Case Note & Summary
The dispute arose from an Agreement of Sale dated 23.11.2006 between the appellant (purchaser) and respondent (seller) for property in Bangalore, with a total sale consideration of Rs.5,53,90,000 and an earnest money deposit of Rs.1,50,00,000. The agreement included an arbitration clause (Clause 11) for dispute resolution. After the respondent cancelled the agreement and forfeited the advance amount in 2008, the appellant invoked arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996, filing CMP No.297/2009 in the Karnataka High Court. During pendency, the parties reported settlement out of court, leading to disposal of the petition on 05.07.2011. However, the settlement did not fructify, prompting the appellant to file a recall application, which was rejected on 13.10.2014. Subsequently, the appellant filed CMP No.228/2015 under Section 11(6), but withdrew it with liberty to file before the appropriate court, leading to Arbitration Application No.52/2016 in the Hyderabad High Court. The respondent opposed, citing the earlier recorded settlement. The Hyderabad High Court dismissed the application, holding that the recorded settlement barred arbitration. The core legal issues were whether a concluded settlement existed and whether the dispute subsisted for arbitration. The appellant argued that the settlement was not finalized, and its non-adherence revived the original dispute. The respondent contended that the judicial order recording settlement should preclude arbitration. The Supreme Court analyzed the orders dated 05.07.2011 and 13.10.2014, noting they did not detail the nature or conclusiveness of the settlement. The Court found no definite material indicating a concluded settlement and held that the non-fructification of the proposed settlement itself constituted a dispute or revived the original dispute under the arbitration clause. The Court emphasized that the arbitration agreement survived, and the dispute required resolution through arbitration. The decision set aside the High Court's order and remitted the matter for appointment of a sole arbitrator under Section 11 of the Act.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 Arbitration and Conciliation Act, 1996 - Dispute subsists despite recorded settlement - The Supreme Court considered whether a recorded settlement in a previous arbitration application barred subsequent appointment of an arbitrator. The Court held that the settlement was not concluded as it did not fructify, and the non-adherence to the proposed settlement itself constituted a dispute or revived the original dispute, warranting arbitration under the arbitration clause in the sale agreement. The High Court's dismissal was set aside, and the matter was remitted for appointment of a sole arbitrator (Paras 9-14).
Issue of Consideration
Whether there was a concluded settlement between the parties after the first arbitration application was filed, and whether the dispute 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
Final Decision
Supreme Court set aside the impugned order dated 31.12.2018 passed by the High Court of Judicature at Hyderabad in Arbitration Application No.52/2016 and remitted the matter to the High Court for appointment of a sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996
Law Points
- Arbitration agreement survives if settlement not concluded
- Non-fructification of proposed settlement revives original dispute
- Appointment of arbitrator under Section 11 of Arbitration and Conciliation Act
- 1996 is warranted when dispute subsists
