Case Note & Summary
The Supreme Court of India considered a special leave petition against a Delhi High Court Division Bench order that had affirmed a single judge's decision allowing an application under Section 20 of the Arbitration Act, 1940. The dispute arose from a construction contract between a co-operative group housing society and a private contractor. The society had originally awarded construction of seven towers to the contractor under a contract dated September 4, 1996 (as per judgment, though subsequent awards were in 1988 and 1990, indicating possible typographical error). The contract contained clause 32 for arbitration. Subsequently, the society awarded three more towers on December 12, 1988, and four more towers on March 12, 1990, making a total of seven additional towers. Disputes arose in the construction of these latter seven towers. The contractor invoked clause 32 and filed an application under Section 20 of the Arbitration Act, 1940, in the Delhi High Court, seeking reference of the disputes to arbitration. The society resisted by filing an interlocutory application under Order 7 Rule 11 CPC to dismiss the suit on two main grounds: first, that as a co-operative society registered under the Delhi Co-operative Societies Act, 1972, the dispute fell within the ambit of Section 60 of that Act and Section 93 barred the civil court's jurisdiction; second, that notice under Section 90 of the Co-operative Societies Act was a precondition to maintain the suit, and no such notice was issued. The single judge and the Division Bench both rejected these contentions. The society then approached the Supreme Court. Before the Supreme Court, the society raised a third argument: that the arbitration clause in the agreement only pertained to the original seven towers, not the subsequently awarded seven towers, and therefore there was no arbitration agreement for the latter work. The Supreme Court analyzed each contention. On the bar of Sections 60 and 93, the Court held that Section 60 applies only to disputes among members, past-members, persons claiming through them, or between them and the society, committee, officers, or agents, as listed in clauses (a) to (d) of Section 60(1). The present dispute between the society and an external contractor did not fall within any of those categories, so the non obstante clause did not operate and Section 93 did not bar the civil court's jurisdiction. On the notice requirement under Section 90, the Court held that an application under Section 20 of the Arbitration Act, 1940, though treated as a suit, is procedural in nature, and the mandatory notice requirement of Section 90 of the Co-operative Societies Act did not apply. The Court also referred to the decision in Kalyan Peoples' Co-operative Bank Ltd. v. Dullhanbibi Aqual Aminsaheb Patil (AIR 1966 SC 1066) regarding the non-insistence of notice under Section 80 CPC in certain proceedings, and noted that the 1976 CPC amendment had softened the rigour of Section 80 notice. On the scope of the arbitration clause, the Court observed that the contract terms quoted and clause 32 read together clearly indicated that the award of work during the course of execution was part of the original agreement. Therefore, clause 32 constituted an arbitration agreement under Section 2(a) of the Arbitration Act, 1940, covering all subsequent work awards. Consequently, the Supreme Court found no substance in the special leave petition and dismissed it, thereby upholding the maintainability of the Section 20 application and the reference of disputes to arbitration.
Headnote
A) Arbitration - Scope of Arbitration Clause - Clause Extends to Subsequent Work Awards - Arbitration Act, 1940, Sections 2(a), 20 - The petitioner contended that the arbitration clause applied only to the initial seven towers and not to the later seven towers; the court found that the contract terms expressly contemplated entrustment of further work at same rates, and clause 32 read with those terms made the arbitration agreement applicable to all towers awarded during execution; Held that application under Section 20 was maintainable. (Paras 1-3) B) Co-operative Societies - Bar of Jurisdiction - Sections 60 and 93 Delhi Co-operative Societies Act, 1972 - The petitioner argued that being a co-operative society, the dispute was arbitrable under Section 60 and Section 93 barred civil court; the court held that Section 60 applies only to disputes among members, past-members, or persons claiming through them, or between them and society, committee, officers, etc., as per clauses (a) to (d) of Section 60(1); the dispute with an external contractor did not fall within these parameters, so the non obstante bar did not apply; Held that plea of bar under Sections 60 and 93 was devoid of substance. (Paras 1-3) C) Civil Procedure - Pre-suit Notice - Section 90 Delhi Co-operative Societies Act, 1972 and Section 80 CPC - The petitioner contended that notice under Section 90 was a precondition; the court held that an application under Section 20 of Arbitration Act, 1940 is procedural and not a suit requiring such notice; reliance on Kalyan Peoples' Co-op Bank Ltd. and the softening of Section 80 CPC notice requirement by 1976 Amendment supported this view; Held that mandatory notice under Section 90 did not apply. (Paras 1-3)
Issue of Consideration
Whether Sections 60, 90, and 93 of Delhi Co-operative Societies Act, 1972 bar the maintainability of an application under Section 20 of Arbitration Act, 1940; whether the arbitration clause covers disputes relating to additional towers awarded after the original contract.
Final Decision
Special leave petition dismissed; Supreme Court held that Section 20 application under Arbitration Act, 1940 was maintainable, arbitration clause covered subsequent work awards, and Sections 60, 90, and 93 of Delhi Co-operative Societies Act, 1972 did not bar the proceedings.
Law Points
- Arbitration agreement requires consensus ad idem
- terms of contract and arbitration clause read together can extend to subsequent work awards
- Section 60 Delhi Co-operative Societies Act
- 1972 applies only to listed disputes
- Section 93 bar is limited to specified subjects
- Section 90 notice not required for Section 20 application under Arbitration Act
- 1940
- Section 20 application is procedural in nature.
