Case Note & Summary
The petitioner, Shah & Mody Developers, was the defendant in a suit filed by the respondents (Alka Ketan Shah and others) in the City Civil Court, Dindoshi, Mumbai. The respondents had entered into an agreement for purchase of commercial premises on 12th June 2008 under the Maharashtra Ownership of Flat Act, 1963 (MOFA). The agreement contained an arbitration clause (clause 61). When the respondents sued the developer for enforcement of statutory obligations under MOFA and also impleaded the Mumbai Municipal Corporation (MMC) seeking a stop work notice and cancellation of amended plans, the petitioner filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the dispute to arbitration. The trial court rejected the application on 4th January 2013. The petitioner challenged this order by way of a writ petition. The High Court held that Section 8 is peremptory and mandatory only when all parties to the suit are parties to the arbitration agreement. Since the MMC was not a party to the arbitration agreement, the dispute could not be referred to arbitration. The court also noted that the suit sought statutory reliefs under MOFA against the developer and the MMC, which could not be adjudicated in arbitration. The writ petition was dismissed.
Headnote
A) Arbitration Law - Reference to Arbitration - Section 8 of the Arbitration and Conciliation Act, 1996 - Condition for Reference - The court held that Section 8 is peremptory and mandatory only when all parties to the suit are parties to the arbitration agreement. Since the suit included the municipal corporation as a defendant, which was not a party to the arbitration agreement, the application for reference to arbitration was rightly rejected. (Paras 5-7) B) Maharashtra Ownership of Flat Act, 1963 - Statutory Obligations - Suit for Enforcement - The plaintiffs sought enforcement of statutory obligations under MOFA against the developer and also sought reliefs against the municipal corporation for issuance of stop work notice and cancellation of amended plans. Such statutory reliefs cannot be adjudicated in arbitration as the municipal corporation is not bound by the arbitration agreement. (Paras 5-6)
Issue of Consideration
Whether a suit filed by flat purchasers against the developer and the municipal corporation for enforcement of statutory obligations under the Maharashtra Ownership of Flat Act, 1963 can be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 when the municipal corporation is not a party to the arbitration agreement.
Final Decision
The writ petition is dismissed. The order of the trial court rejecting the application for reference to arbitration is upheld.
Law Points
- Section 8 of the Arbitration and Conciliation Act
- 1996 is peremptory but applies only when all parties to the suit are parties to the arbitration agreement
- Suit seeking statutory reliefs under MOFA against developer and municipal corporation cannot be referred to arbitration as municipal corporation is not a party to the arbitration agreement
