Case Note & Summary
The Appellants (BKS Galaxy Realtors LLP and others) filed an Arbitration Appeal under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the order dated 2nd May 2024 passed by the Civil Judge, S.D. Belapur, rejecting their application under Section 8 of the Act in Special Civil Suit No.87 of 2024. The suit was filed by Respondent No.1 (Sharp Properties) and others seeking declarations that a Memorandum of Understanding (MoU 2015) and an Allotment Letter dated 5th November 2015 were subsisting and that Respondent No.1 had 50% rights in the constructed area. The Appellants contended that the Agreement for Sale dated 5th November 2015 contained an arbitration clause (Clause 35), and the MoU and Allotment Letter were executed in furtherance of that Agreement and were interlinked. The Trial Court had granted an ex-parte injunction in favor of Respondent No.1. The Appellants filed the Section 8 application, which was rejected by the impugned order. The High Court analyzed the documents and found that the MoU 2015 was executed pursuant to Clause 16 of the Agreement for Sale, and the operative portion of the MoU stated that the responsibilities, duties, and entitlements of the Agreement and MoU shall be read jointly and not separately. The Allotment Letter was issued as security for the monetary consideration under the MoU. The Court held that all three documents were interlinked and not separate and distinct. Therefore, the dispute fell within the ambit of the arbitration clause. The High Court allowed the appeal, set aside the impugned order, and referred the parties to arbitration in accordance with Clause 35 of the Agreement for Sale. The Court also disposed of the interim application.
Headnote
A) Arbitration Law - Section 8 of Arbitration and Conciliation Act, 1996 - Reference to Arbitration - Interlinked Documents - The dispute arose from a Joint Development Agreement and subsequent MoU and Allotment Letter. The Trial Court rejected the Section 8 application holding that the MoU and Allotment Letter were separate contracts without arbitration clauses. The High Court reversed, holding that the MoU and Allotment Letter were executed in furtherance of the Agreement for Sale which contained an arbitration clause, and all documents were interlinked and had to be read jointly. Held that the dispute is referable to arbitration under Section 8 of the Act (Paras 1-30).
B) Arbitration Law - Section 37 of Arbitration and Conciliation Act, 1996 - Appeal against order refusing reference - Maintainability - The appeal under Section 37 lies against an order refusing to refer parties to arbitration under Section 8. The High Court entertained the appeal and set aside the impugned order (Paras 1-30).
Issue of Consideration
Whether the Trial Court erred in rejecting the application under Section 8 of the Arbitration and Conciliation Act, 1996 for referring the suit to arbitration, given that the Agreement for Sale contained an arbitration clause and the MoU and Allotment Letter were interlinked with the said Agreement.
Final Decision
The High Court allowed the Arbitration Appeal, set aside the impugned order dated 2nd May 2024, and referred the parties to arbitration in accordance with Clause 35 of the Agreement for Sale dated 5th November 2015. The Interim Application was disposed of.
Law Points
- Section 8 of the Arbitration and Conciliation Act
- 1996
- Section 37 of the Arbitration and Conciliation Act
- Interlinked documents
- Arbitration clause in main agreement extends to ancillary documents
- Doctrine of severability not applicable when documents are interlinked
Case Details
2024 LawText (BOM) (11) 112
Arbitration Appeal No.72 of 2024 with Interim Application No.9968 of 2024
Mr. Pravin Samdhani, Senior Advocate a/w Mr. Mayur Khandeparker, Ms. Aneesha Cheema, Ms. Darshia Parekh, Mr. Parth Jasani and Ms. Sneha Golecha i/b M/s. Purnanand & Co. for the Appellants; Dr. Virendra Tulzapurkar, Senior Advocate a/w Mr. Siddhesh Bhole i/b. SSB Legal and Advisory for Respondent No.1; Mr. Nikhil Sakhardande, Senior Advocate a/w Mr. Siddhesh Bhole, Ms. Shubhra Swami i/b. SSB Legal and Advisory for Respondent No.2; Mr. Siddhesh Bhole a/w Mr. Apoorva Kulkarni i/b. SSB Legal and Advisory for Respondent Nos.3 to 5; Ms. Vinodini Srinivasan (through V.C.) Mr. Dharmesh Jain, Ms. Roshni Naik i/b. Mr. Anil Agarwal for Respondent Nos.6 & 7.
BKS Galaxy Realtors LLP and others
Sharp Properties and others
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Nature of Litigation
Arbitration Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against rejection of Section 8 application for reference to arbitration.
Remedy Sought
Appellants sought to set aside the impugned order rejecting their application under Section 8 of the Arbitration Act and to refer the suit to arbitration.
Filing Reason
The Trial Court rejected the Section 8 application on the ground that the MoU and Allotment Letter were separate contracts without arbitration clauses, despite the Agreement for Sale containing an arbitration clause.
Previous Decisions
The Trial Court granted ex-parte injunction in favor of Respondent No.1 on 6th April 2024. The Section 8 application was rejected on 2nd May 2024.
Issues
Whether the MoU and Allotment Letter are interlinked with the Agreement for Sale containing the arbitration clause, so as to refer the dispute to arbitration.
Whether the Trial Court erred in rejecting the Section 8 application.
Submissions/Arguments
Appellants argued that the Agreement for Sale dated 5th November 2015 contained an arbitration clause (Clause 35), and the MoU and Allotment Letter were executed in furtherance of that Agreement and were interlinked, hence the dispute should be referred to arbitration.
Respondents contended that the MoU and Allotment Letter were separate and independent contracts without arbitration clauses, and the suit was maintainable.
Ratio Decidendi
Where a main agreement contains an arbitration clause, and subsequent documents are executed in furtherance of that agreement and are interlinked with it, the arbitration clause extends to those documents. The dispute arising from such interlinked documents is referable to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996.
Judgment Excerpts
The impugned order was passed rejecting the Application filed by the Appellants under Section 8 of the Arbitration and Conciliation Act, 1996 for referring the aforementioned Suit for Arbitration.
In the operative portion of the MoU 2015, it is provided that the responsibilities, duties and entitlements of the said Agreement and MoU 2015 shall be read jointly and not separately.
The said documents were interlinked, had to be jointly considered and were not separate and distinct from each other.
Procedural History
Respondent No.1 to 5 filed Special Civil Suit No.87 of 2024 before the Civil Judge, Senior Division, Belapur. The Trial Court granted ex-parte injunction on 6th April 2024. Appellants filed Section 8 application on 16th April 2024, which was rejected on 2nd May 2024. Appellants then filed the present Arbitration Appeal under Section 37 of the Arbitration Act.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 8, Section 37
