on
the ground that in view of the arbitration clause in the
Development Agreement, the dispute ought to be referred to
arbitration. There was a prayer made for referring the dispute
to arbitration. The Trial Court rejected the plaint. The Trial
Court also exercised power under Section 8 of the Arbitration
and Conciliation Act, 1996 (for short ‘the Arbitration Act’). The
Trial Court directed the parties to refer their dispute to
arbitration. In a revision application preferred by the
respondent, the High Court has interfered and has set aside
the order of the Trial Court.
SUBMISSIONS
3. The learned counsel appearing for the appellant pointed
out that the High Court relied upon a decision of the Division
Bench of the same Court, which holds that the adjudication on
the issue whether there is a cancellation of the Development
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Agreement will operate in rem and therefore, the arbitration
clause cannot be invoked.
4. The learned counsel appearing for the appellant relied
upon a decision of the Bench of three Hon’ble Judges of this
Court in the case of Deccan Paper Mills Company Limited v.
1
. He submitted that
Regency Mahavir Properties and Ors.
this Court has held that action instituted under Section 31 of
the Specific Relief Act, 1963 (for short ‘the Specific Relief Act’)
is not an action in rem . He would, therefore, submit that the
order of the High Court is erroneous and, therefore, the order
of the Trial Court be restored.
5. The learned counsel appearing for the respondent
submitted that the arbitration clause will not apply as the
prayer in the suit is for cancellation of the agreement in
accordance with Section 31 of the Specific Relief Act. Her
submission is that the issues arising under Section 31 of the
Specific Relief Act can be adjudicated only by a competent Civil
Court.
OUR VIEW
We have considered the submissions. Admittedly, there
6.
is an arbitration clause in the Development Agreement, which
reads thus:
"All the disputes arising out of or in
shall be
connection with this agreement
initially resolved by mutual discussions
among the developer and landowner or the
nominated representatives of both the
1
( 2021) 4 SCC 786
Civil Appeal No.2927/2023
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parties. In case of disputes not resolved
by mutual discussions, the same shall be
referred to the arbitration in accordance
with the provisions of the Arbitration
The disputes
and Conciliation Act 1996.
shall be referred to the mutually agreed
arbitrator within from the cause of action.
The award of the arbitrator shall be binding
and final on both the parties. "
(emphasis added)
7. The dispute, whether the Development Agreement stands
cancelled or whether the agreement can be lawfully cancelled,
is a dispute arising out of or in connection with the
Development Agreement. Therefore, as per the arbitration
clause, if the issue concerning cancellation is not mutually
resolved, the same must be referred to arbitration.
The only ground on which the High Court has interfered
8.
is that the adjudication pursuant to invocation of Section 31 of
the Specific Relief Act is an adjudication in rem . However, in
1
the case of Deccan Paper Mills Company Limited , this
Court has categorically held that it is impossible to hold that
an action instituted under Section 31 of the Specific Relief for
cancellation of an instrument is an action in rem . In view of
the applicability of the arbitration clause to the dispute subject
matter of the suit filed by the respondent, the learned Trial
Judge was justified in passing an order under Section 8 of the
Arbitration Act by directing that the dispute be referred to the
arbitration.
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9. Therefore, the appeal succeeds. We set aside the
impugned judgment and order of the High Court and restore
the judgment and order of the Trial Court. Parties shall act in
accordance with the mandate of Section 8 of the Arbitration
Act. The appeal is allowed on the above terms with no order as
to costs.
.………………………J.
(Abhay S. Oka)
..………..……………J.
(Rajesh Bindal)
New Delhi;
April 28, 2023.
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